UK gift card sector plays
Studies show that, in the UK,
adoption of gift cards is now catching up with the US as more
retailers seek to exploit sales growth and benefit from operational
efficiencies. How retailers manage consumer-card interaction and
service delivery, however, will be crucial in achieving and
sustaining this level of prepaid card growth.
Gift cards are proving as popular
with the public as with retailers. With the economic recession
restricting credit, many consumers are going back to basics using
prepaid and debit platforms to achieve better control over their
spending. Recipient attitudes to prepaid gift cards have also
changed. While gifting ‘value’ used to be considered impersonal,
this view is changing rapidly; particularly with the introduction
of custom designed, personalised and open loop cards.
Prepaid figures from Deloitte show
that in the US in 2009, gift cards held first place position with
64% of consumers buying them as presents; 42% preferring to receive
gift cards than other merchandise and the average spending per card
up from $28 to $35.
One thing that Europe can learn
from the US is that consumer visibility of cards is vital. Prepaid
‘gift card malls’ have undoubtedly helped raise prepaid’s profile
with, and acceptance by, consumers. With 70% of UK retailers
currently offering a gift card, we are now seeing more PoS-focused
activity around gift cards and the further development of ‘gift
card malls’ in many major retail outlets.
Another wave of card innovation is
rippling out from the US as the card industry anticipates the
impact of new American government regulations on gift and prepaid
cards. The new regulations will force prepaid card players in the
States to re-examine their business models, but they’ll still be
able to generate fee revenue through other channels and more
innovative card based services.
Analysts, including Javelin,
suggest usage of prepaid and gift cards may be boosted from the new
regulations if they make pricing clearer and increase consumer
In addition, the recent CARD Act,
which states that a new credit card cannot be issued to a person
who is under 21 years of age, opens up a whole new target market
for prepaid as students, in particular, seek alternative payment
It makes sense that US retailers
will look to technology innovation to help them face these
challenges and maximise returns from these new market dynamics.
Developments such as mobile hand-held units and kiosks will take
prepaid exposure to a new level – making prepaid a high growth area
for retailers and bringing new revenue streams to large shopping
Mobilising prepaid services allows
retailers or shopping mall owners to take the sale to their
customers; targeting high footfall areas, relieving queues during
busy periods, adding new capacity during seasonal hot spots and
offering more convenient and quicker ways to purchase gift cards.
In addition to selling instant issue cards, the mobile device
manages integrated payments and can also accommodate balance
enquiries and card reloads.
Another significant US development
is the trend toward self-service and the use of touch screen
kiosks. Many retailers are looking to reduce staff costs and add
convenience by introducing a self-service gift card purchasing
option, through a standalone kiosk. By continually driving new
access channels that engage the consumer, retailers can reinforce
the benefits of prepaid cards.
Focus on the
And there is still a huge amount of
potential to exploit. Experts predict the prepaid card industry
will continue to grow despite regulatory and economic pressures.
According to latest reports the total prepaid market size in 2011
is now forecast to be $427.5bn.
As competition for consumer loyalty
intensifies, retailers will need to be able to respond with more
aggressive promotional programmes designed to differentiate, retain
custom and drive business goals. Kiosks, mobile solutions, more
appealing retail display and marketing and the opportunity to
personalise prepaid cards will provide them with new platforms to
extend services and re-engage with the consumer.
By looking more closely at American
methods and embracing some of the innovative new technologies and
approaches already being successfully rolled-out, European
retailers can gain additional competitive advantage; and help close
the gap between European prepaid card adoption and that of our
counterparts across the Atlantic.
Ray Stanton is CEO of SCL, an
independent software vendor which specialises in the provision of
travel money and stored-value card processing systems