Prepaid card issuers could benefit from highlighting gift card offerings. According to Deloitte research, 76% of purchasers plan to commit 17% of their spend amount to buying gift cards. A portion of consumers who chose this option for gift giving as a result of COVID-19, having learned the process, will stick to this gift option. Empty store shelves may open an opportunity for prepaid gift cards to shine during the 2021 holiday shopping season.
Physical Gifts and Supply Chain Uncertainty – Gift Cards Are an Excellent Alternative
Beyond their popularity, gift cards may play an even bigger role during the holidays as a way around supply chain worries and out-of-stock or hard-to-find item frustration. Respondents in a Deloitte holiday survey, indicated plans to shop earlier in 2021, fearing supply chain issues and out-of-stock items. Supply chain fears pressuring consumers to shop early to avoid the disappointment of not being able to find in stock items, is an opportunity for card issuers to offer gift cards and help alleviate those fears.
Open-Loop and Closed-Loop Gift Cards
Mercator Advisory Group noted that, “Consumer preference for open-loop gift cards over other alternatives such as physical gifts or closed-loop gift cards during the pandemic may continue.” Mercator observed a 7% increase in total open-loop gift card loads for 2020 and forecasts a 2.4% increase YOY for 2021-2025. Gift card issuers hoping to increase consumer loyalty and card spend revenue can also add or expand closed-loop gift cards in their card program. Closed-loop prepaid cards can increase shopper loyalty and provide more options for payment at point-of-sale. Loyal consumers will purchase closed-loop gift cards for key holidays, purchasing branded cards for friends and family while also taking advantage of savings, shopping at a place they endorse. Mercator Advisory Group forecasts a 4.7% growth rate for closed-loop prepaid cards 2021-2025, rebounding from a decreasing trend from 2016 to 2020.
The type of prepaid card and reasons for purchasing prepaid cards may be evolving, but gift cards maintain their popular status during the holiday season. This year’s supply chain uncertainty makes prepaid gift cards an excellent alternative to physical gifts. Building on an existing program or implementing a new prepaid gift card program is an important component in your 2021 holiday strategy.
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Peggy O’Leary is the VP/Head of Sales Prepaid, Personalization Solutions and Instant Issuance at CPI Card Group