The Right Time for Merchants to Upgrade Their Gift Card Solutions


Gift cards bring in more revenue, but they also benefit businesses in other ways. Merchants should make the most of the opportunity

The demand for gift cards and gift card solutions remains high. Research for Fiserv’s 2023 gift card trends report found that 61% of consumers plan to give gift cards to celebrate holidays, birthdays, and milestones, such as graduations (44%). Additionally, 30% use gift cards as a way to say thanks. The research also found, however, that consumers are using gift cards for the purchases they make themselves, with 27% using them to buy needed items and 22% relying on gift cards to offset groceries and gasoline costs as prices continue to climb. Additionally, 42% are holding on to gift cards to wait for promotions so they can stretch their value even more.

With more consumers turning to gift cards for a variety of reasons, it's safe to say that if merchants aren’t meeting consumer demands for gift cards, they’re leaving money on the table.

The Benefits of Gift Card Solutions

Gift cards are a lucrative revenue stream year-round, but not only because of the income from the initial purchase. Tatiana Chernogorova, Head of Product at Diggecard, says gift card solutions provide merchants with value in additional ways. “Our merchants say that one of the most valuable features of gift cards, in general, is that they bring them new customers,” she says. “A gift card is not only money but also a recommendation of the brand from someone that you know. Statistics show that 18% of people who receive a gift card become loyal customers. But in order to become popular, gift cards need to be nice to look at and easy to use. This is why old solutions do not bring equal value compared to modern ones that allow a high level of personalization and provide a seamless experience both for the buyer and the receiver.”

Chernogorova adds, “What is equally valuable is that gift cards allow merchants to get paid in advance before actually delivering a product or a service. Here the advantage is that the gift card service providers do not hold the merchant’s money but send it directly to the merchant’s account right after a gift card has been bought. Diggecard is one of the gift card service providers that works like this.”

“Another leading functionality is refund cards,” she says. “The pressure of e-commerce with easy returns and money-back guarantees, as well as legal requirements in some territories, lead to an increase in returned goods, especially in retail. At the same time, refunds in cash are not the preferred solution for the merchants. Refund cards are an attractive alternative to cash refunds, and consumers may choose to accept them instead of cash if the solution is easy to get and use. Here digital refund cards that can be issued on payment terminals and scanned into the customer’s phone are clear winners.

Your clients may also benefit from:

  • Overspending: Merchants often see more revenue than the value of a gift card. Blackhawk Network reports that 90% of consumers are willing to spend more than a gift card’s face value. Research shows that consumers spend, on average, $51 more than the value of a $10 gift card and up to $106 more than a $500 gift card.
  • Consumer loyalty: Gift cards help build loyalty in several ways. When a merchant offers gift cards as loyalty rewards, it keeps customers coming back. Additionally, when consumers purchase and reload gift cards from a business for self-use, they’re more likely to choose that business when it’s time to make a purchase again. And building loyalty is good business. Loyal customers are 50% more likely to try new products and spend 31% more than new customers.
  • Gen Z appeal: Blackhawk Network’s research also found that gift cards have particular appeal to younger shoppers, with about 20% using gift cards for digital purchases for themselves and more than 10% using gift cards because they don’t have credit or debit cards. Treating this demographic right is key to continued business growth. Gen Z considers personal recommendations and social media as the most powerful drivers for purchases. Satisfied Gen Z customers will share their experiences with their friends.

Why Merchants Need to Upgrade Their Gift Card Solutions - Now 

Consumer behaviors have evolved since 2020. More people consider themselves “omnichannel consumers” who engage with businesses on various channels and even use multiple channels for a single purchase. To optimize experiences for these consumers, merchants must have a gift card solution that allows them to sell and redeem gift cards on any channel and manage activity on all channels centrally.

Chernogorova explains, “Modern society embraces simpler ways of handling all types of interactions, including financial transactions. We move from carrying cash or checkbooks to having everything stored on our phones or in the cloud and paying by watch or fingerprint. In this era of convenience, gift cards should strive to provide the same seamless experience and reflect the ease and versatility consumers have come to expect.”

“That's why old fragmented technologies that allow using gift cards only in-store or only on an e-commerce website, that require gift cards on paper are being replaced by innovative approaches that effortlessly connect in-store and online experiences, as well as bridging the gap between the physical and digital worlds,” she says.

According to GCVA (Gift Card and Voucher Association) report, the proportion of gift card buyers who expect gift cards to be cross-channel grows dramatically: from 26.2% in 2020 to 40.8% in 2021. “This is what consumers demand. This is what competitors are offering. This is what every merchant needs to have to stay in the game,” Chernogorova says.

Additionally, with more gift cards sold and redeemed online, choosing a solution with security and fraud prevention is vital. Merchants need gift card solutions with fraud detection features that protect their businesses from gift card purchases made with stolen card data and malware that targets gift card data. A gift card solution that allows merchants to limit gift card amounts or multiple purchases or redemptions in a single day can also prevent losses from fraud.

Merchants will also benefit from gift card solutions that integrate with their payments, loyalty rewards program, point of sale (POS), and e-commerce software. Totally integrated solutions allow consumers to check their balances in-store and online, reload cards, and purchase both physical and digital cards however they choose to engage.

While integration has advantages, it can be challenging, particularly if a merchant wants to upgrade from its current solution to one that’s more omnichannel-friendly. A solution that helps merchants overcome this challenge is a Payments Platform as a Service (PPaaS) approach. Gift card solution providers integrate their solutions with the payments platform. Then acquirers can make the option available as one of the services it provides, fully integrated with the payments solution they use.

Now Is the Time to Upgrade Gift Card Solutions

As merchants navigate the annual cycle of preparing for the Q4 holidays, preparing to sell and promote gift cards are undoubtedly part of their strategies. But it’s also important to remember that gift cards are in demand all year long. Migrating to a new gift card solution with features that address omnichannel shoppers and younger demographics can mean a boost in sales earlier in the year.

It's a wise move to meet consumers’ growing demands for gift cards now.

To learn more about gift card solutions that integrate seamlessly with payments, contact us.

Matt Dougherty.png

Matt Dougherty

Account Executive

Ingenico North America

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