by Susanne Steidl
January 14, 2016

Mobile technology is changing the way people use gift cards – and creating new opportunities for merchants

Every busy shopper knows the benefits of the gift card: it’s an effortless way to wish someone a happy Christmas or thank them for a job well done. It allows the recipient to buy what he or she truly wants, and it’s as easy to use as cash.

Perhaps that’s why 2015 gift card sales in the U.S. reach $130 billion, a 6% increase on the year before. But this is just the beginning, as gift card sales are predicted to reach $160 billion by 2018. E-gifting had the largest increase, rising to 26% in 2015, representing $7.1 billion in volume. This increase is also expected to support the overall payment industry growth.

Long-term prospects for e-gifting remain promising as more payment services become mainstream and plastic cards make the switch to digital, according to CEB Tower Group, a research firm. CEB notes that many consumers spend more than the value of the gift card, resulting in more sales for retailers. And for eight years straight, gift cards have been the most-asked-for gift item, the National Retail Federation found.

There has been a fundamental shift in the way people use gift cards

Needless to say, the gift card market is significant. But even as these cards are enjoying broader appeal than ever before, consumer attitudes towards gift cards are changing.

Consumer`s confidence and trust in mobile retail and payment apps is growing – at least where gift cards are concerned. This is good news for merchants for several reasons.

For one, virtual gift cards cost less than plastic ones. They can be used flexibly and are trackable, which provides merchants with a wealth of valuable data. For another, consumers that store and redeem gift cards on a mobile device are likely to be more comfortable making other kinds of mobile payments in the future.

Merchants are meeting new consumer demands

Merchants that want to capitalize on the enormous potential in the gift card market would be smart to start selling their gift cards online. It’s a relatively easy way to keep up with changing consumer demands. Supporting e-gift cards and making sure that both virtual and physical cards are compatible with popular gift card storage apps are important next steps.

In doing so, merchants are meeting new consumer demands, but they also stand to gain from reinforced brand messaging, increased foot traffic in stores, and higher sales. These are just some of the proven benefits that gift cards deliver.

Rewards and incentives drive gift card purchases

Another area where merchants can benefit from gift card users is with rewards and incentives. According to a survey, respondents, on average purchased two gift cards in the past twelve months because loyalty or rewards points were offered. Furthermore, a third of respondents ended up making a purchase at a particular store because an incentive was offered, even when they were not planning to do so. And 40 percent spent more than originally planned because an incentive was offered.

By linking up rewards and incentive programs with gift cards – for example, by offering customers a discount on their purchases when they also buy a gift card – merchants can turn one-time shoppers into repeat customers and bigger spenders. Rewards and incentives could also convince customers to to up their gift cards after use.

Reloadable gift cards are a big opportunity

The function reloading is a big opportunity. After all, customers who do so usually end up making additional purchases. Most respondents have never reloaded a gift card, but that could quickly change, given consumers’ rapid adoption of other features and functions in the gift card market.

As the way people buy, manage, and use gift cards changes, merchants must keep up with these new trends and technologies. They stand to make big gains, if they do so.