Business of Fintech, Finance Everywhere

As their popularity grows, more banks are eyeing gift cards as a loyalty perk

  • Consumer interest in gift cards remains high, with 56% planning to purchase them for major life events and 38% preferring them as Christmas gifts over physical items.
  • Given consumer interest, multiple FIs and fintechs are partnering with technology providers to offer gift cards and drive consumer loyalty and engagement.

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As their popularity grows, more banks are eyeing gift cards as a loyalty perk

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56% of consumers plan to purchase a gift card for a major event this year, according to recent data. From weddings to anniversaries, major life events are the primary driver for this type of consumer purchase.  In fact data shows that 38% of Americans would prefer to get gift cards and vouchers as gifts for Christmas, physical gifts (excluding money) are preferred less by 10 or more percentage points.

Source: Statista

But even though gift cards aren’t new, how and where customers are buying these cards is changing. Urban dwellers are two times more likely to purchase a gift card through a P2P app like Venmo. Last year, the company announced a partnership with gift card manufacturer Hallmark, which enabled customers to gift money in a physical card by Hallmark. Venmo reports that 78% of its customers regularly use the P2P app to send money as a gift to their friends and family. 

Along with the where, the what is changing as well, with 32% of customers reporting that they purchased an online gaming gift card. 

But despite increased activity in the space, many gift cards still go unused, with 47% of Americans owning at least one unused gift card. This may be because four in every ten consumers forget to use their gift card, with more consumers forgetting to use physical gift cards than digital ones. This may be detrimental, because even though gift cards effectively lock in a purchase, unused gift cards do not achieve their secondary purpose: driving successive purchases and engagement. 54% of customers report using their gift cards to buy items during a promotional period. 

Given the continued interest in gift cards, FIs are starting to see the product as a loyalty driver. Technology providers like Prizeout have partnered with credit unions and community banks to enable banking customers to receive bonuses when they purchase gift cards through the platform. 

For an FI, offering gift card-related products can be a way to engage as well as support alternative usage patterns. “What we see is that digital gift cards have replaced what would normally be done with a debit card. Consumers are pre-buying them for the week, getting their bonus money, and then re-upping every week based on their needs, whether it’s $25 on coffee, or $75 on groceries,” said David Metz, founder and CEO of Prizeout.

Beyond banks, BNPL providers like Affirm are also diving into the space. Itpartnered with digital gift card distributor Blackhawk Network last year to enable its customers to purchase gift cards from its app. The announcement came right around the holiday period, because Affirm likely wanted to capitalize on increased gift card purchases during the season. 

Moreover, expanding into this space was also a way for Affirm to bring its BNPL service beyond e-commerce. 

“We’ve been caged in this e-commerce cage for a very long time and feel very good about our — breaking out into the bigger wide open commerce space writ large,” said Max Levchin, founder and CEO of Affirm in an earnings call last year. 

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