New research sizes the U.S. digital gift card space and forecasts its growth through 2022.
Gift cards are a big business, exceeding $95 billion in loads in the United States, with solid expectations for continued growth well into the future. Whether the gift card business will survive isn't really a question; the question seems to be what form factor will prevail. Will it be a physical plastic card, a contactless physical plastic card, digital cards, or those used via a mobile device or form factor? The reality will likely end up being a combination of all the above, at least for the foreseeable future.
Digital Gift Cards: U.S. Market, 2019
provides a look into the U.S. digital gift card market including market size, growth forecast, fraud, breakage, and best practices. Additionally, the report looks at the federal and state regulatory environment for prepaid gift cards and identifies risks that can affect program revenue.
Digital gift cards will continue to grow and eventually surpass physical gift cards. However, in the meantime, retailers should be using an omnichannel approach to grow their gift card programs. That means offering gift cards through store locations, offering online ordering with physical card delivery, online/app/mobile app ordering with a digital delivery. Consider offering or adding a loyalty program to your gift card program to encourage repeat purchases, stated the author of the report.
Highlights of the report include:
Digital gift cards are purchased most frequently by consumers with an annual income of $75,000 or more.
Microgift cards are gift cards provided digitally via a token for small amounts usually under $20, with $5-10 being the most common amount.
Gift card fraud is between 1% and 4% of revenue. Fraud is prevalent for both physical and digital gift cards but is higher for digital gift cards.
Digital gift card fraud is a $950 million annual loss to the industry annually.
Key Topics Covered
Sizing the Gift Card Market
Measuring the Market
Innovations in Digital Platform Capabilities
Areas of Exposure
US Regulatory Compliance
Best Practice Tips for Successful Digital Gift Card Programs
Figures & Tables Figure 1: Measurement of load value on prepaid cards produces the best estimate of total market size Figure 2: Market size: total closed loop cards versus closed loop gift cards and closed loop digital gift cards, 2018 Figure 3: US closed loop digital gift card market size and forecast, 2018-2022 Table 1: Gift card platform features, with percentage of cards that offer each feature or method Figure 4: Digital animated gift cards, typically under $20 Figure 5: Virtual card buyers skew younger and ethnically diverse Figure 6: Mobile redemption of gift cards is relatively low across all consumer age segments in the US Figure 7: Almost half as many US consumers purchase digital retail gift cards as purchase physical prepaid cards Figure 8: Digital gift cards are most frequently delivered by email Table 1: Gift card platform features, with percentage of cards that offer each feature or method