Tourists traveling to Japan will soon have a simpler way to get around—a prepaid transit card designed specifically for short-term visitors.

Pasmo Co, which issues cards for Tokyo’s widely used train system, will introduce the new card, valid for 28 days and accepted for cashless payments across the country.

Tourist Pasmo will be available at vending machines and ticket offices in major transportation hubs, including Tokyo’s two main airports. It enables tap-and-go travel across public transportation networks, as well as payments at many shops and vending systems. It can be recharged during the 28-day period, though any remaining balance is nonrefundable.

Pricing varies by airport. At Narita Airport, the card costs a flat 2,000 yen. At Haneda Airport, travelers can load between 1,000 yen and 10,000 yen at purchase.

Travel Is the Sweet Spot

The card is especially useful for first-time visitors navigating Japan’s extensive—and sometimes confusing—transit system. It simplifies access to trains, subways, and buses, reducing fare confusion and speeding up travel.

“At Javelin, we see a lot of trends in self-use of prepaid cards, and a plan like this matches several of the key reasons why individuals buy prepaid cards for personal use: convenience, budgeting and safety,” said Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research. “We also found that 25% of prepaid users do so to pay for expenses while traveling. By embracing these trends, this becomes a really novel approach to ease the burdens of travel and currency conversion.”

Hirschfield said he is not aware of other countries taking such a direct approach to prepaid travel tourist transit cards. Pasmo previously offered a similar product, Pasmo Passport, which was discontinued in 2024.

A Souvenir of Japan

Pasmo also hopes travelers will keep the card as a souvenir.

East Japan Railway offers a more limited alternative, Welcome Suica, which focuses on eastern Japan, and is available only on iPhone, not on Android devices.

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When events like the NCAA Final Four come to town, they bring an influx of short-term workers who keep everything running—but often for just four or five days. Despite the brief duration of this work, many organizations still rely on traditional payroll systems to compensate them, creating unnecessary friction where speed and simplicity matter most.

In industries that have relied heavily on cash tipping, such as hospitality, prepaid cards can be just as game changing. Instead of asking for a valet driver’s Venmo, a diner could scan a QR code and send a tip directly to the driver’s prepaid account.

While event staffing and tipping are two clear examples, the potential extends much further. In a recent PaymentsJournal podcast, Ben Osmond, SVP of Treasury and Payment Solutions at U.S. Bank, and Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research, explored the impact of prepaid solutions across sectors such as the gig economy and contract work.

As cash and checks continue to decline, prepaid products can reshape the work experience for contract and seasonal workers, while also delivering benefits for employers.

Filling the Tip Card

As tip jars have gone increasingly cashless, restaurants have sought more efficient ways to distribute tips digitally.

“What they are doing is using prepaid programs to provide tips at the end of shift,” Osmond said. “There’s some interconnectivity with the point-of-sale systems where we’re able to calculate the tips that a server is going to receive so that they can have those loaded onto a prepaid card at end of shift. Often, they will have them on their card and in their account before they jump in their car or jump on the bus to head home.”

This model is often well received, in part due to consumers’ familiarity with gift cards and the stored-value accounts like those offered by Starbucks or Target. That said, some workers may still hesitate to accept tips through what they perceive as a gift card format.

“Sometimes people don’t understand that you still get a regular paycheck maybe from your hourly work, and that a card that you get for your tip outs is a payroll card,” Hirschfield said. “Some of that is just the messaging and the idea around it, where they don’t think of it as payroll but as their tip card, that’s what it’s there for and that’s the intent.”

“It’s a payment option; it doesn’t mean it’s the one thing they will get,” he said. “When you go home at the end of the day, you’ve got that tip money in your hands in the same way you would have in a cash environment. These products support the whole idea that there’s multiple ways to pay people, just like they’re always have been. It used to be you would get your check for your hourly work and your cash for your tip outs. Now, we’re moving to a digital environment for that.”

Winning or Losing Talent

Beyond tipping, digital prepaid cards can dramatically improve the work experience for contract and seasonal workers across industries.

“Instant issuance changes the game when you think about those contractors, those seasonal workers and short-term employees whose entire employment experience might come down to five days of working at an event,” Hirschfield said. “When they finish on the day it closes, pay them out and their entire experience is complete. They’ve worked their hours; they’ve received their payment, and everyone has a clean break.”

This streamlined approach creates a win-win: payers benefit from simplified coordination, while workers receive fast, secure, and flexible compensation.

As short-cycle payments become more common—whether for summer jobs, event staffing, or project-based work—prepaid cards are well positioned to meet this important need.

“More employers are starting to realize the value because today’s workforce is mixed,” Osmond said. “There are gig employees, contractors, and temps, and a lot of the legacy payroll systems struggle with high turnover and rapid onboarding of employees.  Ultimately, a pay experience can win or lose talent in a tight labor market. It’s very important that employees are being paid the way that they want to be paid.”

Real-Time Earnings Access

Just as important as how workers are paid is when they are paid. In a digital payments landscape, where consumers can receive near real-time transfers via apps like Zelle, the answer is increasingly immediate.

“One of the most relevant trends today is earned wage access, the ability for an employee to receive wages for hours that they have already worked but have not yet received a paycheck for,” Osmond said. “With that Friday or every other Friday payday, they’re able to access these funds early and request a portion of their wages which can be sent to them electronically onto a prepaid card, plastic or digital.”

Regardless of how payments are delivered, workers expect digital access to their financial information. This makes it critical to offer a robust app that provides full visibility into balances, transactions, and spending. This is especially important for contract and short-term workers, many of whom juggle multiple jobs and remain constrained by traditional pay cycles.

“Having these options where you can get paid either with earned wage access on an early basis or a couple days early, those are critically important to the people receiving that money—especially when they may need to spend that money as soon as they earn it to fit their lifestyle.” Hirschfield said. “Also, you get people who are potentially underbanked and unbanked, and this can also fill that gap.”

From the Employer’s Perspective

While the benefits for workers are substantial, employers also stand to gain. Paying via prepaid can reduce onboarding time and administrative costs, enabling workers to get started more quickly.

“It can cut costs around eliminating checks or email reissuing of checks, things of that nature,” Osmond said. “It can reduce fraud. That’s something that often doesn’t get talked about from an employer’s perspective, but there is fraud on paychecks. They’re also having less calls and less concerns into their HR or their payroll department with questions about their checks.”

“You can lower the cost of ownership scale of all of these things,” he said. “We work with a lot of quick-service restaurants that have many different locations that are using our prepaid products. By having one product and one disbursement method, they’re able to be much more efficient than they would by delivering checks to each different location.”

Immediate payouts can also play a valuable role during employee separations. Whether voluntary or involuntary, issuing final wages via prepaid card can help defuse what is often a sensitive and time-critical situation.

And these scenarios are only part of the broader opportunity for prepaid solutions within the full-time workforce.

“You look at other things where it might be an off-cycle payment, where it could be a bonus or sales incentive program,” Hirschfield said. “These things are done off cycle; they’re instantly done. You hit an incentive bonus on sales, you’re paid instantly, and you feel rewarded. These are all examples that play into why having programs like this help.”

A Frontline Experience

Taken together, these developments position prepaid cards as a valuable part of modern work experience—and signal the potential for disruption within the broader payroll space.

“As we think about this as a whole, payroll and wages aren’t just a back-office function anymore, it’s a frontline experience,” Osmond said. “Payroll cards and wage cards have moved beyond check replacement to become a digital infrastructure for the workforce that today is mobile, it’s mixed, and it’s often outside of traditional banking.”

“The next standard is simple, it’s a quick onboarding process,’ he said. “We need to pay people fast, we need to pay them consistently and we need to do it with controls in place that employers can stand behind. What these products do, it helps make a real bank-issued program that can support earned wage access as well as tip functions—without changing the payroll cycle as a whole for the employers.”

The post Tips on a Prepaid Card: A Practical Solution with Broad Industry Impacts appeared first on PaymentsJournal.

Just in time for Earth Day, CPI Card Group’s donation of 25,000 paper prepaid cards to Street Charity underscores a growing realization that simple, low-cost payment tools can expand access to aid while advancing sustainability efforts.

The initiative highlights an emerging use case for single-use gift cards that are both less expensive to produce and more environmentally conscious than traditional options. It also offers a practical way to support individuals in need who may not have access to virtual cards via a phone or other device.

The cards are built on the Discover Network Prepaid Cards platform and their use is limited to fast-food and quick-serve restaurants nationwide. This ensures that donations are directed toward meals rather than cash.

Street Charity supports crisis centers, shelters, and nonprofit partners serving individuals experiencing food insecurity.

Sustainability Goals

Paper-based alternatives to plastic are becoming a popular option across the industry, not just for charitable initiatives but also as part of broader sustainability efforts. Single-use prepaid cards are particularly well suited to paper, as don’t require the durability of traditional credit or debit cards intended for repeated use.

“The announcement from CPI underscores two main industry initiatives,” said Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research. “First is the fact that physical cards are not going away, but instead are often complementary to digital products. Second is that the prepaid industry consistently works to reduce its impact on the environment through use of eco-friendly materials. It’s important for the entire ecosystem to accept both as goals in efforts to fulfil sustainability goals.”

Verifying the Chain of Custody

CPI has played an active role in these efforts. Since 2022, the company has produced nearly 100 million eco-focused paper payment cards.

The market is demanding greater transparency around sourcing. In response, CPI has earned certification through the Forest Stewardship Council’s Chain of Custody program. This certification ensures that wood-based materials are tracked from responsibly managed forests through to the final paper products, and that FSC-certified materials are properly identified or kept separate from non-certified inputs throughout the supply chain.

This trend is likely to accelerate. A CardRates.com survey conducted last year found that nearly 60% of Gen Z cardholders consider sustainability a top priority.

The post Paper Prepaid Cards Emerge as an Eco-Friendly Tool to Fight Hunger appeared first on PaymentsJournal.

The open-loop commercial prepaid market is entering a more consequential phase. What began as a practical way to control spend and simplify disbursements has evolved into a flexible payment tool used across payroll, incentives, travel, and B2B use cases. As businesses look for faster, more transparent ways to move money, open-loop prepaid programs are gaining traction for their ability to operate across established card networks while offering tighter controls than traditional credit. At the same time, issuers, program managers, and fintech partners are reshaping the space with embedded features, real-time funding options, and better data visibility.

Don’t miss another episode of Truth In Data! Click on the red bell in the lower-left of your screen to receive notifications as soon as the episode publishes.

Data for today’s episode is provided by Javelin Strategy & Research’s Report: 2026 State of the Industry: Commercial Prepaid Cards

2025 U.S. Open-Loop Commercial Prepaid Loads (In Billions of U.S. Dollars)

• $98 – Government open loop
• $78 – HSA/FSA
• $34 – Insurance
• $22 – Consumer incentives

Source: Javelin Strategy & Research

About Report

Growth in the commercial prepaid market is expected to be uneven over the next five years, with particularly strong potential in non-government segments such as healthcare benefits, incentive programs, and various disbursement use cases.

In its latest installment of an ongoing prepaid trends series, Javelin Strategy & Research examines the commercial prepaid landscape across both business-to-business and government applications. Although prepaid solutions still make up a relatively small portion of overall commercial payments, they present a meaningful opportunity for expansion. These products can serve alongside traditional postpaid options or, in some cases, replace them entirely. With a stable foundation already in place, commercial prepaid is well positioned to support emerging use cases and extend its reach into new areas of the market.

The post Top 4 Open-Loop Commercial Prepaid Loads appeared first on PaymentsJournal.

Consumers aren’t just receiving prepaid cards anymore—they’re reloading them. What was once a one-time gift is increasingly being used like a personal spending account, signaling a shift in how prepaid fits into everyday financial life.

In a new report, Self-Use Motivations Extend the Prepaid Payments Life Cycle, Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research, looks at the benefits of self-use and how providers can encourage it. Loading, redeeming, and reloading a prepaid card creates ongoing relationships—ones that can be strengthened through rewards, data security assurances, and budgeting tools.

Shifting Toward Self-Use

Several key factors are driving the shift toward self-use. First are the benefits and rewards these cards offer. Starbucks provides a strong example: its loyalty incentives encourage continuous loading and redemption, effectively turning prepaid into a preferred payment method rather than an occasional one. By prompting users to reload through its the app, the prepaid card no longer feels like a gift card—it becomes simply a part of the user’s account.

Privacy and safety are also important factors. Prepaid cards function much like cash, but with a safety net, allowing users to control spending before a purchase is made.

“In terms gaming and gambling, which don’t accept credit, it’s a safety net limiting your exposure,” said Hirschfield. “With cash, your only limit is the amount of cash you have potentially available to you. With a prepaid card, you have to load it. They’re great budgeting tools for these kind of splurge purchases.”

Getting to the First Reload

For issuers, one of the most critical moments is prompting the first reload, which initiates the ongoing usage cycle. The challenge is to create an experience compelling enough that consumers not only redeem their initial balance but choose to reload for future use.

“You got to make that positive first impression, but it doesn’t take a lot,” said Hirschfield. “It could be an extra $5 bonus. Maybe it’s the new sandwich you just introduced. When you give them an incentive to come back at essentially no risk, it pays off in the end. You’re not going to have 100% conversion, but you’re going to have a high enough conversion versus the cost of that incentive that it really does kick off the cycle.”

Registering a gift card also transforms it from an anonymous instrument into one tied to an individual account. This shift away from anonymity is a big step for both the consumer and the issuer.

There are several other ancillary benefits to increased prepaid usage. For example, merchants may pay a single transaction fee on a $25 card instead of multiple fees on several smaller purchases, plus interchange. While the savings per transaction are modest, they can add up to a meaningful impact at scale.

“There’s a lot of benefit there for both sides when the loyalty gets rewarded,” said Hirschfield. “The user gets their extra points and stars and all that. But the retailers get benefit of fewer transactions, as well as ways to drive people back to make purchases, and increase the lift and frequency of those purchases.”

A Tool for Banks

Many banks are still missing the opportunity to offer prepaid cards as a complement to a traditional checking or debit accounts. As a budgeting tool, prepaid cards allow customers to segment their spending—for example: “This is my budget for gaming or eating out,” which they can load onto a separate card.

The challenge is to position prepaid programs in a way that highlights these self-use opportunities. They can serve as companion products for existing customers or as entry points for those who may later develop deeper relationships with a financial institution.

“One of our big winners in Javelin’s General Purpose Reloadable Scorecard was Regions Bank,” Hirschfield said. “Their prepaid card does a lot of good things, like access what they call My Green Insights, which is an educational tool about your personal spend and budgeting.”

Building a Relationship

Prepaid cards can also foster brand relationships similar to loyalty programs in industries like airlines, where status tiers drive engagement. At the everyday level, loyalty can be built through routine purchases like coffee or lunch. This cycle can be reinforced by rewarding frequent reloads—for example, offering multiple perks throughout a user’s birthday month rather than a single reward.

Chick-fil-A has successfully integrated loyalty into its prepaid ecosystem. Customers can achieve status level, and the brand can leverage past purchase data to streamline repeat orders. While users are not required to pay with prepaid every time, the option is always available—and the loyalty program delivers tangible, relevant rewards.

“You’re getting your ego fed in a sense of getting that status and extra benefits that everyone else doesn’t,” Hirschfield said. “The retailer is getting more frequency of purchase, more lift, and fewer transactional fees.”

“It really is in everyone’s benefit to continue to feed that cycle in those industries where you can count on some sort of frequency,” he said. “It doesn’t need to necessarily be coffee, where it’s a daily potential frequency. Maybe it’s monthly or weekly, but when you can adapt those users who are going to be constantly coming back at a certain interval you think is appropriate, that cycle will continue to feed itself and benefit everyone.”

Shouldering the Burden

Consumers have demonstrated a clear willingness to engage with prepaid programs for self-user. The onus is now on brands and program managers to clearly communicate—and deliver—the benefits.

“Our data that shows that it really should be one of your primary messaging items,” said Hirschfield. “It’s an area that that a lot of programs don’t spend time on, even though it’s the easiest way to build recurring models of use.”

The post Turning a Prepaid Card into a Long-Term Relationship appeared first on PaymentsJournal.

Gift cards are moving beyond retail and rewards programs—now, regulators are exploring how they can serve as an entry point into investing.

The use cases for gift cards have continued to expand, especially as prepaid products have become an integral component of many organizations’ loyalty and incentives programs.

The versatility of these solutions has prompted the Securities and Exchange Board of India (SEBI) to propose an innovative framework that leverages gift cards and prepaid instruments to attract new investors. Under this model, gift card recipients would be able to convert their balances into shares of a mutual fund.

SEBI has outline several parameters for this effort. For example, prepaid accounts would be funded exclusively through electronic funds transfers or via India’s popular UPI real-time payments system.

The regulator has also proposed a transaction cap at 50,000 rupees (roughly $537). While this may appear modest from an investment standpoint, it presents substantial long-term growth potential.

“The move in India authorizing the simple inclusion of prepaid cards to fund long-term investments highlights the power of giving, backed by the security of prepaid cards,” said Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research. “By allowing prepaid to be used as a gifting vehicle for investments, India will enable opportunity for underrepresented communities to begin their investment journeys.”

More Than a Cash Equivalent

Fostering financial inclusion is another key objective of SEBI’s strategy. Prepaid solutions offer a compelling alternative to cash by enabling unbanked and underbanked individuals to participate in the digital economy. This is one of the reasons nonprofit organizations are increasingly adopting gift cards for aid distribution.

Among other benefits, digital gift cards offer immediate delivery and are trackable. Perhaps more importantly, they can be tailored for specific use cases, such as limited spending to select brands or approved categories—or enabling conversion into mutual fund shares.

From Gift to Long-Term Investment

All these benefits underscore why gift cards continue to evolve and find new applications. While India’s approach plan is noteworthy, it is far from an outlier.

“It should be noted that there are other great examples of similar use of prepaid vehicles for investment in other global markets,” Hirschfield said. “In the U.S., givers can fund a recipients 529 tax-advantaged education savings plans through organizations like Gift of College. Small gifts into these programs create opportunity for the recipient to grow those gifts into meaningful, long-term investments.”

The post India Floats Plan for Converting Gift Cards into Mutual Funds appeared first on PaymentsJournal.

Although prepaid cards are often associated with gift cards on retail shelves, the commercial side of prepaid presents a rapidly growing market in its own right. Total commercial prepaid loads reached $426 billion in 2025, and the next five years present strong opportunities in areas such as healthcare benefits, incentives, and government programs.

For companies looking to enter this market, the potential upside is substantial. A report from Javelin Strategy & Research, 2026 State of the Industry: Commercial Prepaid Cards, highlights several under-the-radar commercial prepaid segments with strong growth potential—segments that can also serve as a pathway to broader, consumer-facing initiatives.

“Commercial opportunities really do help support those consumer type products down the line, because you have the flexibility to reach individuals differently,” said Jordan Hirschfield, Director of Prepaid at Javelin. “You’ve established that base with your business-to-business programs that are a one-to-many sale type opportunity instead of a many-to-one.”

The Changing Face of Travel

Most organizations with expense programs already understand how prepaid cards can fit their needs. The challenge is less about awareness and more about adoption. Prepaid cards aren’t meant to replace corporate credit programs entirely, but to complement them—particularly for employees who travel infrequently and only need a per diem, or for contractors who travel on an organization’s behalf but aren’t full-time employees. In those cases, prepaid offers a flexible alternative that fits alongside traditional corporate credit programs.

While corporate prepaid programs are still a relatively small segment today, several adjacent areas are primed for expansion. Because they are starting from a smaller base, they also have the potential to deliver outsized growth.

Corporate expenses represent a major opportunity, as do other types of corporate disbursements that don’t necessarily fall within traditional expense categories. Prepaid programs also provide built-in safeguards that help organizations control spending and reduce waste.

Corporate travel patterns have also shifted since COVID-19. With many employees now taking only one or two trips a year, maintaining a corporate credit card may not justify the annual fee. Prepaid cards make it easier to manage expenses for these occasional travelers, especially those who may not be familiar with corporate travel policies. Organizations can load per diems onto the card while restricting other types of spending, creating clear guardrails around how funds can be used.

The Preferred Option

Prepaid cards are also easy to program and distribute for incentive programs. They can be issued in bulk to recipients and easily reloaded when rewards are earned. For example, incentives for activities as simple as giving blood donations can be distributed quickly and even renewed on a recurring basis.

Employees also tend to value the flexibility prepaid rewards provide.

“They can treat themselves for something they want,” Hirschfield said. “And that’s the whole point of employee recognition. When you’ve got sales incentive programs, they’re easy to have reloadable cards because every time they hit that incentive, the money can automatically flow onto that card. It really is the opportunity to give something that makes you think I was celebrated and I did something nice. There are some employees who find ways to pay bills and feel grateful for that too. It all comes back in the form of more engaged, enthusiastic employees who feel that they’re respected by their employer.”

Keeping Employees Healthy

Health and wellness programs are another emerging area for prepaid programs. Although still relatively early in their development, these programs are gaining traction as more companies adopt self-insured healthcare models and look for ways to encourage healthier behaviors among employees.

Reloadable prepaid cards can be used to reward a range of wellness activities—from maintaining gym memberships to using wearable devices that track daily steps, or even completing routine medical checkups.

“If you incent your employees to be healthier, you’re reducing the risk as an organization that you’re taking on by being self-insured,” said Hirschfield. “It’s really a win-win. The employee feels motivated, and our research shows that if you give an incentive program, the healthier your workforce is.”

Opportunities in Government Programs

Government programs have also been a strong source of prepaid adoption. While federal programs have fluctuated in recent years, state-run initiatives have proven more resilient. Unemployment benefits, for example, remain a key use case where prepaid cards are frequently deployed.

In addition to state programs, major cities such as New York and Los Angeles have introduced prepaid programs for residents, and some municipalities have banded together and established regional prepaid programs. These efforts create additional points for providers looking to establish a foothold in the market.

“These programs don’t really go away,” said Hirschfield. “Once you get into a contract, it’s yours to keep as the provider. It’s easier because they’re reloadable, and the card restocks as you go through the process. If you can provide that kind of benefit to the state to say ‘We’re here to support those people in need and we’ll do it in a simple way,’ it is resilient.

While government programs may not generate the largest margins, they play a key role for many prepaid providers. They help establish a stable operational base and cover core infrastructure costs—allowing providers to build experience and scale before expanding into  more lucrative commercial prepaid programs aimed at the broader B2B market.

“These are the ones that really reduce the number of contacts you need in terms of making a sale,” said Hirschfield. “Whether you’re doing a B2B program or a government program, you’re selling to one entity for many products. It really enhances the efficiency of your programs.”

The post Where Are the Biggest Opportunities in the Commercial Prepaid Market? appeared first on PaymentsJournal.

American Airlines is betting that miles are more than just a ticket to the skies. The airline has launched prepaid cards for AAdvantage members, letting them redeem points at popular retailers and restaurants—a strategy aimed at boosting engagement and reaching travelers who rarely cash in on flights.

The new offering joins similar programs from competitors Delta and United Airlines. Members can redeem miles for gift cards from retailers like Sephora, Target, and Best Buy, as well as fast-food chains like Chipotle, Starbucks, and Panda Express.

The gift card program offers a streamlined way to partner with a wide variety of retailers without requiring them to accept points directly at checkout, as hotels in the AAdvantage network do. American Airlines manages the program through a backend card mall and chooses which brands to feature, while participating retailers don’t need to make any technical changes to take part.

New Options for Redemption

By converting miles into cash equivalents, American Airlines may encourage more frequent redemptions, rather than having members hoard points for free flights.

That said, gift cards may not be the most efficient use of rewards. According to an analysis from the Upgraded Points website, gift card redemptions return around 0.7 cents per AAdvantage mile, while miles are generally valued at 1.4 cents each—effectively cutting their value in half.

Reinforcing Loyalty

Still, as a marketing tool, the prepaid cards make sense. Expanding the ways members can use miles broadens the program’s appeal, especially to travelers who might not full utilize traditional rewards.

“Rewards and incentive options beyond your core brand are becoming much more common as a way to both encourage redemption and continued loyalty to the issuer, in this case the airlines,” said Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research. “For airlines, their core loyal base wants to extend their enjoyment of their travel experience to other necessities. This could be anything from getting beach supplies for that vacation or using a gift card to upgrade their hotel room. In the end, the redeemer leaves with a more positive opinion of the airline for extending their redemption opportunities.”

American Airlines has taken other steps to makes its miles more flexible. The AAdvantage Exchange Marketplace, launched last year, allows members to redeem miles for premium retail items, and the airline has also added options like redeeming miles for in-flight Wi-Fi.

The post American Airlines Introduces Gift Cards for AAdvantage Members appeared first on PaymentsJournal.

More states are cracking down on gift card scams. In 2025 alone, 22 states have introduced legislation targeting gift card fraud—up from just eight in 2024. While most proposals focus on enhancing criminal penalties, many also place new responsibilities on merchants that sell prepaid cards.

Over the past five years, six states have enacted merchant-specific requirements related to prepaid cards, according to a study from the National Conference of State Legislatures. Among retail-focused laws, the most common mandate is the posting of clear, visible notices warning consumers about potential gift card fraud. Two states—Maryland and New Jersey—have gone further, adding requirements around packaging, record-keeping, and employee training.

Fighting Gift Card Traffickers

More widespread, however, has been the push to increase penalties for fraud. Some 25 bills have been proposed in this category, with six states enacting new laws. Many impose harsher penalties on criminals considered traffickers of scam-related gift cards.

Texas, for example, now sets penalties based on the number of unactivated or counterfeit gift cards in an individual’s possession. Possessing fewer than five cards constitutes a state jail felony, while holding more than 50 counterfeit cards rises to a first-degree felony. Arkansas defines scams involving gift cards with an aggregate value under $1,000 as a Class A misdemeanor, while schemes exceeding $25,000 qualify as a Class B felony.

“Associating criminal offenses to the perpetrators of gift card theft and fraud is a positive move forward,” said Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research. “It penalizes their acts without placing burdens on retailers, their associates, or the buyers. Regulations forcing better packaging and signage are generally a positive but can become burdensome or discourage sales if the language stated is not reflective of the actual problems.”

Concerns Over Cash-Out Laws

According to Hirschfield, the most consequential trend for the industry is the growing wave of cash-out laws, which allow consumers to redeem gift cards for cash when the remaining balance falls under a certain amount. At least 15 states have passed such measures, with California setting the highest threshold at $15.

“These regulations are promoted to help the consumer, but without the foresight into the negative consequences,” Hirschfield said. “While California’s $15 cash out law was promoted as a protection to allow consumers to not surrender unredeemed value, bad actors can easily take advantage of the higher limit to more easily convert gift cards into cash.”

Javelin is currently researching the impact of these cash out regulations as part of its annual prepaid consumer sentiment survey, which is scheduled for release this summer.

The post More States Are Tightening Their Gift Card Regulations appeared first on PaymentsJournal.

Public transit systems are critical infrastructure that shuttle commuters and fuel tourism. However, purchasing tickets and reloadable passes is often a complex process that creates long queues and checkout friction.

That’s why more cities are moving to contactless payments, as San Francisco did last year with its Bay Area Rapid Transit (BART) system. Now, the Seattle and Puget Sound region’s transit system, ORCA, is launching contactless functionality that will allow riders to tap credit and debit cards, as well as leading mobile wallets like Apple Pay and Google Pay.

While this capability will likely be a boon for daily travelers, it can also dramatically reduce strain on the system during high-traffic events. For example, Seattle is expected to see a surge of visitors when it hosts six matches of the FIFA World Cup this summer. The city also has a packed calendar of concerts and festivals throughout the year.

Prepaid to Contactless

Delivering this functionality requires a substantial infrastructure investment, but the benefits of contactless payments outweigh the costs in this case. As a result, the ticketing and transit segment is one of the few markets shifting away from prepaid models after years of reliance on them.

Contactless payments accelerated during the pandemic due to hygiene concerns, and adoption has continued to grow because of their convenience. In addition, contactless payments offer flexibility that can drive revenue gains. For example, more riders may be enticed to use public transit when they don’t have to wait in long lines or decipher complex fare structures.

Taking the Pitch

This line of thinking was one reason the UK recently scrapped its transaction limits on contactless payments. Tap-to-pay has become one of the most popular payment methods in the region, and enabling more higher-value purchases can further support economic activity.

Despite the benefits of contactless payments, optionality is key. To that end, ORCA will continue to issue prepaid cards for riders enrolled in discounted or free-fare programs, such as seniors or those with organizational sponsorships.

This inclusive approach to payments can help ensure efficient travel for fans who want to be there when the USA takes the pitch against Australia this June.

The post Seattle Area Transit System Adds Contactless Payments Ahead of World Cup appeared first on PaymentsJournal.

The past holiday season didn’t just test consumer wallets—it revealed how dramatically shopping behavior is evolving. As inflation-weary shoppers searched for flexibility, value, and convenience, gift cards emerged as a central tool in how consumers planned, budgeted, and ultimately gifted. From promotion hunting to increased reliance on AI, the behaviors that defined the season are poised to shape retail for years to come.

In a recent PaymentsJournal podcast, Sarah Kositzke, Director of Research at Blackhawk Network (BHN) and Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research discussed the accuracy of holiday shopping predictions, evolving consumer gift card habits, and how brands, retailers, and issuers can prepare for a dynamic year ahead.

Navigating Affordability Through Promotions

One of the most closely scrutinized aspects of the season was how consumers—under sustained pressure from inflation would approach holiday gifting. While BHN’s post-holiday research indicates that budgets were largely flat year-over-year, shoppers adopted new approaches to strategies to stretch their spending.

“This past holiday, we saw about 90% of people—that’s nearly everyone—leveraging some sort of a promotion, whether it was buy-one-get-ones or percentages off of certain products, or even gift cards,” Kositzke said. “I feel like a lot of people started earlier. They were looking for those deals, that’s what was a motivating factor for starting earlier.”

“One of the most interesting things, which we nodded to in pre-holiday work that we had done, is we said: ‘I think folks who start earlier in the season also have a larger budget for gifting.’ And we found that to be true, it was nearly double those who started later,” she said. “Factor in all the promotions, factor in looking for those deals—even if it was starting in October—that’s where we saw the crux of people finding that momentum to get out there and shop.”

This focus on finding discounts further entrenched Black Friday as the official kickoff to the holiday season. BHN found that 31% of respondents identified Black Friday as the leading promotional period, beating out Cyber Monday.

At the same time, more shoppers bought fewer gifts this holiday season. This shift was driven partly by economic concerns and partly by how consumers are prioritizing and managing their many gifting and holiday obligations.

“Gift exchanges are fascinating because, anecdotally, I see it happening a lot,” Hirschfield said. “We’ve put COVID behind us and now it’s like, let’s just get together, but let’s do it in a way that’s fun and interesting, And instead of spending $10 on everyone, you’re amplifying that budget into one item, but you’re doing it in a fun and social way.”

A Haven for Last-Minute Shoppers

Even though more consumers started shopping earlier, many stretched their budgets to the very end of the season. Nearly three-quarters of respondents purchased digital gift cards as a last-minute gift on Christmas Eve or Christmas Day.

“They really became a safe haven this holiday season,” Kositzke said. “We saw this last year and we predicted that this would be the case, but digital was such a key factor. We saw 80% of people purchase a digital card for that specific occasion.”

“Whether it’s, ‘Oh, no, I got to the event and I thought nobody was buying gifts, now suddenly everybody bought a gift and I’m feeling left out’ or ‘I missed somebody’ or ‘I’m suddenly going have a night out or a dinner with somebody and I want to be thoughtful and get them something,’ we saw an incredible amount of shift to those digital cards,” she said.

For retailers and brands, this trend heightens the importance of a strong digital gift card offering. Retailers should also promote digital gift cards heavily through Christmas Eve to capture last-minute shoppers.

While digital gift cards served as a lifeline for last-minute gifting, they can play a much larger role in merchants’ overall gift card strategies.

“For a long time, people said digital will replace physical, and I don’t believe that’s true,” Hirschfield said. “Timing is a key factor of why those choices are made. People may prefer to give a physical gift because they want that tactile experience that includes unwrapping something, and you can do that with a physical gift card.”

“But when time gets short or when distance is a factor, digital becomes the gift of choice,” he said. “It fills a need when you can’t be there in person or they’ve just run out at the store, or you can’t get to the store. We also see that impacts the value of these cards. From 2024 to 2025, physical card loads on average went up $11; digital went up $15. When you don’t have to package it, mail it, and all those costs involved, you can say ‘I can spend $4 or $5 more.’”

In addition to the shift toward digital, the value loaded onto both physical and digital gift cards continues to rise. The average total gift card value reached $236 last year, up from $209 in 2024. Beyond this initial spend, gift cards also present a meaningful opportunity for merchants once they reach the recipient.

“What’s interesting is the fact that then I’m going to take that card and I’m going to overspend at the place of purchase, whether it’s a restaurant, whether it’s a store, or whether it’s a service I’m getting done,” Kositzke said. “On average, people spent about $108 over the value of the cards that they received.”

“And people on average—so this has stayed the same—have received about three cards,” she said. “We’re not seeing a huge shift in the number of cards, which means the value of each is going up.”

Generational Gaps in Loyalty and AI

In addition to spending trends, one of the most closely watched aspects of this shopping season was the impact of artificial intelligence. While overall AI usage increased among all consumers, a growing generational divide is emerging: nearly three-quarters of younger consumers used AI for holiday shopping, compared to roughly 31% of older consumers.

What’s more, the number of Gen Z and millennial consumers using AI grew 8% year-over-year, compared to just 1% for Gen X and Baby Boomer shoppers. This overall rise in AI adoption is likely to have lasting effects.

“We saw a lot of people using it for looking for promotions, they’re looking for the best cost, or they’re looking to try to figure out the most creative gift ideas,” Kositzke said. “Especially if it’s somebody who they’ve been gifting to a long time and they just need some new fruitful ideas of, ‘What could I bring?’”

Understanding this growing preference for digital and AI-driven solutions is critical for merchants and gift card issuers seeking to develop deeper engagement with the new generation of consumers.

In addition to AI integration, younger consumers are increasing motivated by rewards and are willing to adjust their shopping behaviors to maximize value.

“The loyalty era is here,” Kositzke said. “People are looking to exchange any points that they have, wherever those programs might be for gifts. We found that younger consumers, about three-quarters, exchanged loyalty points for gifts, compared to 57% of older consumers.”

“What kind of gift did they exchange it for?” she said. “Almost half exchanged for gift cards, some exchanged for physical gifts, and about 10% exchanged for some sort of experience. So, loyalty points and programs can provide the gamut of what people are looking for, especially dependent upon who that end recipient is. It’s important to add these programs into any sort of messaging or ties that you have.”

Diversifying Marketing Channels

Another important consideration for merchants is the evolving array of channels through which consumers seek guidance and make purchases.

“Those traditional channels—whether it’s emails, word of mouth, maybe it’s a print in-store flyer—those are all still heavily leveraged,” Kositzke said. “However, we find that they’re more so leveraged by older generations. Nearly two-thirds are seeking those sources compared to only maybe about half of younger shoppers.”

“Younger people are looking for these promotional deals across their Cash Apps, any sort of shopping discount channels that they might be on,” she said. “There are some programs out there where you can input information about your purchases and you’re then earning power there as well, which goes back to that whole points and exchange for gift cards as part of a program.”

This diversity of channels makes it essential for merchants to diversify their marketing and promotional strategies. For example, retailers should expand their approach to include price comparison tools like Google Shopping and deal forums like Slickdeals and Reddit.

To stay relevant, merchants must also continually reevaluate the impact of social media channels.

“TikTok Shop is really driving purchases,” Hirschfield said. “In my N=1 study of my Gen Z daughter, the number of times I hear her mention TikTok Shop purchases for her or her friends, it’s really one of their main sources of purchases. My daughter is a freshman in college, there are 400 young women living in her dorm, and I guarantee you that she is not alone.”

“These are significant populations of people who are using things like TikTok Shop rather than a traditional retail outlet,” he said. “So, utilizing TikTok and things like that where these younger generations are gathering to be influenced to find deals, it’s a meaningful driver of business and you have to be hyper-aware of what’s next—beyond what you might be comfortable with for the people who are making these business decisions.”

Watching Your Consumer

In addition to these impactful consumer trends, gift cards remain a dominant choice. Last year, roughly 65% of employees received a gift from their employer, and nearly nine out of 10 of these gifts were gift cards.

This highlights the increasing prevalence of gift cards—not just during the holidays. Leveraging promotions, integrating AI, bolstering loyalty programs, and diversifying marketing efforts are all critical lessons from the holiday season that can be applied year-round.

“What I would say is, going into 2026, really watch where your consumer is,” Kositzke said. “Watch where they’re researching, watch the way in which they’re speaking to AI about what it is that they’re looking for, and find a way to be present. We talked about TikTok, YouTube, Cash App, and all these different sites. It’s making sure you’re staying relevant where the consumer is, that’s going to be very important in 2026.”

To learn more, check out BHN’s 2025 post-holiday gift card report infographic, How holiday shoppers adapted to affordability challenges. Just click here.

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Prepaid cards are used for many different reasons, from everyday spending to gifts and financial management. Looking at the types of prepaid cards people purchase, reload, or receive can reveal how consumers actually use them in practice. Some cards are bought for personal budgeting, others are given as gifts or incentives, and many serve as practical tools for people who prefer alternatives to traditional bank accounts.

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Data for today’s episode is provided by Javelin Strategy & Research’s Report: 2026 Prepaid Payments Data Book

Prepaid Cards Purchased, Reloaded, or Received in the Past 12 Months

• 72% – Retailer-specific gift card
• 50% – General-purpose non-reloadable prepaid card
• 29% – General-purpose reloadable prepaid card
• 25% – Multi-retailer gift card

Source: Javelin Strategy & Research

About Report

Prepaid card programs continue to expand across multiple sectors, reinforcing their role as an important component of the payments ecosystem. Over the next five years, several prepaid segments are expected to experience steady growth, with many categories projected to achieve annual increases of around 5% or more. Certain areas—including gift cards, gaming-related payments, cash-access alternatives, and commercial incentive programs—are forecast to grow even faster, averaging roughly 8% annually as adoption increases across consumer and business use cases.

Although prepaid products are commonly associated with consumer spending, commercial and government programs account for significant load value and remain an important part of the market. Government-funded programs continue to represent a large share of prepaid volume, though their growth is expected to remain relatively modest compared with other segments. Policy changes, federal funding adjustments, and cost-of-living increases tied to programs such as Social Security and nutritional assistance may influence growth patterns across these categories.

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Using debt to fund gambling activities is a highly risky proposition, even more so when transaction fees are involved. That’s why online betting giant FanDuel will no longer allow customers to fund accounts with credit cards.

The ban will apply to the company’s U.S. sportsbook, casino, and racing segments and follows mounting industry pressure and regulatory scrutiny. Senator Elizabeth Warren recently urged the company to halt credit card payments, noting that nearly a quarter of American bettors used credit cards to fund their accounts and that many incurred fees as high as half of the original wager.

Rival online betting platform DraftKings cited these fees as the main reason it stopped accepting credit card payments last year. Funding a gambling account with a credit card is often treated as a cash advance rather than a purchase, allowing interest charges and fees to accumulate quickly.

“This is actually a win-win for both FanDuel and consumers,” said Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research. “For FanDuel, they get some modest per-transaction cost savings, which add up over time. And they can utilize the stored-value accounts to encourage responsible play, but also to incent and reward new deposits at rates less than the transaction and interchange fees.”

“For the players, they can continue to play and use readily available funds, meaning they will not be incurring credit card debt to fund their gambling activities,” he said.

Incentivizing Betting Behaviors

FanDuel’s stored-value accounts exemplify a model that has reshaped a prepaid industry once centered largely on gift cards. In effect, these accounts function like digital gift cards purchased for self-use. Such products have surged as more organizations recognize the pivotal role stored-value accounts can play in loyalty and rewards programs.

Amid the broader expansion of the prepaid market, digital gaming and gambling have emerged as standout segments. This growth is partly driven by platform incentivizes, including deposit matches and rewards tied to specific betting behaviors.

Gambling on Prepaid

Beyond loyalty optimization, there is a more practical factor behind the digital gaming and gambling market’s recent growth: legalization. Now that online betting is legal in 32 U.S. states, the pace of expansion may begin to moderate as the market matures.

Still, the elimination of credit card payments by the two leading U.S. online gambling platforms is likely to keep digital gaming and gambling among the top prepaid segments. While some gambling platforms still permit credit card deposits, that option may diminish. Eight of the 32 states have already banned credit card funding for betting platforms, and additional states could follow.

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General-purpose reloadable cards play an important role in the prepaid ecosystem, but continued usage is not guaranteed. While many consumers adopt these products for budgeting, convenience, or access to digital payments, a range of factors can influence whether they keep using them over time. Understanding why consumers discontinue use offers valuable insight for issuers, program managers, and payment providers looking to improve retention. The latest data highlights the primary reasons cardholders step away from general-purpose reloadable cards.

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Data for today’s episode is provided by Javelin Strategy & Research’s Report: 2025 General-Purpose Reloadable Card Scorecard

Top 4 Reasons for Discontinuing Use of General-Purpose Reloadable Cards

• 38% – Reloading it wasn’t convenient
• 25% – The fees were too high
• 13% – I lost it
• 13% – I was able to open a bank account with a debit card instead

Source: Javelin Strategy & Research

About Report

The 2025 General Purpose Reloadable Card Scorecard examines the competitive landscape of the GPR market through a consumer-focused lens. As one of the most significant segments within prepaid payments, general-purpose reloadable cards reached $255 billion in total load volume in 2024 and are projected to expand at an annual growth rate of roughly 8%, according to Javelin Strategy & Research. These products serve diverse purposes, functioning as an alternative for consumers without access to traditional credit or debit, a budgeting tool for everyday expenses, a gateway to peer-to-peer payments, and in some cases a loyalty driver for retailers.

Javelin’s research explores how consumers evaluate reloadable cards, identifying cost, security, accessibility, and digital functionality as the most influential factors shaping satisfaction and continued use.

In the 2025 rankings, the Regions Bank Now Card earned top overall recognition among 16 widely used programs. While it did not lead in any single scoring category, its consistently high performance across all segments secured its position at the top. The Cash App Card and GO2bank Card followed closely, each demonstrating strong overall results despite not finishing first in individual categories. Notably, the top three programs reflect distinct market approaches, representing a traditional bank-sponsored offering, a peer-to-peer platform-backed card, and a retail-focused GPR product.

The evaluation framework assesses 55 separate attributes grouped into three weighted categories: Ongoing Experience, which accounts for half of the total score, and Cost as well as Additional Benefits and Features, each representing 25% of the final rating.

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After Synergy abruptly shuttered its restaurant gift card program over the weekend, consumers were left holding stacks of apparently worthless prepaid cards. The company’s pending bankruptcy—after nearly 30 years of selling gift cards for locally owned restaurants—highlighted just how little recourse most consumers have when prepaid cards suddenly lose their value.

For many consumers, the end came swiftly. Synergy initially announced that its cards would expire on February 1, prompting a rush by consumers to spend any remaining balances. That surge in redemptions drained the program’s funds even faster than anticipated, forcing Synergy to shut it down a day earlier than planned.

Costco Steps Up

The cards were sold through Costco, which has stepped in to offer refunds to some customers. Costco is under no legal obligation to cover customers’ losses, and its website asserts that gift cards are nonrefundable. Nonetheless, the company has taken steps to provide limited relief to its customer base.

According to posters on Reddit, Costco is refunding the purchase price to customers who bought the cards themselves,or offering a Costco gift card if a third party had bought the Synergy card. While some customers said refunds were available only for cards that still retained their full original value, others reported that certain stores were granting refunds for partially used cards as well.

Unsecured Liabilities

The affected restaurants are also under no obligation to honor the cards. That leaves Synergy itself, which issued gift cards for local restaurants not only in its home base of San Diego, but also in Florida, New York, Texas, and several other states.

Synergy has no legal duty to reimburse its customers. Even if the company enters bankruptcy—an outcome expected any day—cardholders, though technically creditors, would be at the bottom of the priority list for repayment.

“In general, gift cards are unsecured liabilities, meaning they do not need any collateral or reserve requirements,” said Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research. “They are simply a promise to pay. For most major brands this is not an issue, as they aren’t in danger of bankruptcy. But it shows why consumers need to understand the gift card they are buying and evaluate the worthiness of the represented brands to fulfil their obligations.”

For now, Synergy has now gone completely dark. Its website displays only a brief notice stating that the gift card program has been discontinued.

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Consumer demand for reloadable prepaid cards has shifted in recent years as payment preferences continue to evolve. From budgeting tools to digital spending options, these products serve a range of financial needs. But how strong is purchase intent today?

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Data for today’s episode is provided by Javelin Strategy & Research’s Report: 22nd Annual U.S. Open-Loop Prepaid Card Market Forecast, 2025-2029

Consumer Intent With Regard to Purchasing Reloadable Prepaid Card Products, 2025

• 26%- More likely to purchase
• 41% – Purchases will stay the same
• 11% – Less likely to purchase
• 15% – Will not purchase any reloadable prepaid cards
• 8% – Don’t know

Source: Javelin Strategy & Research

About Report

Javelin Strategy & Research is continuing its analysis of developments across the open-loop prepaid sector. The firm expects solid expansion across most major prepaid segments, particularly general-purpose reloadable cards, payroll and government benefit cards, and business or expense-related products. As with prior forecasts, broader economic conditions remain a key factor shaping performance, with growth measured against overall economic activity.

Policy changes, program administration improvements, and benefit enhancements are supporting certain prepaid categories, especially general-purpose and benefit cards. These products can serve as alternatives to higher-cost credit or to healthcare spending that offers fewer tax advantages. At the same time, wider macroeconomic pressures, including political uncertainty and smaller cost-of-living increases, are tempering growth in areas such as Temporary Assistance for Needy Families and campus card programs.

Separate consumer research from Javelin indicates that U.S. consumers continue to view prepaid products favorably. Usage levels remain strong, load activity is steady, and purchase intent is trending upward. Spending activity is particularly concentrated in high-volume categories, including gift purchases and cards used for personal spending.

The post How Likely Are Consumers to Buy Reloadable Prepaid Cards? appeared first on PaymentsJournal.

Gift cards have become a go-to choice for consumers who want something flexible, convenient, and easy to personalize. But where people choose to spend those cards says a lot about what they value and how they shop. From everyday essentials to entertainment and experiences, certain categories consistently rise to the top because they fit real needs and lifestyles.

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Data for today’s episode is provided by Javelin Strategy & Research’s Report: 22nd Annual U.S. Closed-Loop Prepaid Card Market Forecast, 2025-2029

Top Consumer Gift Card Purchase Categories

• 43% – Mass merchandisers (Walmart, Target, etc.)
• 41% – Online-only merchandise retailers (Amazon, eBay, etc.)
• 34% – Fast-food/quick-service restaurants (McDonald’s, Panera Bread, etc.)
• 31% – Coffee/specialty food (Starbucks, Dunkin, etc.)
• 25% – Supermarkets/Grocery stores (Kroger, Publix, etc.)

Source: Javelin Strategy & Research

About Report

This report builds on Javelin Strategy & Research’s ongoing analysis of the closed-loop prepaid market, examining recent load activity alongside projected performance over the next five years. The overall outlook remains favorable, with the category expected to expand steadily. Segments such as in-store gifting and incentive programs are positioned for solid gains, while areas like nutrition assistance and prepaid mobile are projected to increase more modestly. Online gaming and gambling continue to be a notable growth driver, supported by broader legalization and strong consumer interest. Shifting economic pressures and policy decisions remain key variables, as higher everyday costs tend to support prepaid usage while lower levels of federal funding limit growth in certain programs.

Consumer attitudes toward closed-loop cards are also trending positive. Both purchasers and users in the U.S. indicate ongoing adoption, driven by increases in load amounts, a stable mix of gifting and personal use, and a balanced shift between digital and physical card formats. Together, these factors point to sustained relevance and gradual expansion across the market.

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As National Use Your Gift Card Day approaches, many retailers are developing strategies to encourage consumers to spend the unredeemed gift cards they received over the holidays.

The spending power significant: U.S. consumers are estimated to be holding roughly $23 billion in unused prepaid cards. This latest demand, combined with traditionally slower January sales, led to the creation of National Use Your Gift Card Day seven years ago.

“Gift cards fill a need that no other gift can give, and that means that a lot of U.S. consumers are sitting on gift cards they got in the past month from the holidays,” said Jordan Hirschfield, Director of Prepaid Javelin Strategy & Research. “Most of those are probably retailer-specific, but you have some open-loop gift cards too, and both need redemption.”

“It’s always the most popular gift both as a recipient and to give, but givers generally prefer those retail, single-vendor gift cards because it seems a little more personal, even though recipients marginally prefer the Visa, Mastercard, or American Express open-loop cards,” he said.

Preparing for Repeat Customers

Encouraging consumers to use their gift cards can deliver dramatic benefits for merchants. According to Javelin, over two-thirds of consumers received a gift card this holiday season, and roughly a quarter of those cards carry higher balances than the previous year.

“That means retailers that are preparing to accept those gift cards should be ready,” Hirschfield said. “The date of January 17 makes sense because the majority of recipients of gift cards will use them within a month. Not only will they spend it within a month, they will spend more than the value of that card. For retailers, if it’s a $50 gift card and they’re spending $75, you’re getting uplift of spend that maybe they weren’t intending to buy, and they’re buying more profitable items.”

Beyond the immediate revenue opportunity, gift card redemption gives merchants a chance to build long-term customer relationships.

“Roughly half will become a repeat customer of that brand when they get a gift card and they use it,” Hirschfield said. “Four out of 10 will join the loyalty program; another four out of 10 will download that app. Especially when you think about popular gifts that people getting as gift cards—quick-serve and fast food, coffee shops, mass retailers like your Walmarts and Amazons—all those have easy to utilize and frequently utilized apps.”

“You can incentivize people by offering a bonus or different things like that,” he said. “But they’re going to download that app, and about 20% are going to refer that retailer to another friend or family.”

The Redemption Pattern

All these benefits stem from the simple act of receiving a holiday gift card. Although many retailers focus heavily on driving gift card purchases, redemption is often even more critical, because it represents a self-use choice.

For merchants, National Use Your Gift Card Day can provide a valuable lift during an otherwise slow first quarter. However, effective prepaid strategies should stretch far further than a single day.

“We have Father’s Day, Mother’s Day, and graduation—all the May and June holidays,” Hirschfield said. “Birthdays are the number one reason people get gift cards, and birthdays happen 365 days a year—366 some years. You’ve got thank you gifts, house warmings, religious occasions, births, weddings, and all these things.”

“Valentine’s Day is coming up and people don’t think that it’s a great gift card occasion, but I might send my kids $10 to show them I care about them while they’re off at college,” he said. “These are all micro-events that will not top the fourth-quarter explosion of sales, but all are additive. How the redemption pattern went in January is critical to how the redemption pattern will go all year round.”

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In the post-COVID era of remote work, organizations often struggle to find meaningful ways to recognize their top performers. In-person celebrations are not always possible, and traditional physical gifts can sometimes feel impersonal or difficult to deliver effectively.

In this context, digital gifting platforms have risen dramatically as a powerful tool to celebrate achievements, boost morale, and drive sales performance. Beyond their versatility, digital gift cards also provide several behind-the-scenes benefits—from streamlining the gifting process to offering measurable insights into their impact.

“If you have a dispersed and virtual workforce, clearly a digital gift card’s going to be the best option,” said Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research. “There’s no mailing, but even though everyone is in separate locations, it can be sent automatically and systematically to arrive at the same time.”

Immediate Rewards

Only around one in five employees receives any type of incentive, even though research published by the National Library of Medicine confirms that immediate rewards have the strongest motivational effects on employees.

“That immediate reward really makes people feel good,” said Hirschfield. “You can go out and treat yourself to something because you hit a goal.”

Organizations that have implemented digital gift cards have discovered a wide range of strategic uses that support various aspects of the business. When used as incentives for sales teams, rewards can be tied to specific results, such as closing a deal or meeting quotas. Additionally, digital gift cards generate analytics that can inform future incentive and rewards planning.

These cards can also recognize achievements of all kinds, from birthdays to sales milestones to team accomplishments. Immediate, on-the-spot rewards help boost employee satisfaction, enhance retention, and strengthen an organization’s competitive culture. According to research from Javelin, 83% of prepaid card recipients report that incentives increase their satisfaction—particularly in remote work environments where teams cannot celebrate successes together in person.

“Even though the long-term effects of COVID from a business standpoint are starting to fade, the learnings we had and the tools that were developed are going to stay,” said Hirschfield. “COVID accelerated the development of some of these tools, and now the industry can run with it for long-term gain, not just their immediate short-term needs.”

Behind-the-Scenes Benefits

Efficient and easy to use, these digital gift cards offer a wide range of operational benefits. They can support everything from individual or small team incentives to large-scale rewards programs. Flexible delivery options allow organizations to schedule cards well in advance for milestones, birthdays, or link them to KPIs for performance-based bonuses. Moreover, they can be personalized for each employee, reflecting their accomplishments and providing rewards tailored to their preference.

“You might have a wellness program where if a person hits their 10,000 steps, they get a $5 credit,” said Hirschfield. “It also allows a recipient to select the gift cards they want. Electronic delivery is the best way to provide those multiple options, so they can go through the catalog of choices and choose the one that suits them the best.”

Organization can also customize these gift cards with their own branding at a lower cost than personalizing physical cards. This includes adding company logos, colors, fonts, and word marks. Some advanced providers, such as Prezzee, even allow the inclusion of video messages to enhance the personalization.

Distribution is straightforward, even for large or widely dispersed teams. For department- or organization-wide programs, cards can be bulk-sent via CSV upload. Unlike store-bought gift cards, which are increasing subject to tampering and fraud, digital gift cards remain secure and reliable.

On the back end, digital gift cards provide measurable impact in ways that traditional rewards can’t. They offer real-time tracking of redemptions, giving HR departments a way to ensure cards are being used as intended. Their performance can also to the performance of the rewarded employees, allowing management to assess their effect on sales and overall performance.

Advantages for Issuers

There are benefits for issuers as well. Employees who receive an incentive are more likely to try a new brand or sign up for a loyalty program. If a recipient becomes a member of a rewards community, that the incentive shifts from being a one-time tool that serves the employer’s needs into a long-term benefit that strengthens the relationship between the employee and the card issuer.

An experienced digital gift card partner like Prezzee  can help an employer address all these needs. A trusted expert can manage the various elements of these incentive programs, which have the potential to transform an organization’s workforce.

“Not only are the employees more satisfied, but they are more likely to be an advocate for their employer if they feel like they are being treated well,” said Hirschfield. “These are really simple tools that have big-time payoff.”

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Roughly $23 billion in gift cards go unused in the U.S. after the holiday season, and consumers now have more options for spending this unexpected windfall.

Gift cards have become a top choice for shoppers, offering a personal touch from the giver while letting recipients select exactly what they want. This prepaid trend fueled significant holiday spending—according to data from National Use Your Gift Card Day—U.S. shoppers were projected to spend around $29 billion on prepaid cards.

In this gift card frenzy, there is always a chance that a card ends up tucked away at the bottom of a drawer or a purse, waiting to be rediscovered.

“While Javelin research shows that the majority of consumers will use their gift cards quickly and in full, there will always be a small segment that sit on their card values,” said Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research. “We are seeing positive trends for retailers who are able to digitize their physical cards which enables easier ongoing redemptions and potential reloads.”

Donating the Balance

Another emerging prepaid trend is the use of gift cards for charitable donations. When consumer don’t want to shop at the retailer on a branded card—or still have an unused balance—they can donate the funds to charitable organizations such as St. Jude Children’s Research Hospital, GiftCards4Change, or Donate Your Card.

“A key fact is that donations do not need to just be with currencies,” Hirschfield said. “Gift cards act as a currency replacement and can be incredibly useful to organizations of all types and also retain the tax benefits of a donation.”

Beyond donation acceptance, gift cards have become a pivotal part of many nonprofit disbursement operations. These organizations often rely on manual processes and traditional payment methods like paper checks. Conversely, gift cards are faster to deliver, can be digital or physical, and put purchasing power directly into the hands of those in need.

Self-Use Synergy

Aside from the benefits for nonprofits, organizations of all types are beefing up their prepaid programs. Gift cards and stored-value accounts—such as the balances shoppers keep at Starbucks or Amazon—can integrate seamlessly with loyalty and engagement programs.

This highlights one of the most important trends in prepaid: the increasing frequency of self-use. This trend is likely to continue growing as consumers have more options to buy and spend gift cards, potentially reducing the number of unused balances.

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The holiday season has increasingly revolved around gift cards, as more consumers prefer spending power over physical gifts. Although gift cards are an enduring offering, the prepaid industry has evolved to include an array of products that are as much about self-use as they are about handing out gifts.

As Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research, detailed in the 2026 Prepaid Payments Trends report, the reimagining of prepaid could even go further than stored-value accounts and digital payment cards. New technologies like digital assets have the potential to turn the prepaid model on its head and shift the course of the industry.

Blending Toward Equilibrium

As digitalization has accelerated, speculation has held that the workhorse of the prepaid industry, physical gift cards, could be phased out. However,  a strong demand for these products persists, even if consumers have new preferences for how to leverage them.

“You need physical gift cards because they are a point-of-sale item,” Hirschfield said. “In general, consumers still like physical cards—you go to a store, and you could tap your phone, but people still like to pull their card out. But especially on the consumer side, both with open-loop cards and closed-loop cards, the ability to digitize a physical card is a critical step that a lot of companies and programs have taken.”

The capability to digitize a physical card is important because it can bridge a single-use gift card and a recurring-use account. This makes it critical for companies to consider their card program holistically, regardless of a card’s initial form factor, and identify ways that their prepaid products can work symbiotically.

For example, with a physical card, a merchant could incentivize a customer with loyalty and rewards tools to digitize their card and reuse it. When developing their prepaid strategies, organizations should also understand that digital and physical cards are essential tools.

“It takes away that talk track—that I think was getting stale—of ‘Digital is what you have to do,’ because it’s just not happening like that,” Hirchfield said. “As much as digital is happening and is critical, the physical step is going to remain important.

“You have to be engaged in a digital program if you’re in prepaid, both from a closed-loop retail gift card type environment and in an open-loop. But where I think the market is headed this year is, ‘How do you blend this omnichannel program into an equilibrium?’”

Filling the Slush Fund

As an extension of this big-picture mindset, more prepaid growth this year will be driven by self-use. While the term “gift card” has become entrenched in the lexicon, many products are better classified as stored-value accounts.

When consumers have this digital account that is tied into rewards and loyalty, it can be a powerful driver to self-use these products. This can deliver significant ongoing advantages for merchants and customers.

“If you are a retailer and people are beginning to load money into their account, you’re saving on transaction fees,” Hirschfield said. “Those are pennies at a time, but those pennies add up. Instead of five transactions of $5, it’s one of $25—and that’s five times less on transaction fees. That’s a big deal.

“For consumers, you reward them by having loyalty points, rewards, and offers, be it a quick-serve restaurant where you might get a free drink or a free side dish. But even when you look at other retail dollars, it might be a $10 reward, and usually that $10 reward creates—and our research shows it—$20 or $30 more in spending. You’re going to be incented to spend even more than you would have just by giving that $10 off.”

Prepaid cards are also often superior to many coupons and discounts because they represent a fixed dollar amount, whereas many coupons offer a percentage discount that could be more costly in the long run.

The promise of these programs has attracted the attention of many organizations, particularly in the peer-to-peer space. Many P2P companies like Venmo and Cash App have prepaid cards that are tied to P2P accounts. These products are designed to give customers incentives to spend their balances in-store.

“They’re going to use that P2P account more because they’re holding that money, so there’s a lot of opportunity,” Hirschfield said. “You’re seeing a lot of growth in Venmo and PayPal commercials for their cards because they’re seeing the benefit of that self-use.

“Sometimes it’s a slush fund account, they want to have that money on the side, and they’re using this to treat themselves or whatever it may be. Those are critical growth engines to make sure that the individual is engaged for the long term with prepaid cards.”

The Promise of Digital Assets

Another prepaid growth engine is just beginning to gear up: digital assets and crypto. In fundamental terms, there are now gift cards that allow users to purchase cryptocurrencies and stablecoins. However, the potential use cases go far beyond these simple transactions.

“Prepaid is a liability on the balance sheet where we owe you this money,” Hirschfield said. “But if you shift that—and there’s regulatory issues that will need to be worked through and a lot of what-ifs and hypotheticals—instead of buying a gift card that is a liability, you buy a digital asset. You then start to create an asset class that people can work from.

“It has the potential to be actualized cross-border much easier. If you have an account at Starbucks—as an example—that has a cross-border presence, you have to have separate accounts for different currencies. In a digital asset environment, you could pull from that, and they could convert it for you.”

Leveraging digital assets could also give program managers running multiple prepaid programs a valuable alternative when dealing with at-risk retailers. Now, if a retailer goes out of business, their gift cards are unsecured liabilities that are valued at zero.

However, if the prepaid cards are backed by assets the program manager holds, these assets could simply be transferred to another program.

“There’s a lot of hypotheticals and potential uses,” Hirschfield said. “This year, you’re going to start to see planning for it, and you’re going to start to see acceptance that there is potential for digital assets to play a role in the prepaid ecosystem as a shift from a liability to an asset. I think it’s something where you can’t ignore digital assets anymore, in any aspect of the payment space.”

The post In a Pivotal Year for Prepaid Products, Digital Assets Emerge appeared first on PaymentsJournal.

As the holiday shopping season heads into its final phase, last-minute gift cards are expected to fly off the store shelves. This year, shoppers may benefit from a new technology designed to make those cards far more tamper-proof.

Schnuck Markets, a grocery chain in the St. Louis area, recently completed a 10-week pilot program with Digimarc that embedded a tamper-evident digital watermark directly onto its gift cards. The watermark replaces the standard activation barcode, which is typically protected by scratch-off strips or bulky packaging intended to deter theft.

With traditional gift cards, criminals have been able to cover legitimate barcodes with fraudulent ones, causing any funds loaded onto the card to be redirected straight into a criminal’s account. Under the new system, if a watermarked card shows any sign of tampering at checkout, it simply will not activate.

Early results from the pilot are encouraging. There were no reports of fraud involving any of the Digimarc-secured cards, and every gift card in the program was activated successfully.

Streamlined Processes

The new technology did not slow down the checkout process. In fact, 87% of cashiers reported that Digimarc cards activated just as quickly—or faster—than traditional gift cards. Employees also no longer needed to open packaging or visually inspect cards for fraud, a step that can delay checkout. The program required no changes for customers at self-checkout and did not interfere with existing in-store processes.

“From a technology perspective, the added layer of the watermark serves to be a simple and unobtrusive security measure that protects consumers and retailers,” said Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research.

A Concerted Effort

Gift card fraud has long been a concern across the industry, with consumers losing more than $200 million to these schemes last year. Recent packaging improvements have already helped create an environment in which shoppers feel more confident and secure.

“While Javelin research shows that most consumers already feel safe using and buying gift cards, these efforts highlight the proactive approach that the entire prepaid ecosystem is taking to protect balances,” said Hirschfield. “What is most evident is the full-scale cooperation from packaging to program management to retailers and merchants working to solve the problem.”

The post Digital Watermarks Are the Latest Protection for Physical Gift Cards appeared first on PaymentsJournal.

Some shoppers have purchased gift cards, loaded the balances, and later discovered that the funds disappeared before the intended recipient ever used them. This scenario is often the result of gift card draining scams, in which bad actors steal gift card data or tamper with cards before returning them to store displays.

Once a consumer activates and loads a compromised cards, a bot alerts the criminals, who immediately drain the funds.

These scams escalated enough to draw the attention of the Department of Homeland Security (DHS) last year. Their investigation revealed that many of these operations are run by large overseas threat actor groups, which have collectively reportedly cost U.S. consumers more than $1 billion over the past two years.

Working to Curtail

Because gift card draining networks pose substantial risks, many organizations have moved to create defenses against this scam.

“These sophisticated crime networks have tried to find a vulnerability in the card supply chain, but it should be noted that industry and regulatory bodies are working to curtail these activities,” said Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research.

“Major brands and their card and security partners have continually strengthened their packaging to show signs of tampering, as well as other security measures—such as to use tamper-evident seals and labels over key card information,” he said.

Gift Card Awareness

Consumer education is a critical part of fraud prevention, and informing customers about gift card scams is especially important as the holiday season approaches. Gift cards have become popular holiday gifts because they give recipients the flexibility to choose something they really want.

To ensure their gift stays secure, consumers can take a few simple steps to protect themselves this season.

“If a consumer is choosing a card off a display and not in tamper-proof packaging, they should browse several cards and ensure that the labels covering the account numbers are identical,” Hirschfield said. “These labels are generally difficult to reproduce if removed.”

Although gift card purchases may require a heightened awareness, the threat shouldn’t be blown out of proportion.

“Consumers should feel safe buying gift cards,” Hirschfield said. “While these crimes do occur and shouldn’t be minimized, Javelin research shows that very few consumers have ever purchased a gift card that was skimmed.”

The post Gift Card Draining Fraud Could Diminish Holiday Cheer appeared first on PaymentsJournal.

Too often, those most in need of assistance are the last to receive it—delays compounded by manual processes and outdated payment methods that many nonprofits still rely on. To modernize and speed up the delivery of aid, many organizations are turning to a simple yet powerful solution: gift cards.

In particular, digital gift cards offer a faster, more flexible, and more dignified alternative to traditional forms of aid. Moreover, the benefits extend beyond recipients—digital gift cards provide nonprofits with greater scalability, customization, and efficiency, enabling them to better serve their communities.

Removing the Barriers to Usage

Traditionally, nonprofits have relied on mechanisms like paper vouchers, checks, or physical supplies to deliver aid. However, these methods are often slow to distribute and difficult to track.

Additionally, these logistically complex operations are frequently performed manually, increasing the likelihood of errors or even fraud.

Traditional payment types such as checks can also be misaligned with recipients’ needs, as they often require additional steps—like depositing a check—before the aid can be used. Underbanked individuals, especially, may face fees or challenges in cashing checks, further reducing accessibility.

This lack of flexibility in conventional payment formats can undermine the effectiveness of even the most well-intentioned aid. In contrast, gift cards can be game changer for nonprofits: they are simple to issue, easy to track, and immediately usable.

“When you’re in need, you might need something immediately, like when you look at a natural disaster or even theft or fires,” said Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research. “When you give a gift card, they are instantly active and ready to use, so there’s no barrier to usage.”

“Checks have a barrier to usage and cash is easily lost, although there is still the same risk when you talk about a physical gift card,” he said. “This is why there needs to be an equilibrium where you offer both physical and digital gift cards.”

The Digital Advantage

Although there are occasions when a physical gift card is better suited, digital gift cards offer substantial advantages for nonprofit use cases.

One of the most important benefits is speed—a digital gift card can reach its intended recipient instantly via email, SMS, or other messaging platforms. This immediacy can make a profound difference for individuals facing urgent needs, such as victims of abuse, natural disasters, or financial hardship who require immediate aid.

Like all gift cards, recipients have the flexibility to spend their assistance on the items they consider most essential, such as groceries, clothing, or other staple products. This autonomy provides individuals in difficult circumstances with a sense of dignity and independence.

Digital gift cards can be even more effective in many situations, as they can be easily added to digital wallets or used in e-commerce purchases—often without the need for a bank account. However, recipients must still have a means to access the digital card.

“This is where the digital/physical equilibrium is also interesting, because access with digital is sometimes an issue,” Hirschfield said. “Sometimes you need physical, but it’s that balance of how do you access the person in the right way, and that’s what you can do with gift cards.”

“You can access someone who, ‘Hey, I’ve lost everything. I don’t even have my phone,’—here’s a physical gift card,” he said. “Or ‘I’m in need, but I do have my phone,’ so here’s a digital gift card and go get what you need. That’s the advantage of it, it’s multi-form factor—it gets the person what they need, when they need it, and how they need it.”

Tailoring the Give

While gift cards offer significant advantages for recipients, they also provide substantial benefits for nonprofits, especially with delivered digitally.

First, digital cards are easier to distribute in bulk, allowing nonprofits to efficiently scale their programs from local campaigns to nationwide initiatives. Second, they can be customized with the organization’s branding, helping to reinforce its identity and increase campaign visibility.

Third, digital gift cards enable real-time tracking and reporting, providing valuable insights into delivery, redemption, and usage patterns. And because there’s no need for storage, shipping, or physical handling, they reduce administrative workload and costs.

Over time, these efficiencies can add up to major savings and greater impact.

“One thing that you always see are the ratings on nonprofits on how well they’re using their money—are they using it administratively?” Hirschfield said. “What a gift card does is twofold. It’s easily trackable and that’s where in the digital format, you can know that you’ve given out this money.”

“You can also in these types of situations claw the money back if it hasn’t been used,” he said. “There’s opportunity to say, ‘We’re going to give you what you need, but if you don’t need it, we’re going to take it back and give it to someone else who needs it.’ They’re going to utilize their money in the most efficient and responsible way possible, which is their duty as a nonprofit.”

In addition to better serving the community, the customization capabilities that come with offering tailored gift card solutions can help nonprofits move from offering one-size-fits-all aid to delivering personalized support.

Another key benefit of digital gift cards is their payments flexibility. Nonprofits maintain control by setting parameters on how cards are used—for example, limiting purchases to essential items or to specific partner brands.

“Instead of just handing out cash and cash equivalents, sometimes an open loop gift card might be the way to go—here’s a Visa or Mastercard card, go use it for whatever you need,” Hirschfield said. “But it might be you’re in need of toiletries and supplies, so here’s a gift card to a big-box store or a drugstore.”

“It tailors the give to what the recipient needs,” he said. “That’s something that gift cards can do that cash and cash equivalents cannot do. That way, the nonprofit can say when we wanted to give that aid, we gave it specifically to what was needed. It was to hit the mission and not to just give money away.”

Living Up to the Mission

Much like consumer payments, the convenience of digital payments has accelerated the adoption of digital-first relief efforts—an approach that will likely soon become the norm.

“With digital, you can turn it on in zero time,” Hirschfield said. “Essentially, you can show up with a computer or a phone if you’re the nonprofit and start distributing that aid immediately, and you can also do it in bulk. You can’t write checks in bulk and give them away immediately; they have to be distributed.”

The speed and efficiency of gift cards position them to continue evolving as a trusted channel for financial inclusion and emergency response. Once nonprofits and charitable organizations begin collecting data from digital prepaid products, they can use these insights to refine their campaigns, streamline operations, and amplify their impact.

As these organizations look for solutions to integrate this strategic payments tool, they should consider platforms such as Prezzee, which can support every aspect of digital gift card management.

“There is technology behind it that can say, ‘Here’s everyone who has registered, everyone’s going to have $50 to get to a grocery store to get that immediate food need right away.’” Hirschfield said. “Then it may be, ‘What do you need secondarily so they can be tracked? We’re going to get you started—no questions asked—but then that secondary is, ‘Are you using the aid that we’ve given you? Do you need more aid?’”

“That can all be tracked. That way, the people who are in the most need can get the most help and the people who aren’t taking advantage—for whatever reason—they can take away that resource,” he said. “That’s where the digital aspect comes in, to create another layer of accountability on making sure that the nonprofit is living up to its mission in the most financially responsible way.”

The post How Nonprofits Can Leverage Digital Gift Cards to Help Those in Need appeared first on PaymentsJournal.

Consumers are loading account balances, whether to buy a cup of coffee or to purchase a toll pass. Although a gift card may be the traditional form factor of prepaid products, these stored-value accounts are essentially a gift card purchased for self-use. This concept is revolutionizing the prepaid industry.

As Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research, detailed in the 22nd Annual U.S. Closed-Loop Prepaid Card Market Forecast, 2025-2029 report, the trend toward stored-value accounts is not the only factor driving the rapid growth of prepaid products. New segments and use cases are emerging that will drive consumers and businesses to load balances for years to come.

Thriving Amid Uncertainty

One of the chief recent concerns with prepaid, and payments at large, has been that economic conditions could affect consumer spending. However, the prepaid market has continued to thrive amid high inflation and interest rates. This is partly because prepaid products afford a modicum of security in trying times.

“I think where gift cards come in is they give you some certainty,” Hirschfield said. “When you look at incentives—be it consumer incentives, where you’re getting them either for participating in research or as a rebate for buying tires—those incentives come in handy because they are providing you something that these companies know you want and maybe you can add to your budget a little bit.

“It’s the same thing with employer incentives, where if the employer can say, ‘Hey, you did a great job, here’s $25 for coffee,’ that’s a great growth market. To employers, it’s $25 regardless—inflation doesn’t play into the amount they’re going to spend—and it amplifies the spending power for that end user.”

In addition to spending certainty, other economic factors are keeping the prepaid landscape robust. For example, the recent drive for employees to return to work has increased the usage of prepaid products in toll payments.

“People are back in their cars; they are going to the office on a more regular basis,” Hirschfield said. “You’re seeing highway traffic pick up, you’re seeing toll traffic pick up, and tolls have become almost entirely closed-loop. The idea of a tollbooth is essentially nonexistent at this point. It’s all electrically metered—they have the devices in your cars or other options—but that’s creating a significant growth market for the management of those stored-value accounts.”

An Umbrella Product

Prepaid use in toll payments underscores another important trend: self-use. As more merchants and prepaid providers identify this preference, the stored-value trend could significantly affect the retail experience.

“I don’t want to say gift card is a bad term, but we’re expanding the term from gift cards to stored value because you’re seeing a whole lot of self-use,” Hirschfield said. “We’re in holiday season now; it’s all about gifts, and that’s great. But when you get to January, it’s redeeming those gifts. How do you get people to refresh the balance on that gift card or make it change from a gift card to what is now a self-use stored-value account? That’s driving a lot of the growth.”

Another factor driving this trend is the emergence of digital payments, and digital gift cards have similarly surged in popularity. Due to this success, there has been speculation that one of the hallmarks of prepaid, the physical gift card, could be declining.

However, physical cards remain in strong demand, as many givers feel it adds a more personal touch. Additionally, many consumers still need or prefer to pay with a physical card.

What users increasingly desire is flexibility. For example, they may purchase a physical card, but they still want the capability to digitize it or easily reload balances online.

“It’s one umbrella product with multiple form factors,” Hirschfield said. “The stored-value account is the product, and the form factors are a physical card or your wallet on your phone or maybe even on your computer. Those are the areas that are helping to drive a lot of that growth.”

Betting on Prepaid

Within the overall growth trend of the prepaid market, certain closed-loop products are experiencing demonstrable growth. One of the standout segments is digital gaming and gambling, which has experienced double-digit growth in the past few years. However, this surge likely isn’t sustainable.

“It will slow slightly because we’re starting to get to critical mass in terms of legislative approval,” Hirschfield said. “I believe Missouri might be the only new state adding digital gambling this year. That puts us in the 30s, but we’re to a critical mass. In certain states, it’s going to be a tough path to ever get it passed, but the market is growing partly because you just keep getting more legislative freedom to do it.”

Some of the luster around the nascent gambling sector has been tarnished by recent betting scandals across the NBA, MLB, and other professional sports organizations. However, Hirschfield expects any blowback from these scandals to be short-lived unless game manipulation is exposed on a massive scale.

There could be restrictions imposed on the sector, either by lawmakers or sports leagues. While these moves may cap betting amounts or limit certain types of bets, they are unlikely to significantly affect the gaming and gambling market.

“It’s incredibly accessible to the players because it’s on your phone or your computer,” Hirschfield said. “It’s store $25 bucks at a time, and there’s a lot of incentive play as well. You upload $20 and they might give you $20, or if you win your first bet, you might get $100 in play money.

“They understand how you engender loyalty with rewards and with loyalty points to say, ‘Use my platform, not someone else’s.’ It’s a fascinating market. We’ve just started covering it last year, and we’re going to continue to cover more as it matures.”

Taking a Step Back

While some prepaid segments are surging, others are taking a step back. Some of these downtrends, such as in prepaid petroleum or telecom cards, are long-term trends driven by shifting consumer preferences.

Conversely, prepaid transit passes are a strong market now but could be due for a cooldown.

“I think it’s going to shrink overall because the market is moving away from getting your transit pass loaded up with however many rides or dollars,” Hirschfield said. “It’s moving to true tap-to-pay where you tap your debit or credit card and walk in the gate. That’s one where you’re going to continue to see some movement from prepaid to postpaid in the next five years.”

One of the most important segments that could experience turbulence is nutritional assistance. Although programs like SNAP had short-term funding issues during the recent U.S. government shutdown, these programs could face longer-term challenges.

“Recent legislation has started to gut nutritional assistance, so that’s one fairly large load-value area that is definitely going to struggle, and it could end up fully declining,” Hirschfield said. “We haven’t predicted that yet because we need to see over time, but nutritional assistance is the big alert right now.

“If there are electoral changes, you could start to see some of that money getting clawed back, but it’s too soon to tell. It’s going to be an interesting one to watch because it’s critical and it’s got a mature network surrounding it from a closed-loop provider perspective—but it’s dependent on government funding.”

A True Relationship Builder

Despite these areas of concern, the functionality of prepaid payments and their ever-widening scope means the sector will continue its upward trajectory in the next few years. More than ever, an industry that had largely been associated with birthday or holiday gifts has become an all-year product.

Accordingly, retailers and gift card providers should view a gift card purchase as the first step in a long-term customer relationship. As more organizations leverage this model,  more use cases and greater utility will emerge.

“I don’t see any stopping growth in all the different form factors of stored value, be it individual consumer purchases—which is in-store and digital gifting—or your consumer and employee incentives,” Hirschfield said. “Those are all on a true continued growth plan because they are so tied in with loyalty and rewards and your phone and all the things that make it a deep and true relationship builder.”

The post How Stored-Value Accounts Are the Next Iteration of Prepaid Payments appeared first on PaymentsJournal.

Once a humble piece of plastic tied to a single merchant, gift cards have evolved into flexible ecosystems that sit at the forefront of many brands. A major driver of this transformation has been digital gift cards, which have reshaped the way the industry views prepaid products.

Today, gift cards are not only central to loyalty programs and employee engagement efforts but also remain consumers’ go-to choice for gifting. Yet, the evolution of the gift card industry is far from over. In fact, 2026 is shaping up to be a pivotal year for sustaining the continued momentum of this dynamic market.

A Level of Stability

One of the challenges shoppers face is a macroeconomic environment where inflation and interest rates have tightened budgets and increased credit card debt. As a result, many consumers are becoming more tactical in their shopping and payment decisions.

“With the macroeconomic environment, gift cards offer a sense of stability,” said Jordan Hirschfield, Director of Prepaid at Javelin Strategy and Research. “They are—and broader than the term gift cards—stored value, the ability to have that money that’s either budgeted out or stable. The price of an item can change, but the value of that gift card is going to be the same, so that really creates a level of stability.”

Beyond economic conditions, another driver of growth is the rise of e-commerce and the adoption of digital payment methods. This trend has fueled widespread use of mobile wallets and stored-value accounts across retailers of all sizes.

Additionally, there has been a substantial increase in the corporate use of gift cards. More employers are incorporating prepaid products into their employee appreciation programs, offering gift cards as bonuses, holiday gifts, or rewards.

Prepaid rewards can make a meaningful impact with employees for the same reason gift cards have become the most popular gift overall: they provide the recipient with the flexibility to choose what they truly want.

What’s more, gift cards have also become a common way for consumers to treat themselves.

“When I talk about stored value—and this goes to really the umbrella over everything—it’s that shift in mentality from gift cards and gifting to self-use,” Hirschfield said. “Self-use is on the rise due to things like incentives, which is I’m going to take advantage of a consumer offer. I might buy my tires because I’m getting a $100 gift card back, and that’s a self-use choice.”

Loading Up the Account

The evolution of the gift card industry—particularly the rise of stored-value accounts with self-use potential—is impacting consumer behavior, even when shoppers may not fully realize it.

“Often, people don’t put loading up their account for their favorite coffee shop or fast-food restaurant in the gift card bucket,” Hirschfield said. “Food services is big into this because when you’re giving your kids a budget where, ‘You want to go get your chicken sandwich and your milkshake, here’s how much you get a month,’ and it’s all in their stored-value account, that is all in the realm of what has been considered gift cards.”

“It’s moving to stored value, and that hits at that self-use motivation and it all ties into things that affect behaviors,” he said. “It affects reward behavior and loyalty behavior. The more loyalty points I get, the more rewards I get, the more I can take a part in that and maybe get that extra free item.”

These loyalty-driven features boost engagement, as many consumers are first introduced to new brands through gift cards. Additionally, recipients often sign up for loyalty programs and maintain ongoing interactions with an issuing organization after using a gift card.

Perhaps more importantly, consumers frequently use gift cards to make larger purchases, spending beyond the card’s initial value.

All these factors are not only influencing consumer behavior but also transforming how organizations approach and leverage gift cards.

“Companies were working to say, ‘We’ll get a little bit of breakage, we’ll take those pennies that are left over and we’ll count that as revenue.’” Hirschfield said. “That’s not the target of the gift card industry anymore. Now it’s reload, it’s consistent turnover of that money and reload of that money to increase volume and increase spend, those are the important things.”

The Digital Paradigm

Another factor shifting the perception of gift cards is the rise of digital gift cards. While some buyers may still prefer a physical card for certain occasions, digital gift cards are gaining popularity for several reasons.

First, digital gift cards are more convenient to purchase and use. They can be sent instantly via email, text, or other platforms, making them easy to give and receive.

They also offer greater flexibility because they can be integrated with mobile wallets and used either in-store or online. In addition, they allow for personalization, with options to include messages, themes, music, or videos.

Digital gift cards also give consumers more control. Users can swap, split, and manage balances across multiple brands in real-time, all while benefiting from enhanced security features.

Overall, digital gift cards present a powerful opportunity for businesses to build stronger, longer-term relationships with their customers.

“When that account is tied to you, you can check your balance,” Hirschfield said. “But also, it ties into that data collection opportunity where it’s mutually beneficial in loyalty and rewards. It’s making sure that you’re getting the items that you want. ‘Hey, would you like to repeat your order, and would you like to use your gift card balance to pay for that?’ Those are all things that come from that digital.”

Understanding the Value Chain

The shift in consumer preferences, coupled with advances in technology, suggests that digital gift cards are poised to capture a larger share of the gift card market next year. At the same time, the broader prepaid market continues to experience strong growth.

“Growth is really strong, we have it at 7.5% to 8% compounded growth rate—others in the industry have very similar numbers—and that leaves a lot of opportunity to go beyond that,” Hirschfield said. “Some segments of the industry are shrinking, some are growing, but it’s really a matter of understanding where you sit in that value chain of gifting versus self-use.”

Once brands understand how to strategically leverage digital gift cards, they will look to companies like Prezzee, which are driving the shift toward a more digital experience.

“To me, it’s about understanding that marketplace of who the user is and who the buyer is,” Hirschfield said. “In the end, everyone’s a self-user when they get the card, but how do you load that value is the first step in understanding that. That—to me—is a driving trend of 2026.”

The post How the Gift Card Revolution Will Accelerate Next Year appeared first on PaymentsJournal.

A roaring fireplace radiates warmth and light while a snowstorm rages outside—a classic holiday scene. But these days, it’s just as likely to have been created by artificial intelligence. Perhaps Santa and Mrs. Claus sit in armchairs beside the fire—or perhaps not. It’s all up to the content creator.

In today’s hyperconnected world, even the age-old traditions of the season are being reimagined through technology, updated for the modern era. The same is true for gift giving. Technology has transformed the timeless custom of sharing abundance with loved ones. For instance, gift cards let givers personalize and guide their presents without dictating them—preserving the spirit of generosity while bringing it into the digital age.

Cutting-edge technology is helping keep these traditions alive, fresh, and relevant for generations to come. One company, Prezzee, has been at the forefront of this evolution, creating dynamic, personalized gift cards—even ones that can bring Santa right into someone’s home.

Gift Cards: A Holiday Legacy

Prepaid cards have become a cornerstone of holiday gift giving. Data consistently shows that gift cards are the number one request from recipients, representing nearly half of total holiday spend. Research from the Blackhawk Network found that during the 2024 holiday season, consumers received an average of three gift cards, with a combined value of just over $200.

The versatility of these cards is evident in the repeat business they generate. Consumers who buy gift cards one year are overwhelmingly likely to return to that same option year after year. Javelin Strategy & Research has found that among people who bought a holiday gift card last year, 96% are likely or definitely going to buy a gift card again for the holidays this year. And the vast majority of those are going to spend a similar amount or even more money this time around.

Within the gift card landscape, electronic versions are gaining ground—driven by the convenience of online delivery and the flexibility they offer. Consumers favor eGift cards for their personalization options, from custom messaging and artwork to tailored value amounts for each recipient. Card processing firms also appreciate their versatility and the wide range of merchants and products they can be used with.

Another factor driving their popularity is how easily they meet diverse gifting needs. Have a family member overseas for the holidays? An electronic card makes it simple. Need a last-minute gift for someone you forgot to add to your list? A digital card can be purchased and delivered in minutes.

“It’s easy to send at any point, especially when you’re not going to be with the person for a physical gift exchange,” said Jordan Hirschfield, Director of Prepaid at Javelin. “You can buy one in U.S. dollars and send it in U.S. dollars, even from overseas. And there’s a security level to sending it electronically versus putting a gift card in the mail.”

“It also works for retailers to have that option when inventories run low, prices are too high and people aren’t quite sure what they want to get someone,” he added. “They can always send that digital gift card as either an alternative gift or as an additional gift.”

AI Has Changed the Season

Just as it’s being used to create images for the holiday season, AI is also adding color to the rise of gift cards, deepening the emotional connection and convenience for buyers and sellers alike. For electronic gift cards, generative AI can create custom content and artwork that feels personal and unique to the recipient.

Once again, cutting-edge technology of the kind that Prezzee is creating helps deliver the timeless message of the holiday season—connection, creativity, and care. Prezzee has worked to bring together the best of tradition and technology by making personalized eGifting easier, offering eGift cards that combine a personal video or voice message with a greeting card.

With Prezzee, card shoppers can use AI to craft their message, ensuring each note feels personal and perfectly suited to the recipient. Custom artwork can also be generated for the card, transforming digital gifts into something rich with emotional resonance. AI can even create tailored rewards for both the purchaser and the recipient. Retailers can get innovative and use AI to add new elements to their traditional holiday approaches, as Prezzee demonstrated last year.

That was when Prezzee’s Magical Messages Campaign drew on all these advanced technologies, allowing families to send personalized videos from Santa himself. A hologram-like image of St. Nick delivered the message, which could include the recipient’s name, age, and hometown. The messages could be accompanied by Santa’s Magical Smart eGift Cards. The campaign highlighted how cutting-edge tools can help recreate classic holiday memories.

This Years’s AI Experiences at Prezzee

This year, Prezzee is bringing holiday magic to life through two unique AI-powered experiences One is for consumers and one is for businesses, but both are designed to make gifting more personal, memorable, and fun.

For the B2C audience, people can nominate friends or family members for Santa’s official Nice List — and surprise them with a personalized video straight from the North Pole. Individuals can submit the name of someone special to them, along with theirage, hometown, a photo, and why they deserve a spot on Santa’s Nice List.

Santa will respond with an AI-created  personalized video message, calling the person by name and congratulating them for making the Nice List. The experience can also include Santa’s Magical Smart eGift Card, a Prezzee gift card that delivers a present along with that holiday joy.

For organizations, Prezzee has introduced AI Carollers, a playful, shareable experience that transforms a workplace team into virtual singers. Users simply upload up to four team members’ photos and choose a festive song for the group to “perform.” AI brings it all to life in a custom, animated video you can share with your entire team. Again, the giver can also add a Prezzee eGift Card.

Together, these experiences showcase how Prezzee is using AI to make digital gifting and the entire holiday season more interactive, emotional, and delightfully personal — for both consumers and businesses.

Prezzee has long combined fintech innovation with customer experience to create unique experiences that especially resonate throughout the holiday season. To find out how Prezzee can transform your holidays, click here.

The post Deck the Holograms: How AI Is Redefining Holiday Magic appeared first on PaymentsJournal.

Google Play is launching a dedicated section within its App Store that allows shoppers to search for, purchase, and send digital gift cards, featuring brands ranging from Starbucks to American Eagle. While the move could generate some ancillary revenue for Google, it remains unclear whether consumers will start viewing the Play Store as a primary destination for buying gift cards.

The rollout was surprisingly low-key. Rather than making a formal announcement, Google quietly notified users via email with the subject line: “Important Update to Play: Now you can buy Gift Cards.”

Changing Customer Behavior

Google has a long road ahead in changing consumer habits in this space. Buying digital gift cards through an online marketplace offering multiple retailers is still relatively uncommon.

“Javelin’s statistics show that consumers are most likely to visit a multi-card in person display, a retailer’s own store or website to buy a gift card,” said Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research. “Significantly fewer people go to a website that sells cards for multiple retailers, which would be the most similar outlet to the Play Store.

“It will give Google a nice additional play to garner a little bit of revenue, but consumers won’t think of it as an obvious place to buy cards,” he said. “I think they’re tapping into that population to try and get net additional sales on top of apps and subscriptions—more than to try and get people specifically shopping for a digital gift card.”

For now, the digital gift cards are available only to shoppers in the U.S., the UK and Mexico. Expanding to the UK could be especially significant, as digital gift cards there now represent more than half of the market. According to Hirschfield, the U.S. is expected to reach a 50/50 split between physical and digital gift cards by the end of the decade.

More Changes in Play

Google has long offered both physical and digital Play Store gift cards. The addition of third-party digital gift cards to the Play Store comes as the company faces pressure to open its marketplace to outside sellers following its long-running legal dispute with Epic Games.

As part of its proposed settlement, Google has told a judge it would make it easier for users to download and install third-party app stores. The company is also reducing its billing fees to 5%, down from the current 15%. 

The post Google Opens Digital Gift Card Shop appeared first on PaymentsJournal.

Chipotle is the latest retailer to learn that circumventing California’s gift card cash-out laws can cost far more than the value of the cards. The fast-casual restaurant giant was hit with a $246,000 fine over allegations that it failed to allow customers to redeem the unused portion of their gift cards in cash, as required by California law. More significantly, the chain was ordered to set up a website where customers could cash out their gift cards.

A class-action lawsuit filed last year accused Chipotle of offering meal vouchers to customers seeking refunds for the unused portion of their prepaid cards. In addition to not providing cash, as the law requires, the vouchers also expired after 30 days—whereas California law mandates that gift cards have no expiration date. In settling the suit, Chipotle denied any wrongdoing.

California is one of many states that require gift card issuers to redeem low-balance gift cards for cash upon request. The currently threshold of $10 is set to rise to $15 next year.

Following Home Depot and Taco Bell

In a similar case, Home Depot was charged with violating the law last year. In addition to a $750,000 fine, it was ordered to reprogram all its registers to automatically cash out gift card balances under $10. Taco Bell faced a similar fine and was required to implement cash-back training for all its store managers. Like Chipotle, these companies appear to have relied on individual stores to handle these redemptions on their own.

“In general, brands do a good job of complying, so these instances are rare,” said Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research. “There are also some questions about how cash back must be supported—some merchants believe that you can centralize this so the stores aren’t responsible on an individual level. The reality is that the cash back laws are a little vague in terms of process, creating those questions for retailers.”

Tough Decisions

As the state with the largest economy, California will continue to serve as a bellwether for retailers. Franchises that train employees on handling gift cards will need to consider California’s restrictive laws. However, for large, nationwide brands, the costs of supporting cash back policies may outweigh the potential penalties.

“The amount of training to staff—especially in industries with high turnover—for a relatively small occurrence is likely more costly and burdensome than the penalty,” Hirschfield said. “That’s true even in a state as large as California, which produces high amounts of total revenue.”

The post Chipotle Learns the Cost of California’s Gift Card Law appeared first on PaymentsJournal.

A group of cybercriminals dubbed “Jingle Thief” is using phishing techniques to gain access to gift card systems, then issuing cards to resell for personal profit.

Researchers from cybersecurity company Palo Alto Networks uncovered the group’s tactics as Jingle Thief targeted the cloud infrastructure of retail and consumer services companies. Once inside, the bad actors search for the mechanisms that allow them to issue gift cards and work to cover their tracks.

Gift cards have become a growing target for cybercriminals because of their ubiquity in retail and e-commerce, both for gifting and self-use. Prepaid products can be redeemed easily and require little personal information from the purchaser, making it harder for authorities to track and identify those who exploit them.

Stopping the Drain

More regulators have been taking steps to mitigate gift card fraud. For example, Maryland recently passed a law aimed at combating gift card draining scams, which have become prevalent.

In this scam, criminal networks largely target retail cards sold in stores. Bad actors tamper with the packaging to obtain the card number and then return the compromised card to the shelf. Once an unsuspecting consumer purchases and loads funds onto the card, the criminals quickly drain the balance for their own use.

To address this issue, legislation such as Maryland’s bill requires secure packaging for gift cards, mandates that merchants register with the state, and calls for employee training to help prevent fraud.

A Tribute to Success

The threats against gift cards and prepaid providers are, in many ways, a tribute to their success. Consumers increasingly prefer cash and cash equivalents as gifts, but buyers are often reluctant to give cash because it is less secure and impersonal. That’s why gift cards have become one of the most popular gifts year-round—and especially during the holidays.

Unfortunately, the boom in gift card sales and usage around the holidays also creates vulnerabilities criminals can exploit. In fact, the Jingle Thief group earned their moniker because they are particularly active around the holidays.

The post Jingle Thief Bad Actors Target Gift Card Issuers for Fraud appeared first on PaymentsJournal.

Gift cards have evolved from being a thoughtful, last-minute birthday gift into a mature industry that’s helping companies build loyalty both inside and outside their organizations. Their use cases are expanding rapidly, offering innovative ways for business to not only reward employees but also strengthen their bottom line.

In a PaymentsJournal Podcast, Samara Swenson, U.S. Senior Marketing Manager at Prezzee, and Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research, discussed how businesses can tap into this dynamic new landscape for prepaid cards.

A Strong and Growing Market

According to Javelin, the prepaid market was worth more than $300 billion in 2024 and is expected to grow over 8% annually over the next five years. That figure reflects just the closed loop segment; the open loop side adds an additional $40 to $50 billion, with a similar expected growth rate. Altogether, the industry is projected to reach at least $500 billion by the end of the decade.

The B2B segments that Prezzee specializes in are also gaining strength. They account for roughly 15% of the total market, with a comparable 7% to 8% compounded growth rate. Crucially, the B2B segment could expand beyond the current projections as more companies adopt the emerging use cases that are taking shape.

Aligning Objectives

A full-service gift card program can help organizations align their gifting strategies with specific business objectives, whether that’s employee recognition, customer acquisition, loyalty programs, or incentivizing sales teams.

Each objective requires a slightly different approach. For example, for employee engagement, HR leaders can offer highly personalized and meaningful rewards that recognize key milestones, accomplishments, and contributions. For customer acquisition, a prepaid program enables marketing leaders to execute impactful promotions, referral programs, and loyalty initiatives. Sales leaders can use gift cards to motivate teams and reward performance, ultimately driving higher productivity and sales outcomes.

New Frontiers in Employee Incentives

One of the key areas where gift cards are already very popular is employee incentives. Gifting employees helps them feel recognized and appreciated, and companies that do this often see increased motivation, loyalty, and overall productivity.

“What many organizations might not realize is that this positive internal atmosphere naturally extends outward,” said Swenson. “Engaged employees are often a company’s best advocate, allowing companies to channel this energy into external marketing campaigns, customer facing initiatives and sales programs.”

Javelin is also beginning to track how many people receive sales incentive through a prepaid program, and early data is showing strong signs of growth.

“That’s been a bit untouched in employee incentives, but there are so many great opportunities to go multimodal—maybe have some that is cash, some that might be stock, but also an immediate reward. ‘Hey, you can go out and treat yourself to something because you hit a goal,’” Hirschfield said.

“It’s not like you’re sitting and waiting,” he said. “You don’t have to do anything except load it in your wallet or go to a store and say, ‘I’m going to use that.’”

Employees who receive incentives are generally happier with their employer. But beyond supporting loyalty at work, card issuers have found that gift cards also foster loyalty among recipients. Javelin data shows that consumers who receive a gift card are more likely to join loyalty programs, become repeat visitors, and even advocate for the brand to friends and family. As a result, these incentives go beyond providing an immediate reward—they can spark long-term relationships.

Digital vs. Physical Cards

As an electronic gift card platform, Prezzee offers plastic-free gift cards that help companies reduce their environmental footprint, supporting broader corporate ESG commitments. By replacing traditional plastic cards with digital alternatives, businesses can cut plastic waste while signaling their dedication to sustainability.

Hirschfield anticipates that digital and physical gift cards will reach an equilibrium by the end of the decade, with a roughly 50/50 split in volume. Gifting is likely to remain popular in physical form, as people often value the tangible experience and gratification of opening a present.

“When you have that ability to provide immediate access, you look at employers and employees, especially when they are remote,” said Hirschfield. “A lot of times, the person giving that reward is not sitting with them. That’s where digital factors thrive.”

Solving for Unused Balances

One emerging and valuable benefit thatPrezzee offers is the ability for businesses to reclaim any unused or unactivated gift card balances, ensuring that no budget goes to waste. Unlike traditional providers, companies only pay for activated gift cards and can also set expiration dates to encourage timely redemption.

“From a broad perspective, unused funds (tend to accumulate) at what I call the edges of the value: either at full value or down to the last pennies on the card,” said Hirschfield. “These are mostly the scenarios where someone just forgets to use their card. When you eliminate that fully unused portion, you can provide better bang for the buck for that incentive provider and reduce those pressures on the brand. You don’t have that excess liability on the back end.”

Prezzee also provides reporting and analysis tools, enabling businesses to track gift card usage and redemption rates. This data allows companies to continuously refine their strategies, reallocating funds to maximize impact. The combination of transparency and flexibility ensures that every dollar invested in gifting delivers tangible results and measurable returns.

“We’ve seen some truly innovative and impactful applications,” said Swenson. “In emergency response situations, Prezzee has enabled organizations to rapidly distribute funds directly to those affected by crisis. Following natural disasters, our partners have provided essential resources to communities within 24 hours.

The post From Gift to Growth Engine: Exploring the Gift Card Evolution appeared first on PaymentsJournal.

Celebrating the holidays is still a top priority for consumers, but several factors make this season unique. Shoppers are balancing tighter budgets, adapting to a rapidly evolving digital landscape, and carrying ever-higher expectations. At the same time, many employers are grappling with how best to show appreciation to their teams.

In a recent PaymentsJournal webinar, BHN’s Director of Global Research, Sarah Kositzke, Head of Global Commerce, Brett Narlinger, and Head of Global Incentives, Jeff Haughton, along with Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research, discussed the key forces shaping holiday shopping behavior, the influence of promotions and technology, and the central role gift cards are set to play.

The Impacts of Holiday-flation

One of the defining factors this season is the shifting economic environment. According to BHN’s 2025 holiday research, which tracked consumer sentiment throughout the year, price anxiety has risen sharply in recent weeks.

Rising costs for groceries, food, and utilities remain top concerns for most consumers, and these everyday pressures are directly influencing holiday shopping behavior.

“What we see is that about 13% of people are buying fewer gifts for fewer people this year,” Kositzke said. “When we asked why, there’s this notion (that) there is potentially less money, so there’s cautiousness and carefulness as it comes to increased costs that might be out there.”

“We’ve also seen some people mention that maybe it’s a shift from, ‘I used to give a gift for every single person,’ to now it might be more like a Secret Santa or a white elephant or draw a name out of a hat,” she said.

Even though shoppers are buying fewer gifts this holiday season, the number of gift exchanges is on the rise. Where once people may have only exchanged presents at family gatherings, many are now also participating in gift swaps at work, school, and other social groups.

This increase in occasions has pushed consumers to be more strategic with their budgets, fueling a shift toward gift cards—even in situations where a physical gift might once have been the preferred choice.

Shifting to gift cards has positive impacts for buyers. According to BHN’s research, roughly 74% of respondents said they bought gift cards because it helped them stick to their holiday budget, and more than half reported that buying a gift card reduced their financial stress.

Gift cards are also well-received by recipients. As economic conditions have tightened, more people now prefer gift cards that help offset everyday expenses. This has fueled growing demand for cards from grocery stores and big-box retailers like Walmart and Target. Additionally, many recipients are also seeking gift cards that support entertainment costs, like Netflix or HBO Max subscriptions.

While the macroeconomic environment is shaping holiday shopping behaviors, it hasn’t diminished consumers’ determination to enjoy the season.

“I heard a new term this morning: holiday-flation,” Narlinger said. “(Despite) the challenges and all the things that we’re worried about, there’s still a desire to have a lot of fun and have a holiday. So, how do I change my behavior? How do I stretch my dollar to get the most, given this holiday-flation moniker?”

Getting Out of Bed for Promotions

As consumers become more calculated and creative in their holiday purchases, strategic promotions can be a boon for businesses.

“What gets people out of bed to go shopping for the holidays?” Kositzke said. “Promotions do—sales, deals, anything that people gravitate toward. When we asked people after last holiday if they had leveraged any of these promotional opportunities, three-quarters said, ‘Yeah, we took advantage,’ and I think we’re going to start to see a lot of that again this year.”

Some of the most effective promotions include discounts on frequently purchased products, variations of the “buy one, get one” model, and the traditional use of coupons and price reductions.

Shoppers are discovering these deals through traditional channels such as word of mouth, in-store flyers, and email campaigns. However, younger consumers are increasingly turning to third-party platforms like social media and AI-powered chatbots, which they use to compare prices and gather personalized recommendations.

“There are two things that are happening,” Narlinger said. “One, you have a generation that’s like, ‘I’m not paying a dollar for a dollar; I want value; I want something more than that spend.’ The second is the continued use and evolution of technology to find better deals, whether it’s using AI or being able to use those frequent places where they can get discounts.”

Where Consumers Are Shopping

Along with shifts in how consumers shop, there are also continued changes in where they buy their gifts.

“What we find is that it’s equal for generations to be shopping in-store: 77% of younger people, 77% of older people,” Kositzke said. “Where we see a slight difference is that younger people do tend to be a bit more online than older people, but there is this notion of convenience and elements of being able to avoid the crowds, being open 24/7. We’re going to continue to see shifts to online, but it’s great to see that we’ve got a lot of people still shopping in-store.”

To avoid crowds, many shoppers are starting early. BHN’s research found that roughly a third of respondents have either already begun their holiday shopping or plan to do so before November. This is critical, as early shoppers typically spend 20% more on holiday gifts.

However, many shoppers also start early to stay within their budgets and take advantage of deals throughout the season. As a result, retailers should launch promotions early and maintain them throughout the holidays.

While most consumers still plan to shop in-store, retailers can’t afford to overlook their omnichannel strategies. E-commerce will continue to be a strong draw, especially for younger generations, but it is equally important for merchants to highlight digital gift cards.

“Try to get as many deals out there at the beginning to grab that customer and that brand share—but keep that drumbeat going,” Narlinger said. “Last year on December 23, we broke a record internally for us. Then did it again on the 24th, related to volume.”

“They may start in these early times, but they’re going to finish the day of, and we even did a tremendous amount of volume digitally on the 25th,” he said. “You’re going to need to have a strategy that understands that it’s the start all the way to the last procrastinator. It’s going to be critical because this is the most elongated holiday we’ve had in a long time.”

Avoiding Damaged Relationships Through Gift Cards

Although this holiday season is only one shopping day longer than last year, there are four full shopping weekends after Thanksgiving. This gives retailers an extended holiday window to leverage, which could pay off significantly.

“This is everybody’s most favorite and anticipated numbers for the holiday, and good news: they’re strong numbers,” Kositzke said. “We see that overall holiday gifting spending is rising, but the percentage that is being dedicated to gift cards is rising even more. Men are dedicating about 41% of their overall holiday gifting budget to gift cards—that’s up about 18% year over year. Women are at 36%, which is up about 5%.”

“One of the most interesting things was we took a look at people who are budgeting,” she said. “We asked a question, ‘Are you budgeting for this holiday season with gift spend?’ Of those who said ‘Yes,’ 43% of their dollars are dedicated to gift cards.”

When it comes to the type of gift cards recipients prefer, choice is the top priority. That’s why general-purpose cards, such as those from Visa and Mastercard, remain the most popular.

Beyond multipurpose cards, Gen Z consumers and women tend to gravitate toward beauty and wellness cards, while men show a stronger preference for video games. For boomers, dining out gift cards are often the go-to choice.

Regardless of demographic, there is a growing consensus among consumers: they are fed up with bad gifts. The three most common offenders are clothing that doesn’t fit, generic or impersonal items, and gifts that don’t suit the recipient’s lifestyle—like giving a bottle of wine to a non-drinker.

While many givers may feel that it’s the thought that counts, a poorly chosen gift can do far more harm than good.

“This is one of my new favorite findings,” Kositzke said. “We asked people to think about a time when a gift missed the mark and how does it make you feel about the person that sent you that gift? One in three relationships this holiday season have the chance to be damaged.”

“This is not good,” she said. “We do not want to have damaged relationships over holiday gifts because it does make people feel like ‘You don’t know me; you don’t understand who I am.’”

Making Employees Feel Valued

Unfortunately, many employers have also given poor gifts. Common mistakes include giving nothing at all or opting for impersonal items.

“It reminds me of a movie I know my family watches every year, which is Christmas Vacation, where Clark Griswold gets the Jelly of the Month Club,” Haughton said. “The worst thing an employer can do is not recognize or reward their employees at all, but a very close second is doing something that feels impersonal.”

“The reality is there’s a very simple way to give employees choice, let them make their selections for the needs that they want, and do it in a way that it’s at scale, it’s effective and it can feel very personal to those employees,” he said.

Some of the best choices for employer-provided gift cards are practical options, such as fuel, groceries, or everyday essentials. After practicality, employees appreciate having options, like those offered by multi-purpose gift cards.

Even a small touch of personalization can go a long way with employees—but finding the right balance can sometimes be challenging for employers.

“The concern sometimes with employers is, ‘Gosh, it’s a lot of work,’” Haughton said. “How do I do this at scale? How do I do something personal for an employee when we’ve got a lot of employees? The reality is, if you couple it with choice—prepaid cards or even a curated digital catalog of specific branded cards or multi-branded cards—there’s a lot of ways that you can get employees what they want.”

Extending the Holiday Season

There is a common thread when it comes to gift giving—a bad gift can strain a relationship, while the right one can leave a lasting impression.

“There’s a certain time of the year where employees look back at everything that they’ve worked so hard for,” Haughton said. “Get out in front of it, think about it early and often and then give them choice. If you do those things, it’s invaluable in terms of being able to recognize your employees.”

Similarly, the holiday season is a critical time for retailers. To make the most of it—and set their business up for success in the year ahead—they need a robust holiday plan and jam-packed promotional calendar.

“When you’re giving a gift card, the loading of the gift card and the giving of it starts the journey,” Hirschfield said. “The recipient getting it and having that self-use motivation is really what completes the journey and what extends the relationship. That gift is the first step of what can be a long-term relationship.”

“Those promotions don’t need to end because the holiday season is over,” he said. “The ability to provide additional benefit to that user continues through loyalty programs, through benefits, and through rewards. Keep thinking about, ‘How do we extend a successful holiday season into a successful 2026?’”

For more holiday insights and best practices, download BHN’s eBook, “Holiday Hearts, Tight Wallets.”

The post Unwrapping 2025: Why Gift Cards Still Top Holiday Wish Lists appeared first on PaymentsJournal.

Emerging rails like real-time payments, stablecoins, and central bank digital currencies have quickly created a fragmented payments ecosystem. This environment presents both an opportunity and a challenge for digital wallet companies: they could become the nexus for all payment types if they can build mechanisms to connect disparate sources into a single solution. 

Although digital wallets have gained solid momentum in peer-to-peer and e-commerce spaces, they are not yet an all-encompassing solution. To achieve broader adoption, digital wallets must incorporate near-field communication (NFC) technology to enable account-to-account (A2A) payments in physical stores. 

As IDEMIA highlights in its whitepaper, From One Click to One Tap to Pay: How Next-Generation Digital Wallets are Unlocking In-Store Account-to-Account Payments with NFC, once digital wallets adopt this technology, they can become the next big evolution in the payments landscape. 

Finding the Middle Ground 

As traditional payment types like cash and checks have steadily declined, an increasing array of alternatives have emerged in their place.  

Cards remain the most predominant payment type, but real-time payments, mobile money systems and CBDCs have all achieved varying degrees of consumer adoption and merchant acceptance. As alternative payment methods gain traction, digital wallet providers are under pressure to innovate and differentiate themselves and adopt new solutions. 

“Digital wallets leverage payment methods such as real-time account-to-account payments, which rely on their own dedicated rails,” said Eric Lassouaoui, Head of Digital Payment Product and Solution Architecture at IDEMIA.  

“Now, they have reached a stage where they are positioning themselves at par with rails such as cards.” he said. 

This convergence of factors has left many digital wallet providers scrambling to find a middle ground between the payment rails they have implemented to attract consumers and the most efficient, cost-effective ways to drive transactions. 

Fragmentation and Interoperability 

Although many digital wallet providers are struggling to navigate the evolving payments landscape, the technology they need is already within reach. Digital wallets have emerged as the primary front-end solution to connect and converge these payments rails.  

The effectiveness of digital wallet technology is clear from the sheer number of wallets that have launched—and the diverse use cases they now serve.  

This landscape includes big tech wallets from Apple and Google, as well as all-in-one super apps like WeChat Pay and Grab. There are also retail-specific digital wallets, such as those from PayPal, Amazon, and Starbucks. In the financial services sector, banks have introduced their own solutions, including Zelle and Paze, while card networks have issued wallets such as Click to Pay. 

Notably, some of the most successful digital wallets globally are those designed with domestic markets in mind—for example, Spain’s Bizum and Brazil’s Pix. 

“We can see that in Brazil, with Pix, they have already been able to demonstrate for the past few years the capability to grab a big chunk of payment transactions—and they are even now trying to create more cross-border payments.” Eric Lassouaoui said. 

The success of Pix and India’s United Payments Interface (UPI) has prompted many other regions to explore their own digital wallet solutions. However, this regional approach has also resulted in greater fragmentation across the sector. 

“We already see an emergence of many wallets in Europe, and in many countries,” Lassouaoui said. “Several entities have been also already initiating this work with Bizum in Spain and Blik in Poland. There will definitely be a challenge moving forward in regard to the interoperability of those different wallets. That’s going to be a clear, key aspect and especially in Europe.” 

In-Store and Proximity 

Amid these challenges lies a significant opportunity for digital wallet providers. Digital wallets already account for roughly half of all e-commerce transactions, yet only about 30% of point-of-sale (POS) transactions are conducted through them. 

Since their greatest growth potential is in the in-store experience, digital wallets must incorporate NFC technology to enable single-tap experiences, account-based payments at physical points of sale.  

There are already solutions gaining traction with this model, solutions like Spain’s Bizum and Brazil’s Pix are now moving beyond peer-to-peer transactions to support contactless, in-store payments through NFC. Similarly, PayPal has introduced a contactless wallet in Germany designed for in-store shopping. 

The rise of NFC-powered payments has been fueled by the widespread availability of the technology on smartphones. Additionally, Apple’s recent decision to open its NFC tech to third-party developers has sparked renewed interest in contactless payments. 

Still, widespread adoption of contactless payments remains a complex challenge. To expand beyond P2P and online transactions into everyday in-store purchases, digital wallet providers will need to fully embrace NFC technology. 

Once they do, digital wallet companies will be able to deliver the seamless payment experience their customers have come to expect. 

“Digital wallets can play a significant role in this competitive ecosystem by capitalizing on the customer relationships they already own,” said Eric Lassouaoui. ”Positioned at the front end and supported by existing adoption in P2P and e-commerce, wallets can naturally extend into proximity and in-store payments.” 

“By doing so, they have the potential to reshuffle the market dynamics and strengthen their competitiveness, especially when combined with value-added services such as loyalty programs,” he said. 

Routing the Path to NFC Payments 

Digital wallet providers seeking to bring account-based payment solutions to merchants have two options: they can either build a private in-store acceptance network or rely on existing card acceptance infrastructure at POS terminals. 

Once digital wallet companies have implemented contactless payments, they can then leverage flexible transaction routing. This brings them to another fork in the road: their transactions can either be processed directly by the alternative network, which offers greater independence, or routed through an established card network, which is faster to market and has broader acceptance.  

Regardless of the route, there are significant benefits for the companies that enable NFC payments. 

For example, contactless payments allow providers to offer cost-efficient and locally tailored account-based wallets. This model also gives organizations stronger control over their products, which in turn gives digital wallet firms the freedom to differentiate themselves without external dependencies.  

Finally, adopting NFC payments can lead to substantially higher wallet adoption and usage, since payments are frictionless and convenient for customers. “Previously, many wallets relied on QR-led flows, fine for peer-to-peer payments but slower at the point of sale.” Lassouaoui said. Tap-to-pay by account offers a faster, more convenient experience for consumers, further encouraging adoption and usage. 

“On the other side, Apple has been driving the payment experience within a mobile environment with its tap-to-pay experience, so the consumer is used to presenting their phone at the terminal,” he said. “Those that want to compete with big tech need to match that tap experience and that’s exactly what our stack enables, bridging wallet assets with the existing EMV ecosystem.” 

Bridging Cards and Accounts 

By bringing together emerging and traditional systems, digital wallet providers gain operational autonomy and increase their competitive edge—all while enhancing the customer experience.  

The key to moving into this model is contactless payments, meaning that embracing NFC is no longer optional—it has become essential. As the global payments landscape continues to shift, platforms like IDEMIA’s Tap to Pay by Account present a strategic opportunity for wallet providers to lead the next wave of in-store innovation.  

“On our side, we are one of the unique technological providers, capable to bridge this gap between alternative payment rails and the EMV ecosystem. This is coming from the background we have on the digitization of any card asset into a device and the capability to bridge the EMV world with the account world.” Lassouaoui said. 

The post How Next-Gen Digital Wallets Are Redefining A2A Payments at Checkout appeared first on PaymentsJournal.

Today marks the official end of paper checks for federal benefit payments. As Social Security and the IRS fully transition to direct deposit and prepaid cards, Fifth Third Bank is already capitalizing on the shift.

Just three weeks ago, Fifth Third took over the Treasury Department’s Direct Express program, which had previously been managed by Comerica and, briefly, by BNY. The program serves approximately 3.4 million Americans, providing them with a prepaid debit card to receive their monthly federal benefits.

Fifth Third CEO Tim Spence described Direct Express as the “equivalent of the second-largest neobank in the U.S. with similar average revenue per customer, but significantly better profitability.” Last year, the program generated Comerica roughly $3.4 billion in deposits. Now, with paper checks eliminated, the program is poised for even greater growth.

“We’ll see solid growth in Direct Express,” said Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research. “Direct deposit probably will be the big winner, but for those with less access to banking products, we should see larger than normal growth in Direct Express. Javelin had predicted 3% growth for 2024 to 2026, and I anticipate that will grow to the 5% to 7% range into 2026.”

Comerica Loses the Contract

Direct Express had been operated for years by Comerica Bank, but its partnership with the federal government unraveled in April 2024, when the Fiscal Service announced it would not renew Comerica’s contract. The Consumer Financial Protection Bureau (CFPB) later filed suit against Comerica, alleging mismanagement.

Among other claims, the CFPB said Comerica required users to contact merchants directly to cancel pre-authorized payment transfers from their accounts. As a result, thousands of cardholders closed their accounts to stop such payments. Consumers were then required to pay additional fees to obtain replacement debit cards more quickly, in order to regain access to their government benefits.

BNY Falters as Well

The initial replacement for Comerica, BNY, did not fare much better. Announced as Comerica’s successor last November, BNY lost the contract before it ever took over the program. “Due to readiness challenges involving one of the providers, Fiscal Service made the decision to discontinue the agreement,” a BNY spokesperson said earlier this month.

Fifth Third will begin enrolling consumers in Direct Express at the start of 2026, while Comerica will continue to manage the program until users receive their new cards from Fifth Third. Mastercard will remain the program’s payment network, as it has been since Direct Express’ launch in 2008.

The post As Paper Checks Sunset, Fifth Third Bank Scales Up Prepaid Program appeared first on PaymentsJournal.

Consumers have more options than ever when it comes to general purpose reloadable prepaid cards, which makes understanding what truly matters essential. Before choosing a card, people want to know how it fits into everyday spending, how transparent the fees are, how easy it is to manage, and what protections or perks come with it.

Don’t miss another episode of Truth In Data! Click on the red bell in the lower-left of your screen to receive notifications as soon as the episode publishes.

Data for today’s episode is provided by Javelin Strategy & Research’s Report: 2025 General-Purpose Reloadable Card Scorecard

Top 5 Features to Consumers in Choosing a General Purpose Reloadable Card

• 76% – Low ongoing fees
• 76% – Low cost to set up the card
• 75% – Convenient locations to reload the card
• 73% – Access to ATMs without additional fees
• 73% – Zero liability for fraud losses

Source: Javelin Strategy & Research

About Report

The 2025 General Purpose Reloadable Card Scorecard offers a fresh consumer-focused view of the GPR landscape and how major programs stack up. This segment remains one of the strongest areas in prepaid payments, reaching an estimated $255 billion in load volume in 2024 and maintaining steady annual growth of roughly 8%, based on Javelin Strategy & Research figures. The wide range of providers included in the analysis reflects the many roles GPR cards play. They give consumers without access to traditional banking products a way to participate in electronic payments, help people manage day-to-day expenses, support simple peer-to-peer transactions, and reinforce loyalty for certain retailers. The research also outlines what cardholders care about most, with fees, security, availability, and easy-to-use technology staying at the top of the list.

Regions Bank’s Now card earned the highest overall score among the 16 programs reviewed. While it did not take first place in any single category, its consistently strong performance placed it in the top tier across all three evaluated areas. Cash App and GO2bank followed in second and third place. Neither card led an individual category, but both delivered solid results across the scoring framework. Together, the top three offerings illustrate the different value models in the GPR market: a bank-issued card, a P2P-focused option, and a card aligned with a retail brand.

The post Top 5 Features For a General Purpose Reloadable Card appeared first on PaymentsJournal.

Uber’s new prepaid passes—offering riders reduced rates on frequently traveled routes—are designed to appeal to those who consider the rideshare’s services too expensive. Beyond encouraging loyalty among Uber riders, the program also helps the company manage its overall costs.

Unveiled this week, the prepaid passes are sold in bundles of 5 to 20 rides, with discounts of up to 20% depending on the number purchased. The passes also shield riders from surge pricing.

“The prepaid option makes great sense operationally for Uber,” said Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research. “By creating stored value accounts, they can create a more consistent recurring user model by banking money upfront as a balance sheet liability.

“But at the same time, they are reducing the number of credit card transactions they process, reducing fees paid out to offset any margin losses on reduced fares,” he said. “In essence, they increase loyalty against competition and use the costs savings to supplement the reduced fares.”

Which Market Will Emerge?

The passes may appeal most to commuters, but that represents a fairly limited market. Since they expire after 30 days, they work best for riders making consistent, repeated trips. However, the one-hour ride window can be inconvenient for workers who need to arrive at their jobs at specific times.

Uber has also extended the passes to teen accounts, which may open a stronger market. Younger riders could use them for regular trips home from after-school activities or other scheduled outings.

Flexibility in Payments

Uber has been exploring new ways for riders to pay, aiming both to reduce costs and to offer more flexibility in payment options. Alongside its prepaid offering, Uber expanded its price-lock feature after a trial run in a handful of U.S. cities. The program lets customers lock in fares for up to 10 routes at a monthly fee of $2.99.

Last month, Uber also began accepting cash payments for rides in dozen of U.S cities. Marketed as a way to make rideshare services more accessible to the unbanked and underbanked, the move has also raised concerns among drivers about the safety risks of carrying significant amounts of cash.

The post Uber’s Prepaid Passes Are About More Than Loyalty appeared first on PaymentsJournal.

For the prepaid industry, 2025 has been focused on federal legislation, particularly the impact of the omnibus so-called “One Big Beautiful Bill” that was signed into law in July. On the state side, regulators have been mostly quiet, aside from a gift card cash-out proposal still working its way through the California legislature.

In his new 2025 Prepaid Regulatory Report: Federal Changes Dominate the Conversation, Jordan Hirschfield, Director of Prepaid for Javelin Strategy & Research, looks at how these changes will affect prepaid players over the next few years. While the federal government has narrowed some opportunities, particularly in nutritional assistance programs, the Trump administration is also opening opportunities for prepaid programs in other areas.

Cutbacks in Government Programs

The primary regulatory concern for the prepaid industry in 2025 was the omnibus legislation commonly known as “One Big Beautiful Bill,” which called for severe cutbacks in areas such as the Supplemental Nutrition Assistance Program, or SNAP. That means fewer transactions, less load, and fewer people utilizing the prepaid cards from these programs. This will have a significant impact on the companies that help produce those cards and process the attendant payments.

As with many government programs, political and budgeting decisions could turn this around in a heartbeat as priorities and administrations change. Hirschfield said there may not be a lasting long-term effect, but over the next two to five years, the number of transactions that are approved for nutritional assistance is likely to drop significantly.

“Those in the industry that support government programs are going to feel a pinch from how much they process and the transactional fees they get from that,” Hirschfield said. ”Government programs already are lower margin, by and large, because it’s the government. These aren’t places where you can do profiteering, nor should you. But it is an area where you want to make money by supporting a government contract and doing these things that are important to communities.”

One positive result for the prepaid industry is the administration’s determination to phase out paper checks. The Social Security Administration has announced it will sunset paper checks as of Sept. 30, 2025, opening up an opportunity for prepaid providers. For example, the Direct Express platform is a BNY-sponsored Mastercard that people who are unbanked or underbanked can use to get their Social Security payments on what is essentially a prepaid debit card.

“We will probably see those kinds of offerings increase at a faster rate,” Hirschfield said. “You’ll see other non-prepaid mechanisms increase as well, with direct deposit, ACH transfers, and things like that.”

Cash-out Levels Rising?

At the state level, the most significant prepaid development this year was California’s proposal to raise the cash-out minimum for gift cards from $9.99 to $25. If the law passes—and Hirschfield said it’s been getting some traction—it would require stores to refund leftover amounts on prepaid cards of up to $25.

According to Hirschfield, the proponents of the law mistakenly assume that companies are profiting from unused funds when these actually represent liabilities on their books. They generally have to remain on the books for five years before the issuer can recognize the revenue. Hirschfield said that only 1% to 3% of prepaid cards have a balance on them for a decent length of time,

The proponents of the law used statistics from Starbucks, which has a significant volume of card breakage five years after they were issued. But Starbucks also sells an enormous number of gift cards per year. It may be pocketing $100 million or so a year on leftover gift card money, but it’s selling $16 billion a year.

Putting the Burden on Retailers

What’s more important are the practical implications for retailers.

“Cash is not something that a lot of stores manage anymore,” Hirschfield said. “The excess cash required for people to cash out $25 at a time is a really large amount that these retail stores might need to have on premises. It creates a security risk. You don’t want your retail associates handling that much cash.”

The law would also encourage non-use of these cards, which does not benefit anyone involved. The person who bought a gift card didn’t intend for the recipient to merely cash it in for $25. The recipient is missing out on aspects like loyalty benefits, which could very well be more valuable than just taking $25 in cash.

A law passed in Maryland last year mandating more protective packaging for gift cards, one that quickly became a sort of mandate for prepaid card issuers. Manufacturers don’t want to establish one standard for their cards sold in one state and another for the rest of the nation.

“The industry responded and said yes, we’ll make a better, more secure package,” Hirschfield said. “It just becomes universally accepted.”

By contrast, even if the California proposal becomes law, it is unlikely to affect other states because the onus would be less on the card issuers than on retailers within the state.

“The policies and procedures at the store level will needto be much different,” Hirschfield said. “If you’re a national retailer, a Target, Home Depot, or Walgreens, you have to create a whole separate set of policies, procedures, and technology in your point-of-sale system just for California. It’s a really onerous battle at that point, and really the benefit is so small.”

Limited to California

Hirschfield thinks it’s doubtful there will be much of a copycat effect, either. While 10 other states have cash-out provisions for the unused part of a gift card, they all limit the refunded amount to $10. Some state initiatives affecting the prepaid industry might turn out to be a bellwether for the entire country, but this is an instance where it’s not likely to go further, even if California enacts the law.

“A few states that definitely lean on the protecting-the-consumer end of the spectrum that might try and do something similar,” he said. “But $25 is a really extreme amount. People within the gift card industry are not against cash-out provisions. They’re against the sheer total at $25.”

The post Cuts to SNAP, Rising Cash-out Provisions Lead Prepaid Regulatory Concerns appeared first on PaymentsJournal.

Gift cards have become a year-round payment vehicle, in part because birthdays are the most popular occasion for prepaid purchases. However, even with other spikes in prepaid shopping throughout the year—such as Dads and Grads season in June—the holidays are still the single most popular time to purchase prepaid products.

As Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research, detailed in the 2025 Prepaid Holiday Preview: Gift Cards Could Provide Safe Harbor report, many factors are creating a new prepaid environment this holiday season. These factors have also unlocked powerful opportunities for retailers.

What Shoppers Want

One challenge looming over this year’s holiday season is the macroeconomic environment, which has continued to keep consumers under pressure. Inflation has remained high, as have interest rates, although an interest rate cut could be on the horizon.

Consumer spending has marginally increased in recent months, but the emphasis remains on staple items as opposed to discretionary spending. Along with these issues, potential tariff impacts loom.

“I think there’s a likelihood that there are going to be some shortages of some physical products, because no one knows what to ship, what not to ship, or how much to make,” Hirschfield said. “It’s not that consumers are going to necessarily spend a lot less for the holidays. I think they’ll spend a little bit less. They may have less to physically buy, which goes to the benefit of gift cards.”

As consumers navigate their holiday shopping, two major considerations come into play: what the recipient wants and what the giver wants to buy.

Overwhelmingly, recipients prefer to receive cash and cash equivalents. Their first choice is a general-purpose gift card, such as those offered by the major credit card companies. Their next two preferences are cash and retailer gift cards.

After all these options come physical gifts. Typically, consumers don’t want physical gifts because many have specific preferences and don’t want to engage in the return process. Some recipients would even prefer funds in their peer-to-peer (P2P) account—another cash equivalent—rather than a physical gift.

“Conversely, how do you want to give a gift?” Hirschfield said. “This is what really matters because this is where the transaction happens. The cash number goes way down, and you’re looking at 10% to 12% of people who prefer to give cash, and almost half prefer gift cards in one form or another.

“It’s slightly tilted towards the retailer-specific gift cards because there’s a bit more of a personalization feel. ’I want you to go to this specific retailer because I know you like their shirts, or I know you want to get new headphones, so go to an electronics store.’ It makes the giver feel like they are giving something a little more personal.”

Positioned as Prime Merchandise

The one commonality among recipients and purchasers is the popularity of gift cards, regardless of type. It’s a theme that will continue into the holiday season.

“What we see is that among people who bought a holiday gift card last year, 96% are likely or definitely going to buy a gift card again for the holidays this year,” Hirschfield said. “Around 81% are going to spend a similar amount, 16% are going to spend more, and only 4% are going to spend less. That’s a net increase in spending in gift cards—not a necessarily huge net increase, but it is a net increase in spending.”

Due to the strong preference for prepaid products and the projected increase in spending, retailers should consider gift cards prime merchandise and position them accordingly.

The most popular in-store locations to buy gift cards are the multi-brand, multi-card displays found in large grocery stores, pharmacies, or general merchandisers like Walmart and Target. The next most popular place for gift card purchases is at a specific retailer’s store.

In addition to in-store placement, retailers should consider how gift cards are displayed.

“We have good research we added this year, which says that 61% of people are going to choose a gift card because it has the right messaging—so you need your ‘Happy Holidays’ gift cards ready to go,” Hirschfield said. “49% are going to purchase because the display caught their attention, so that effort matters.

“The other thing is don’t discount that physical gift desire of the purchaser. Nearly 40% are going to be swayed by ancillary packaging, so if you can make a nice package out of a gift card, it makes it feel like more of a physical gift.”

After multi-card displays and retail stores, the next most popular option for gift card buying is at a retailer’s website, including digital cards and physical gift cards that are shipped. This means that along with positioning gift cards front-and-center in their stores, merchants should have gift cards prominently displayed on their website.

A Critical Story

Wherever the gift card is purchased, it represents an important opportunity because prepaid products are often the first touchpoint in customer relationships.

“It works both for the purchaser and the recipient, because the purchaser might be also incented,” Hirschfield said. “We have a lot of good research that says if you offer one of those incentives—buy a $25 gift card, get a $5 gift card—the purchaser is influenced by that. They may be getting their own gift card just for buying someone else a gift card. That’s where the relationship can begin.”

The numbers bear this out: Hirschfield found that roughly 45% of consumers who receive a gift card to a brand they have never used before will become a repeat customer.

Additionally, nearly half of gift card recipients will join the company’s loyalty program, around 42% will download the company’s app, and nearly a quarter will deposit funds into a retailer’s stored-value account wallet.

“The gift card has opened up this incredible opportunity to introduce someone to a new brand and make them a very loyal and sticky customer,” Hirschfield said. “In turn, 19% are going to then refer that brand to someone else. So, you’re getting loyalty, but you’re also getting a referral, and that’s all from one simple product of a gift card. I think that’s a critical story.”

Stretching Into the New Year

Merchants have another, often overlooked opportunity to drive loyalty and engagement this holiday season. Many physical gifts will be given, and many of them will be returned.

Often, the recipient will receive store credit, which is essentially a gift card to the consumer. Accordingly, many consumers engage in the same behaviors with store credit as they do with gift cards, such as purchase totals above the allotted amount and joining a store’s loyalty program.

This opens new avenues for engagement. For example, a retailer could give consumers a bonus or incentive if they use their store credit within a certain period.

Because of the many aspects of prepaid products—and the significant benefits they deliver—retailers should begin developing their holiday shopping strategies now. However, due to the potential for returns and additional purchases, a robust holiday plan should stretch into the new year.

“There’s so much that needs to happen now to get ready for Black Friday and beyond,” Hirschfield said. “Additionally, retailers need to be cognizant that this is your opportunity to be ready for December 26 to the end of March. In that slower first quarter, you can work to implement engagement tools.”

The post How Prepaid Products Continue to Transform Holiday Shopping appeared first on PaymentsJournal.

DraftKings will no longer allow customers to use credit cards as a method of payment. The sports betting site cited this change as a way to protect its users, though it also brings significant benefits for the company.

Customers can still fund their DraftKings accounts using debit cards, bank transfers, wire transfers, and payment platforms like PayPal, Venmo, or Apple Pay. Users who previously used credit cards to top up their accounts will have those cards disabled for funding by the end of the month.

The company told SBC Americas that the move is intended to prevent customers from incurring costly cash advance fees and high credit card interest. For gambling sites, these deposits are typically treated as cash advances rather than standard credit charges, since they are considered a way to access cash. As a result, these transactions incur higher consumer fees.

“With several states already prohibiting use of credit cards as a funding mechanism, and the treatment of credit as a cash advance instead of a purchase, this move just puts DraftKings and their customers in a more secure spot,” said Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research.

Earlier Fines

DraftKings has already come under fire in its home state of Massachusetts, where it is illegal for gamblers to fund their accounts via credit card. Last month, the Massachusetts Gaming Commission fined DraftKings $450,000 for accepting multiple credit card deposits from customers in 2023 and 2024. At least seven other states have banned the use of credit cards to fund gambling sites.

DraftKings self-reported its violations on three separate occasions, acknowledging that it had accepted more than $83,000 in credit card funds. The company said it misunderstood the language of the law, believing it only applied to users making deposits while physically located in Massachusetts. The Massachusetts gaming regulator ordered DraftKings to return the funds to the 218 customers who improperly used credit cards for wagering.

Standardizing Deposits

In addition to mitigating regulatory concerns, the move should also strengthen the security of DraftKings’ deposits.

“This move will standardize the deposits in DraftKings’ stored-value accounts,” said Hirschfield. “Deposits will now be required to use cash equivalents to fund the value of their accounts, which reduces the risk for all parties involved. By removing credit, the remaining options also could present less cost to DraftKings, leading to increased options for player promotions and incentives to boost their stored value accounts.”

The post Why DraftKings Will No Longer Take Credit Cards appeared first on PaymentsJournal.

Gift cards are thriving, but they are just one aspect of the booming prepaid industry. For example, many consumers may not realize that when they are reloading their account at Starbucks, Target, or Dunkin Donuts that they are essentially purchasing a digital gift card for self-use.

As Jordan Hirschfield, Director of Prepaid Payments at Javelin Strategy & Research, found in the Javelin Prepaid Consumer Sentiment: 3-Year Trend Highlights report, this is just one of the many trends driving the prepaid industry forward.

The study spotlighted upward trends, downward trends, and stable areas. All provide valuable data points for organizations deciding how they should invest in this segment and how they can better reach their customers.

Digital and Physical Equilibrium

Since the consumer sentiment survey was revamped three years ago, Hirschfield has seen several patterns emerge. One of the most-watched trends in the prepaid industry has been the continued prominence of digital gift cards.

As with digital payments, some have assumed that digital gift cards would eventually dominate their physical counterparts. However, this pattern may not hold true with prepaid.

“What’s interesting with digital and physical is it’s never going to be a flip to digital—it’s going to be an equilibrium,” Hirschfield said. “I think the data over three years is showing that there’s been a lot of stability in terms of the number of physical cards and digital cards in volume.”

Retail gift cards are still skewing toward physical cards. There are roughly 3 to 3.5 physical cards sold per person per year compared with approximately 1.5 digital gift cards.

Although these numbers have been steady, signs point to an upward trajectory for digital gift cards. Notably, there has been a substantial increase in load volume on digital gift cards.

Second, it is likely that the number of digital gift card purchases has been skewed. For example, the Starbucks or Target cards that consumers reload often aren’t reported as prepaid purchases because many individuals don’t consider them to be a gift card, per se.

As these statistics become clearer and funds continue to flow into digital gift cards, there is an increasing likelihood of an even digital-physical split.

“That’s how you’re getting to that equilibrium perspective, and that’s where I’m advising people I speak with—it is not an either-or scenario, it is a combined effort, and you need to be focused on it,” Hirschfield said. “Also, not only how does your physical support itself and your digital support itself, but it’s also how do they support each other? You have to be thinking of physical and digital, and the way it’s trending out over three years is as a 50-50 proposition.”

Self-Use vs. Gift Use

Outside of the digital and physical divide, there is also a growing split between those who buy prepaid products as a gift and those who buy them for self-use.

Some of the most popular segments where consumers buy gift cards for others have not seen substantial growth over the past few years. This includes food service companies, mass merchandisers, and apparel shops.

These industries have been relatively neutral, but that isn’t a negative. All of these segments are already in a strong position, so rapid growth isn’t to be expected.

However, several industries are experiencing growth in the gifting segment.

“Where we saw a lot of growth is in travel and entertainment: so hotels, casinos, resorts, theme parks, and airlines,” Hirschfield said. “That—to me—says, ‘That’s a great gift to give where there is no physical gift alternative.’ You can’t really give someone a hotel room, but you can give them the ability to get a hotel room. You can buy someone an airline ticket, but you don’t know their schedule.”

When it comes to consumers who buy prepaid products for themselves, substantial growth has been seen in the fast-food or quick-service restaurant (QSR) category. Interestingly, there has not been as much growth in the coffee segment, likely because many of the larger chains have already leveraged their prepaid programs.

There has also been growth in purchasing prepaid products for self-use from self-care providers, drugstores, and sporting-goods stores. Another segment that has emerged in the past few years is the online gaming and gambling sector.

“Online gaming, such as your Xbox, that is definitely growing, and that is definitely a self-use category,” Hirschfield said. “People who are gamers, that is part of their identity. But people who aren’t gamers just probably aren’t going to give it as a gift as much and aren’t really interested in it. So, it’s thinking about how do I get my user as a gamer to buy more of my prepaid products. That’s a big thing.”

Buying vs. Receiving

Hirschfield also examined the differences between what consumers want to receive as gifts and what they want to give as gifts—and found very different perspectives on either side of the equation.

“What people want are cash and cash alternatives, leading with gift cards,” Hirschfield said. “The No. 1 thing they want is a general-purpose gift card—your Visa, Mastercard, American Express, or Discover—because it’s accessible anywhere. The No. 2 thing they want—year after year—is cash, because cash is usable pretty much everywhere.”

After general-purpose gift cards and cash, recipients want retailer gift cards. This means that gift cards are the most popular choice for recipients by far. Roughly half of consumers would choose some form of gift card if they had only one choice.

However, there is a significant shift from the gift giver’s perspective. Even though cash is desired by recipients, most givers don’t want to give cash as a gift. Gift buyers also have a stronger preference for retailer-specific cards as opposed to general-purpose gift cards.

“The giver prefers a retailer gift card because they want it to seem a little more personal,” Hirschfield said. “But then the other thing, they still prefer to give actual gifts. They want someone to open something and have that experience. Cash doesn’t give you a gift experience. It’s a case of, ‘Hey, you may just go and buy something that’s a need, not a want.’”

A Positive Secondary Gift Carding Experience

However, this preference for giving physical gifts is opening up a new paradigm in prepaid.

“That physical gift is an interesting area for the prepaid industry, because many times that turns into a return, and a return turns into a store credit potentially—especially when it’s been a gift and it can’t go back to the original point of purchase,” Hirschfield said. “That store credit then becomes—in essence—another gift card.”

This trend has been increasing as more stores have loosened their return policies. This means there will continue to be opportunities for merchants to leverage this process because there is a pronounced desire among givers to give a physical gift, whereas recipients still want a gift card.

“How you handle a return is important, and not just by giving them a store credit, but maybe it’s a store credit with a bonus promotion and incentive,” Hirschfield said. “The behaviors are all still there—people who utilize gift cards buy more expensive items and spend more than the value of the card. That’s an interesting thing if you are a retailer or a program manager for gift cards.

“Especially in retail gift cards, it’s having that opportunity to say, ‘How do we make this physical item a positive secondary gift carding experience?”

The post Exploring the Trends Driving the Continued Success of Prepaid Products appeared first on PaymentsJournal.

Gift cards are the go-to gift when you’re out of time, out of ideas, or just want to keep it simple. But what actually drives people to buy them? New data shows that while holidays and birthdays remain the most common reasons, other occasions—from graduations to “just because” moments—are nearly as popular. In fact, gift card spending trends reveal a lot about how we celebrate, how we show appreciation, and how we avoid picking the wrong size.

Don’t miss another episode of Truth In Data! Click on the red bell in the lower-left of your screen to receive notifications as soon as the episode publishes.

Data for today’s episode is provided by Javelin Strategy & Research’s Report: 2025 Prepaid Holiday Preview: Gift Cards Could Provide Safe Harbor

Percent of People Who Definitely Buy Gift Cards by Occasion

• 59% – Graduation
• 52% – Holidays
• 52% – Valentine’s Day
• 50% – Birthday
• 46% – Just Because
• 40% – Mother’s Day / Father’s Day

Source: Javelin Strategy & Research

About Report

Holiday retail forecasts for 2025 remain uncertain, with tariffs and ongoing economic volatility casting a shadow over consumer spending. Despite strong performance in the 2024 season, retailers are entering the new year with mixed expectations. Planning for the end-of-year rush is already underway, even as summer temperatures linger. Economic shifts in early 2025 could lead to unpredictable consumer behavior, including delayed or last-minute purchasing decisions. These shifts may ultimately favor the gift card market, as shoppers lean into flexible, future-facing gift options instead of physical goods—especially in an environment with fewer discounts and tighter budgets. The full gift card supply chain—from issuers and retailers to digital wallet providers—will need to be agile and ready to capture demand as it evolves.

Gift cards remain a consistently favored choice among both givers and recipients, across both open-loop and closed-loop formats. According to Javelin’s findings, the opportunity to position gift cards as a smarter alternative to tangible presents—or even competing card options—is still strong. Long-term success depends not only on the initial sale but also on the post-purchase experience. To build loyalty and brand affinity, gift card programs must deliver an engaging experience for the recipient that feels personal and rewarding.

The post Which Events Drive the Most Gift Card Purchases? appeared first on PaymentsJournal.

The traditional model of biweekly or monthly physical check payouts is rapidly becoming a thing of the past. For businesses, moving away from checks results in lower processing costs and a reduced risk of check fraud.

While direct deposit offers clear benefits for employees, it’s not always their preferred method of receiving pay. In today’s competitive labor market, an organization’s compensation model can serve as a key differentiator.

In a recent PaymentsJournal podcast, Kristin Ridgway, Vice President of Treasury and Payment Solutions at U.S. Bank, and Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research, discussed the changing compensation landscape and the growing role prepaid solutions play in attracting and retaining talent.

“When we think of prepaid it becomes about gift cards—giving money away—and self-use,” Hirschfield said. “The payroll card opens up a window of opportunity that can expand almost exponentially in terms of all those things you can do for yourself.”

A Window of Opportunity

The need for more flexible payroll options is increasing. Businesses often have teams composed of various types of employees, not just long-term, full-time staff. In many cases, the traditional check and direct deposit model can complicate payments to a workforce with high turnover or those consisting of a mix of full-time employees, contractors, and seasonal workers. 

“Prepaid payroll cards can reduce costs and administrative work by minimizing paper checks, and offer greater flexibility in delivering payments as needed,” Ridgway said. “Providing more payment options can improve the likelihood that workers will choose to continue working with that company.”

Building strong relationships is especially important with gig workers, who are often critical to an organization’s everyday operations.

The rise of digital payments has led consumers to increasingly expect flexibility—nowhere more so than in the growing gig economy. Most gig workers don’t work traditional hours or fixed schedules, so they don’t expect their payments to follow a traditional model either.

“If you think about a rideshare driver or an Instacart shopper, many want or need to have access to their pay as soon as they’ve finished their shift or the job,” Ridgway said. “With a traditional payroll system, they might not see those earnings for a week or more. With earned wage access and real-time payments to prepaid cards, they receive their money instantly by loading it to the card and could use it to buy gas or groceries or whatever that same day.”

Since many gig workers contract with multiple companies, prepaid accounts that support payouts from multiple sources are especially valuable. Similarly, a full-time worker who picks up gigs on the side can conveniently receive all their earnings on a single card.

Beyond the gig economy, full-time employees also have the option to direct a portion of their paycheck to a prepaid card. For example, a worker might allocate $100 from each pay period to save for the holidays, budget for dining out, or plan for a big-ticket purchase.

Even at companies with high direct deposit participation, a secondary prepaid account can offer added value and engagement. While an employee may initially use the prepaid card to save for a vacation or receive a gig payout, the card remains active and can support a range of future needs.

“There’s an interesting opportunity to have that worker who has multiple work opportunities—maybe one’s full-time and one’s a gig—to have funding onto a similar source,” Hirschfield said. “They want to be able to use that money exactly how the merchant, or wherever they’re going to spend it, is accepting it. Tying that in is really a critical need, not just a want in this environment.”

Retaining Well-Versed Employees

Paying employees in their preferred payment type is important as more consumers become well-versed in the digital economy.

A consumer who can split a check with friends in near real-time using a P2P service may be disheartened to find that the only way to receive their paycheck is through a scheduled direct deposit to a traditional bank account.

This highlights how alternative compensation models are becoming a critical factor in improving employee satisfaction and retention. As companies come to rely more on a shifting workforce—including seasonal, temporary, and contract workers—their goal should be to provide a consistent experience.

“You really want it to be a repeatable opportunity where you bring that employee back in season after season,” Hirschfield said. “There’s a lot of opportunity to use this type of environment down the line—both with your full-time employees and even with workers that come in occasionally—to make sure they have that positive experience, come back, and recommend your organization as a place to work.”

Outside of retention, reloadable card products are often more cost-effective, especially when compared to issuing paper checks.

Additionally, many prepaid solutions include a mobile app or website where cardholders can check balances and receive alerts. Users can also load funds onto the card themselves through cash or check deposits.

What’s more, prepaid often go beyond the card itself, offering features like interest-bearing savings accounts, cash-back rewards, and person-to-person transfers.

Prepaid cards can be instantly issued, allowing companies with frequent new hires or contractors to keep cards on hand. These can be used for immediate payouts, off-cycle payments, termination pay, or any situation where a payment to an individual is needed right away.

They can also help reduce certain regulatory burdens that businesses face.

“Something I’ve been hearing about more frequently in recent client conversations is escheatment,” Ridgway said. “This is a challenge for businesses that are issuing a lot of paper checks. U.S. Bank retains 100% responsibility for escheatment on our card programs, so this completely eliminates this burden from our clients for any abandoned funds. We follow escheatment rules according to the state where the individual lives.”

Redefining the Landscape

The benefits of prepaid in payroll suggest it’s poised to play a larger role in the compensation landscape—and may even help redefine it.

“I think we’re moving into a new generation of how terms are being used,” Hirschfield said. “I still refer to, ‘Oh, my paycheck was deposited.’ Well, I don’t actually get a check anymore, it’s direct deposited. I think you will see the same thing with prepaid cards. Prepaid cards are part of the function of a much bigger and more powerful set of tools where the card is just the centerpiece.”

These tools allow employees to access their earnings and make transactions in a modern way, which ultimately puts them in the driver’s seat.

“The bottom line is that when people have better access to their earnings, they’re more empowered, they’re more productive and they’re more loyal to those companies that offer those benefits and that faster pay,” Ridgway said. “That’s a win-win for employees and employers and it’s a really powerful differentiator in a competitive labor market.”

The post Taking the Check Out of Paycheck: The Role of Prepaid in Payroll appeared first on PaymentsJournal.

For the 18th year running, gift cards topped wish lists as the most requested holiday present—solidifying their role as a cornerstone of seasonal giving¹. With more occasions to gift than ever before, demand is surging, and retailers can’t afford to miss the opportunity.

Insights from the 2025 Best Digital Gift Card Programs, Consumer Experience Benchmark Report, conducted by NAPCO research in partnership with Blackhawk Network (BHN), look at the trends behind this booming market, exploring who’s buying and why, and the retailers that are staying ahead of the curve. In this PaymentsJournal Podcast, BHN’s Sarah Kositzke, Global Research Lead and Hilary Spidaliere, Director of Product Marketing, as well as Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research discussed what leading brands are doing to keep their gift cards front and center with consumers—and how they’re using them as a powerful growth engine for their businesses.

The Gift Card Opportunity

By 2028, the gift card market is projected to hit roughly $267.3 billion, with the digital gift card segment expected to soar to $115.3 billion. Clearly, gift cards have evolved far beyond a holiday-only trend. Consumers are now snapping them up year-round, taking advantage of promotions, loyalty points, and rewards. When brands create loyalty programs that benefit both the buyer and the user, they transform gift cards into a 365-day opportunity for customer engagement.

Kositzke shared that while nearly every type of buyer purchases gift cards, the buyer demographic tends to skew male, with a strong presence among Gen Z and millennials. The findings also show that gift card purchases are more common among married individuals, or individuals in a relationship, with children at home, as well as Gen Z and millennials.

Physical cards still account for the majority of purchases, but it’s worth noting that nearly half of consumers are also buying digital gift cards.  

Research from this past holiday season shows that consumers received an average of about three gift cards, with a total combined value of just over $200. When the recipient isn’t nearby, digital cards are often the preferred choice. The report also found that nearly half of all gift card buyers are opting for digital formats, which are increasingly popular for smaller purchases.

“We are seeing more of what you might call micro gifting,” Spidaliere said. “Especially as more people are remote or hybrid or have friends and family across the country, you may want to send $5 to say thinking of you or congratulating them.”

Thinking about where consumers are buying their gift cards, Physical retailers who sell multiple gift card brands remain the leading point of purchase, closely followed by the brand’s own physical stores. However, there is one generational exception: among the youngest respondents—particularly Gen Z and Gen Alpha—physical stores are the clear favorite.

When it comes to digital gift cards, “We’ve seen a lot of parents who would prefer that their kids didn’t overcharge their credit card,” added Kositzke. “That lends itself to a digital platform, because the kids just want to be able to use the card online, whether it’s gaming or shopping or whatever it might be.”

When shopping for others, the average buyer purchases around four gift cards—typically one of which is digital. However, when buying gift cards for themselves, consumers choose digital formats more frequently, with two out of four being digital.

“I think that’s a really good indicator of the progression of the market,” said Hirschfield. “It was 70% physical a couple years ago, but we’re converging on this long lasting 50/50 equilibrium between digital and physical.”

About the Research

For the latest BHN survey, NAPCO research evaluated 100 U.S. merchants across 17 industries, including department stores, fashion, entertainment, home improvement, consumer electronics, and convenience stores. The study assessed more than 120 criteria, focusing on areas such as discoverability, purchaser flexibility, faceplate design options, and payment options.

Spidaliare noted that the research expanded to include the ability to send an e-gift card via messaging apps or text, in addition to evaluating the purchasing experience via email. While email remains the primary channel for driving engagement, shifting demographics suggest that may not last. Reaching audiences in the right format is becoming increasingly important, especially for those who are unlikely to open emails—or may not even use email at all. These consumers want to discover gifts quickly, whether they’re scrolling through text messages or browsing on social media.

“We see a lot of growth right now in SMS delivery and also direct into merchant app delivery, different ways of getting the gifts into their hands that are most accessible to that recipient,” said Hirschfield. “Some of that is about training the giver on how to get the card to the recipient in the best form factor. We’re seeing movement there, and I think it’s going to continue on a pretty rapid pace.”

Brand’s Own Gift Card: 2025 Results

Staples secured the top spot this year, followed by Amazon, while Best Buy, Sephora, and Target tied for third place. Staples expanded the reach of its B2B program and increased availability across several credit card rewards programs.

“Staples had great discoverability,” said Kositzke. “Across all different devices—on a desktop, in mobile apps and on the mobile web—we were able to find the Staples cards very easily. They had an excellent mobile experience and purchase flexibility, and just an enjoyable recipient experience.”

The top ten brands in the report generally ran more gift card promotions and explored new ways to amplify both brand and merchant visibility. One of the most notable areas of improvement was mobile web usage. Leading brands made it easier for consumers to find gift cards through their apps and provided multiple options for sending them.

“All of the top ten got high scores for their app experience,” said Spidaliere. “All ten had an app with their gift card program included there. Your most loyal customers are your app users, so it’s really important to make sure gift cards are prominently available there.”

Key Takeaways to Consider

The report focuses on specific details around how merchants can build and best leverage a digital gift card program for their brand. For merchants unsure of where to start—or how to grow their own gift card efforts—Spidaliere offered a few best practices to consider:

• Feature your gift card program prominently on your website and in your app, ensuring it’s easy for customers to find and access.
• Simplify the self-use purchase path by removing unnecessary steps for consumers who are purchasing for themselves.
• Allow credit card reward points to be redeemed for your brand’s digital gift cards to help expand the program’s reach and attract a new audience.
• Protect against gift card fraud by securing the digital gift card purchase and delivery process.

“We encourage merchants to conduct a benchmark of their own program, so we’d recommend you use the criteria from this year’s study as a framework,” Spidaliere said. “Go through your own purchase and recipient experience across all your devices, determine what’s working well and anything that you need to work on.”

To read the Consumer Experience Benchmark Report: 2025 Best Digital Gift Card Programs, conducted by NAPCO Research in partnership with BHN, or to watch the webinar, click HERE.

¹ NRF 2024 Holiday By the Numbers

The post The Gift Card Boom—and What’s Driving It appeared first on PaymentsJournal.

A cursory survey of sports venues will reveal fields sponsored by Citi, Chase, PNC, and Truist—just within Major League Baseball alone. However, the connection between payments and the arenas and stadiums that host events runs much deeper than naming rights. With a captive audience of thousands, there’s a strong opportunity to drive loyalty and revenue, which is why so many stadiums and arenas are exploring new pay methods.

In a recent PaymentsJournal podcast, Christopher Miller, Lead Emerging Payments Analyst, and Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research, discussed their experiences at sports arenas across the U.S. and the emergence of new payment protocols at entertainment venues.

A Cash-Free Stadium

The greater movement away from cash and toward digital payments has been gradual shift on a national scale, but many event venues have already made the transition to cashless operations.

“I went with some friends to Charlotte to a soccer game for the team we support in Atlanta,” Hirschfield said. “You walk in this big 70,000 seat football stadium, and the first thing you see is a massive banner that says, ‘We are a cash-free stadium.’ I go to enough games, and almost every stadium I’m in nowadays is cash-free. It creates a lot of openings for organizations to grow their revenue base through new kinds of payment activities.”

One unique aspect of sports and entertainment events is that they attract a captive audience of tens of thousands. Many attendees have paid a premium for entry, and re-entry is often not permitted. Not only are most patrons there for the duration, but they are also frequently loyal and enthusiastic supporters of the team or artist they came to see.

These factors create opportunities for venues and payment firms to drive revenue and foster innovation.

“Many new technologies—and I’ll take biometric authentication as an example—have the best application in scenarios where you have loyal, repeat customers for whom it is worth the effort to enroll. And they believe that there is a benefit to them of enrolling that they will receive repeatedly,” Miller said. “Folks like season ticket holders are a slam dunk of a category there.”

Season ticket holders have already invested a substantial amount of money, are likely to spend more, and visit the sports venue frequently. This gives the team or arena a strong incentive to provide them with unique and distinctive experiences to engage and retain them.

“It’s really a sweet spot for both piloting and implementing these types of things,” Miller said. “We’ve been seeing, for example, biometric entry for a couple of years. There are some stadiums that have done away with every form of media whatsoever—there’s not even digital tickets. Your face is your ticket, your face is used for payment, and there’s just nothing but your face, not even digital wallets. But that’s at the far end of the spectrum.”

Cautionary Tales

Though stadiums and arenas can be effective environments for introducing these new programs, the initial scope should be manageable.

“The Intuit Dome in Los Angeles was the first one I know of that went fully biometric,” Miller said. “The first event there was a concert, and the biometric entry system was broken, and long lines formed of angry people who had been told they didn’t need tickets. It was a cascade of technological failure that delayed individuals from experiencing the concert or, at the very least, colored their perception of what type of experience the arena could be trusted to give.”

These issues can impact repeat patronage, but they are also common when dealing with emerging technologies.

“I was at a soccer game in Atlanta this past weekend and the Just Walk Out technology was down, so all of these stands were inoperable,” Hirschfield said. “They had food spoiling on the shelves, the hot food, but it goes to show there are limitations still in current technology that need to be addressed. There’s a lot to learn and these are great ways to learn without putting too much at risk.”

Because hiccups occur, piloting new technology programs is the best route. For example, at Chase Center in San Francisco, a biometric payments pilot was limited to a certain concession stand.  

The pilot was rolled out as a unique, one-off experience, allowing the technology to be tested and challenges to be identified before scaling it throughout the venue.

Blending Team and Brand Loyalty

Another area of opportunity is for retailers to bring their full loyalty programs to the arena environment. There is a growing presence of retailers in arena concession stands, such as the Chick-fil-A stands in the Mercedes-Benz Superdome in Atlanta. However, these locations don’t fully function like their other franchises.

“It adds to a little bit of confusion on the part of the patron because I have a Chick-fil-A loyalty account and prepaid account, but I cannot use them at what they call their licensed venues,” Hirschfield said. “Gift cards are not applicable at the venue, and I can’t use the app to order. It shows there’s a need to grow—they need to figure out how to blend my loyalty to Chick-fil-A and my loyalty to my team.”

This pain point may ease due to moves happening behind the scenes. There has been a long-term trend of consolidation, involving major companies like Ticketmaster and Live Nation, as well as other arena management and ticketing vendors.

Additionally, there has been substantial consolidation in ownership across sports franchises and leagues. It has become more common for ownership groups to purchase multiple teams, creating opportunities to deliver experiences across multiple franchises.

One of the main reasons licensed stores at venues can’t offer loyalty and prepaid services is that their payment systems are tied to the arenas, which have historically been highly fragmented across the nation.

As consolidation reduces the number of management companies, it will become easier for companies like Chick-fil-A to integrate and offer their full experience at sports and entertainment venues.

“Being able to use a prepaid card issued by the retailer with whom you have a loyalty relationship in these license scenarios changes the game of what’s possible for those types of partnerships, who can obtain value, and how they can attain value,” Miller said. “I think there’s a technical problem there to be solved. There’s a good business opportunity to step into that niche and bridge this gap.”

Opening Opportunities Through Wallets

Another way to leverage the stadium environment to build loyalty is through prepaid wallets. More venues are offering tickets pre-loaded with benefits like $20 in concession value or discounts at arena retailers, but there is still plenty of room for improvement.

“I was in Utah at the Utah Jazz’s arena, and they have a great app where you can pay in the app and then go pick up your food,” Hirschfield said. “It reduces a lot of friction, but how do you load a wallet into that? Then you get those benefits that we’ve seen from other stored-value wallets, like reducing the amount of transaction fees because you’re doing it on a one-time basis versus a many-time basis.”

“In sporting events, I’ll sometimes go to three different concession stands in one event, because I’m with my wife and my kids,” he said. “My daughter wants ice cream, my wife wants a piece of pizza, and my son wants a hot dog. Those are three different places and three transaction fees that can be easily eliminated through technology.”

A team-centric digital wallet also opens possibilities for new partnerships and rewards programs. For example, at T-Mobile Park in Seattle, if a customer uses their Alaska Airlines Bank of America credit card on a Friday night, they receive a discount. However, to take advantage of this benefit, consumers must remember to bring the card and use it for transactions.

“Shifting all of those payments to a team-operated wallet changes the nexus of how valuable that partnership might be for both sides,” Miller said. “If the take rate across all the consumer base can be increased, than the economics of that partnership are improved and we haven’t had to do much. This is relatively small potatoes from a technical perspective, but it does acquire a scale at which it makes sense to take that leap.”

The post Sports and Entertainment Venues Can Be a Proving Ground for Payments appeared first on PaymentsJournal.

Prepaid cards continue to hold a strong position in the payments landscape, offering convenience, flexibility, and control for a wide range of consumers. Over the past year, usage has remained steady across various categories—from everyday spending to gifting and financial management.

Don’t miss another episode of Truth In Data! Click on the red bell in the lower-left of your screen to receive notifications as soon as the episode publishes.

Data for today’s episode is provided by Javelin Strategy & Research’s Report: 2025 Prepaid Card Data Book

Prepaid Cards Purchased, Reloaded, or Received in the Past 12 Months, by Percentage of Consumers

• 74% – Retailer-specific gift card
• 45% – General-purpose non-reloadable card
• 27% – General-purpose reloadable card
• 16% – Gas prepaid card
• 10% – Phone prepaid card

Source: Javelin Strategy & Research

About Report

The prepaid card market—both open-loop and closed-loop—has found its footing, showing modest growth driven by strong consumer usage patterns and the emergence of new sectors like gaming and gambling. According to Javelin Strategy & Research, nearly half of all prepaid categories are projected to grow at or above the industry’s average pace of 8% in 2025. However, not all segments are keeping up. Government and telecom-related products are expected to underperform, with growth lagging behind the 2.7% inflation benchmark.

Political dynamics, including changes in federal leadership, are likely to restrict expansion in public sector programs. Meanwhile, categories such as gaming, healthcare spending cards, retail gift cards, and incentive-based products are set to perform strongly. Programs tied to fixed cost-of-living adjustments or reliant on legislative support—like Social Security or TANF—may face tougher conditions moving forward.

The post Top 5 Prepaid Cards Purchased, Reloaded, or Received appeared first on PaymentsJournal.

Over the past 12 months, consumer spending habits have continued to evolve, and so has the way people pay. We look at which payment cards—credit, debit, and prepaid—have been most commonly used. By breaking down the data, we get a clearer picture of what’s driving consumer choices and which types of cards are gaining or losing ground.

Don’t miss another episode of Truth In Data! Click on the red bell in the lower-left of your screen to receive notifications as soon as the episode publishes.

Data for today’s episode is provided by Javelin Strategy & Research’s Report: 21st Annual U.S. Open-Loop Prepaid Card Market Forecast, 2024-2028

Top 5 Payment Cards Used in the Previous 12 Months

• 82% – Major credit card usable anywhere
• 66% – Major debit card usable anywhere
• 35% – In-store gift card
• 31% – General prepaid gift card (non-reloadable)
• 29% – Store-branded credit card

Source: Javelin Strategy & Research

About Report

Javelin Strategy & Research’s latest annual report on the open-loop prepaid card market outlines key developments and forecasts across several major categories. It highlights projected growth in areas such as general-purpose reloadable cards, payroll and benefits cards, and corporate expense cards. The report links these trends to broader economic indicators, noting that improvements in the economy and regulatory landscape are creating favorable conditions for certain card types. For example, lower inflation and evolving financial regulations are helping drive interest in benefit and general-purpose cards, which can serve as alternatives to higher-interest credit options. On the flip side, factors like a stronger job market and shifts in government aid programs are slowing growth in areas like unemployment-related cards.

The research also shows that consumer sentiment toward prepaid cards remains strong. Buyers are continuing to use these cards frequently, especially in high-volume categories, with many planning to maintain or increase their usage. This year’s findings build on previous trends, confirming that prepaid solutions are becoming a stable part of how Americans manage and spend money.

The post What Payment Cards Have Been Used in the Previous 12 Months? appeared first on PaymentsJournal.

In what remains a challenging environment for many employees, prepaid card programs continue to play a vital role. As associates return to the office or look for new ways to drive sales, employers can leverage a variety of commercial prepaid products to boost morale and reward performance.

In the 2025 State of the Industry: Prepaid Commercial Cards report, Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research, explores the potential of prepaid cards for businesses, employees, and consumers. Hirschfield outlines the ways that prepaid cards have sustained a strong presence in the commercial market—largely due to their flexibility and diverse range of use cases.

Flexible Ways to Keep Employees Happy

Continuing calls to return to the office have led to growing frustration among employees who have grown accustomed to more freedom and flexibility while working from home. Additionally, the costs associated with commuting and in-office work create an extra burden, prompting employers to find ways to make the transition worth their while.

“There are so many ways to use prepaid cards to recognize employees,” said Hirschfield. “If they’re returning to the office, you could offer them an incentive to say, ‘Hey, we know that you haven’t had to pay for gas or transit to come into the office, so here’s a gift card to help ease that pain.’”

The sales environment can also be difficult amid ongoing economic uncertainty and concerns over inflation. To help motivate employees, employers can utilize prepaid cards as a tool for rewarding sales performance through contests or incentive programs. These cards can be reloadable, allowing employers to continuously add funds whenever a representative hits a sales target. Payments can also be made instantly, eliminating the need to wait for the next payroll cycle or HR approvals.

Little Side Benefits

There are also benefits in terms of reporting. Any type of incentive may be subject to tax, and a prepaid program can offer clear reporting if the employer needs to address income tax implications.

Additionally, the shift of many incentive programs to digital platforms is an advantage in today’s modern working environment.

“Even when you have a geographically diverse workforce, you’re able to do these things instantly, to everyone, in an equal manner,” said Hirschfield. “It really simplifies things from that perspective.”

Traditional opportunities also remain for celebrating occasions like holidays, birthdays, and work anniversaries. “These little things can show that you’re in touch with the employees as an employer,” said Hirschfield. “Things can look frustrating to the employee side, and you want to make sure they are recognized.”

Advantages in the Commercial Sector

Prepaid commercial credit programs for midsize to large corporations represent a steady slice of the commercial market. In 2024, prepaid cards maintained a significant 22% market share within the commercial sector.

There are many use cases where prepaid cards make more sense than issuing credit cards. While corporate credit card programs are generally the right option for employees who frequently use their corporate accounts, they can be costly.

On the other hand, many employees only occasionally incur expenses for travel or purchases. Prepaid cards offer a flexible solution, allowing organizations to cover costs without the added administrative burden of enrolling employees in a corporate credit program.

“You really should have both a corporate credit program and a corporate prepaid program,” Hirschfield said. “You can give access to people who need to charge expenses to a card based on their frequency of usage or how much they’re spending. Obviously, if someone’s spending high amounts of money, a credit card makes sense. But when it’s for occasional travel—such as being sent to a training class that might be the employee’s only travel opportunity for the year—a prepaid card can be a lot more efficient in the long run. Combining the two can bring down the expense of running a card program.”

Prepaid is also an effective solution for organizations with contractors who need to make purchases on the company’s behalf. Providing such individuals with a company credit card can be problematic. Instead, granting them access to a prepaid program offers the employer greater control and protection.

“You’re not giving them long term access to a purchasing opportunity,” said Hirschfield. “You’re protecting how much that person can spend, as well as even what they can spend it on.”

A Strong Way to Promote Loyalty

The consumer incentives segment of the prepaid industry has proven to be a real boon for entities seeking to improve customer loyalty. Javelin’s research found that nearly 40% of \U.S. consumers surveyed received an incentive in the past 12 months. Nearly half of respondents who received a prepaid card as a gift ended up joining that retailer’s loyalty program.

The research also shows that when a consumer tries a prepaid gift card for the first time, they are much more likely to become a repeat visitor to a store or website. They are also more likely to join the loyalty program, download the app, and engage in behaviors that increase their long-term engagement as a consumer.

“As a brand, you are reducing the acquisition costs for that customer by participating in incentive programs,” said Hirschfield. “You’re creating a new marketing opportunity to find potential new customers as a brand or program manager by putting these cards in the right places to get exposure to new or lapsed customers.”  

If there is a concern about the future of this market, it’s that the federal government—having played a significant role in fueling the distribution of prepaid cards—may be scaling back its efforts. However, the loyalty example highlights another way in which a prepaid program can serve distinct segments that a postpaid environment can’t replicate. Even as some programs recede, new opportunities and use cases continue to emerge.

The post Digging into the Benefits of Prepaid Commercial Cards appeared first on PaymentsJournal.

Across industries and companies—from small businesses to large enterprises—organizations are constantly searching for ways to improve corporate culture and boost employee engagement. However, in large, dispersed companies, providing employees with the personal touch needed to maintain motivation can be particularly challenging.

In a PaymentsJournal podcast, Julie Gu, Vice President of Sales and Marketing, North America, at Prezzee, and Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research, examined key trends in employee incentive programs, the challenges organizations face, and how customized gift card program can effectively drive engagement.

Don’t Skimp on the RICE

Just as important as understanding what employees bring to the table at work is recognizing who they are as individuals. This is why organizations are increasingly interested in their employees’ hobbies, wellness, and inclusion interests.

As companies explore ways to boost employee engagement, there is an acronym—RICE—they should keep in mind.

“You know I’m Asian, so I never skimp on the rice,” Gu said. “What that means is that ‘R’ is for rewards and ‘I’ for incentives. ‘C’ is for celebrations—and that’s celebrating moments big and small, professional, and personal. Then, there is ‘E’ for engagement, which is making sure you’re forming a daily habit throughout, and that transcends all the aspects.”

Fostering engagement on a daily basis can be difficult in a busy office—and even more so in virtual or hybrid teams.

“We’re very virtual in our organization, so I joined a running group,” Hirschfield said. “I’m a poor runner, but it motivates me to run. Someone just ran a marathon, so it’s a great opportunity to celebrate that. With all these groups, we’re getting updates on coworkers who are having babies or weddings or things that humanize the organization. You don’t want to be an organization that’s robotic.”

Reinforcing the Right Behaviors

This shift toward interest groups is a key engagement trend. While many companies have already implemented enterprise resource groups (ERGs) to foster inclusion, interest groups can be more enjoyable and feel less obligatory than ERGs.

One of the most common types of interest groups is step challenges. However, many organizations are evolving past simple challenges like reaching 10,000 steps in a day. Micro-challenges, such as hitting 500 steps in a day, can be even more impactful.

“The micro-goals are important because that person who hasn’t been participating in an exercise program might be intimidated by 10,000 steps,” Hirschfield said. “I look at myself—I work at home, so I’m not walking from my car to the elevator, which adds a couple hundred steps here or there. Getting to 10,000 steps can be difficult for some people, but when you have attainable goals, they get that feedback and engagement.”

In addition to setting smaller goals, more companies are creating groups around shared experiences. As they organize these activities, organizations should ensure they support interests that positively impact their company.

“The first step is to think about what behaviors are already happening around the organization that you want to reward?” Gu said. “What do you want to continue to validate and celebrate? Who can you showcase as a great example of somebody who’s already living our core values who we can show as an ideal value ambassador? You want to reward those behaviors and make that a daily habit.”

Once organizations recognize existing behaviors, they can begin identifying the activities they want to incentivize. For instance, many employers emphasize mental health and wellness initiatives, as a healthier workforce tends to be happier and more productive.

“Think about which ways you want to reward versus incentivize, and from there,  cascade down to the snackable ways (you) can start, so you can start small,” Gu said. “It shouldn’t feel like this big three-year-long, road-map project that you have to tackle, because that’s where budget constraints and a lot of challenges start to happen.”

Closing the Feedback Loop

As companies refine their employee engagement plans, one of the most important aspects to consider is the employee themselves.

“I have three keywords—feedback, feedback, feedback,” Hirschfield said. “Employees want to feel like they’re being heard. Incentives are going to boost morale—Javelin has a lot of data that proves that—but what also boosts morale is giving employees what they want. That doesn’t mean you need to cater to their every whim of the employee; it means you’re listening to them.”

If employees see that even one program is introduced based on their feedback, it will make them feel that their voice matters and that they belong within the organization.

However, as organizations shift their incentive plans from being employer-driven to employee-driven, it’s important not to overlook the link between the two.

“People leave companies, but they stay for managers,” Gu said. “It’s critical to empower managers when we talk about employee rewards and engagement and incentives. It’s about how do we make sure that employees’ direct support every day is empowered. It makes them feel that they have a sense of community, and that they have this closed feedback loop and can feel heard.”

This community isn’t possible if the manager themselves doesn’t feel equipped with the tools or support needed to reward their teams effectively. One simple, turnkey way to empower managers in driving employee engagement is by enabling them to deliver gift card rewards.

Many companies have adopted this approach using small-denomination gift cards. For example, a manager could send a $5 gift card to recognize a team member for excelling at a task or contributing in a meeting—an appreciation that can have a greater impact than a simple kudos.

“A $5 card when it came from my manager probably feels a lot better than $25 coming from some generic HR inbox or a person who I’ve never met,” Hirschfield said. “The opportunity to make that connection is a huge step. If it’s an HR department that controls these budgets, it may be empowering managers to have access to it and make it easy for them to personally provide those rewards. It’s critical in terms of making that human-to-human connection.”

Beyond Monetary Value

Personalized incentive programs that utilize gift cards are an integral way to create connections and make an employee feel appreciated. Not only are gift cards the most popular gift among recipients, but they can also be tailored to the employee in many ways.

“You can include additional messages so that when I send you that gift card—even though it’s only for $5—the message that I send is that I noticed that you are training for a marathon, so here’s $5 towards your training regime,” Gu said. “It’s not really the monetary value, it’s the fact that you feel heard, seen, noticed and appreciated—and you feel supported for something that’s a big task.”

When giving a gift card, a little extra thought goes a long way. If the employee is training for a marathon, they might appreciate a $5 gift card to Starbucks. However, a gift card to a Dick’s Sporting Goods along with a personal message could have a much stronger impact.

“When you personalize it, you provide that reward or incentive or celebration that speaks to what that employee is doing, so making sure those are choices available to the HR department or the manager who is providing that opportunity, those are key,” Hirschfield said.

A Means to an End

For many organizations, implementing a personalized engagement program that leverages gift cards can be a daunting task. However, companies like Prezzee offer solutions that tailor incentive plans to an organization’s specific needs.

“We make your goals our goals,” Gu said. “Where are you struggling to find engagement or retention? Are you having attrition issues? In terms of employee engagement, we are constantly thinking about it every single day, from our employees to your employees, and we think of the gift card as a delivery vehicle—and a means to an end.”

The post Personalized Gift Cards Are the Cornerstone of Employee Engagement Programs appeared first on PaymentsJournal.

Gift cards have become the preferred gifting choice worldwide, as reflected in China’s gift card market, which has seen a 9.4% compound annual growth rate (CAGR) since the beginning of the decade.

According to a report from ResearchAndMarkets.com, this rapid growth is expected to continue, with China’s gift card market projected to expand at a 7.1% CAGR through 2029. One of the driving forces is the increasing adoption of digital gift cards.

Digital gift cards have gained significant traction in China, largely due to the country’s stringent pandemic lockdowns, which accelerated the shift toward e-commerce. In response, leading e-commerce platforms like Alibaba’s Tmall and JD.com began to offer more digital gift card options and enhanced personalization features, further fueling their popularity.

“The Chinese market really exemplifies the uniformity of gift cards across different cultures and borders,” said Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research. “The keys to growth align similarly to those in western markets—including rewards and self-use, digitization, and commercial incentives.”

Avid Mobile Payments Adoption

The digitization of payments in China has significantly impacted the prepaid market. China has been a keen adopter of mobile payments, with consumers frequently using platforms like Alipay and WeChat Pay for everyday purchases.

This digital-first shift means that payments using cash and physical gift cards will either create friction at checkout or may not be accepted at all. The prevalence of these payments platforms is only expected to rise in the coming years, further driving the adoption of digital gift cards in China.

The Same Trajectory

The increasing trend of self-use is driving this growth. More consumers than ever are buying gift cards to take advantage of rewards and promotions, with digital gift cards being especially  popular because they can be purchased and used instantly.

While China may experience higher digital gift card growth due to its heavy mobile payments adoption, the rest of the world is following a similar trajectory.

“Growth in the Chinese gift card market, despite its relative newness, is already closely mirroring the continued future growth of the U.S. market—further highlighting the similarity of the macro environment,” Hirschfield said.

The post Digital Gift Cards Surge in China as Payment Apps Thrive appeared first on PaymentsJournal.

Many organizations still rely on paper checks, with no immediate plans to phase them out. However, one of the key issues with checks is that criminals favor them as well.

Last year’s AFP Payments Fraud and Control report found that checks are the most frequently targeted payment method for attempted payments fraud—nearly twice as much as ACH transactions.

In a recent PaymentsJournal podcast, U.S. Bank’s Scott Pope, Senior Vice President, Senior Manager of Risk and Compliance; Consumer and Small Business Payments and Mike Watercott, Vice President and Working Capital Consultant, Treasury Management, as well as Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research, discussed the vulnerabilities of paper-based payments and the advantages of shifting to electronic transactions, particularly through prepaid disbursement options.

An Increasing Liability

Check fraud has been the impetus behind the rising prevalence of mail theft, with criminals robbing postal carriers for arrow keys to access blue mailboxes. Once checks are in their hands, they have numerous ways to either sell the data or manipulate it for fraudulent purposes.

Though these crimes may seem like isolated incidents, check fraud is often carried out by sophisticated criminal networks.

“In many cases, it’s a sophisticated supply chain of bad actors, where the person stealing the checks and posting them for sale on the dark web is just one link in the chain,” Watercott said. “Fraudsters may alter or ‘wash’ stolen checks. Washed checks may also be copied, printed, and sold to third-party fraudsters on the dark web, generating even more fraudulent transactions.”

Beyond fraud or theft, issues with checks don’t always stem from nefarious activities—sometimes mail is simply lost or misdelivered. These vulnerabilities increasingly make paper-based instruments a liability.

“It starts with control,” Pope said. “When a company is using a paper check, once they have signed that check and placed it in the mail, they have lost control of it. In contrast, with electronic payments, including prepaid, the control is always there. If the payment has been misdirected or stolen, there are processes in place to quickly replace it and to end its access to the underlying funds.”

Dramatically Safer

In addition to their vulnerabilities, checks also lack many of the fraud prevention tools that electronic payments provide. With digital transactions, the sender can proactively investigate recipients before ever sending a payment.

For example, the payer can verify whether the account is open and in good standing and whether it is owned by the intended recipient. With prepaid payment methods, additional controls are built into the card activation process.

Though some fraud mitigation tools exist for paper checks, such as positive pay, these processes aren’t as robust as their electronic counterparts. Positive pay verifies checks by matching them against a customer’s issued records. Any discrepancies are flagged as exceptions, requiring the customer to approve or reject payment.

“Just as the check payment process is manual and time consuming, so is the fraud mitigation process,” Watercott said. “You’re sending check issue files to the bank, you’re reviewing and reacting to positive pay exceptions daily, and then you’re reissuing checks. As you move away from checks, you gain opportunities to tap into more proactive risk mitigation before payments even happen.”

In addition, regulatory requirements at both the state and federal levels provide protections for prepaid and electronic transactions that don’t exist with checks.

Once a check clears, the only data typically available in statements or transaction histories is the check number and amount. In contrast, electronic transactions and prepaid cards provide organizations with a wealth of additional details, such as the merchant’s name, terminal ID number, location, and phone number.

Many organizations use this information to identify potential fraudulent transactions. For example, a business owner might recognize the merchant where a transaction took place but not the city in which the purchase occurred.

Once they report a suspicious transaction to their financial institution, the bank is legally obligated to investigate and determine whether the transaction was fraudulent. If fraud is confirmed, the customer  can receive a full refund of the transaction amount.

“Throughout that entire process there is a level of transparency; financial institutions are required to send notices and information to the customer during the process, which adds to the outcome,” Pope said. “From a regulatory and risk management perspective, I clearly see electronic payments and the use of prepaid cards as dramatically safer than checks.”

The Tortoise and the Hare, Reversed

Electronic payments offer enhanced security and controls, along with tangible benefits driven by improved efficiency. Chiefly, they elevate the customer experience—the convenience of credit, debit, and prepaid cards is a key reason these payment methods have outpaced checks.

While consumers will certainly cash a check if they receive one, electronic payments are preferable to paper checks sent by mail, which require a trip to a brick-and-mortar financial institution.

“Electronic payments reduce so much friction in the whole process,” Hirschfield said. “It’s the opposite of the tortoise and the hare. We always hear about how slow and steady wins the race but here, quick wins the race. The tortoise is going to run into roadblocks—be it bad actors or just unforeseen circumstances—that get in the way. You want to be the hare in a payment, the one who is getting there quickly.”

Another integral aspect of a positive customer experience is the freedom of choice. Supporting a wide array of electronic payment options allows consumers to customize their payment experience to suit their preferences.

Beyond consumer benefits, electronic payments offer powerful advantages for businesses as well. While some businesses have leveraged the float inherent in check transactions, electronic payments provide greater working capital benefits. With a known settlement date and increased transaction visibility, payers can better manage cash flow and financial planning.

“I think of the visibility of checks as like ordering something online but receiving zero shipping tracking,” Watercott said. “If that check is stolen, you might not know about it until you get a call weeks later asking, ‘Where’s my payment?’ Just removing the payment from a check is already a step in the right direction in terms of fraud risk reduction.”

Implementation Considerations

As organizations transition to electronic payments, there are many considerations. First and foremost, they must understand the scope and breadth of the unique rules that govern electronic payments.

For example, there are regulations like the Electronic Fund Transfer Act, also known as Regulation E, which was enacted to protect consumers’ rights in electronic transactions. Additionally, network rules, such as those governing the ACH process, provide protections for both consumers and the organizations using these services. Ensuring compliance with all applicable rules and regulations becomes even more complex when third-party vendors are involved.

However, financial institutions still have strict compliance mandates that remain in place regardless of outsourcing certain tasks to third parties. If a fintech fails to uphold its share of the compliance burden, the bank—not the fintech—will ultimately be held responsible.

“As institutions are transitioning from paper to electronic disbursements, they need to be aware of the organizational structure that they will be involved in,” Pope said. “Are they looking to leverage a fintech as part of this process, and how does that fintech manage their risks associated with partnering with banks? There is a lot to consider, depending on the model that you’re going to be engaging in.”

A Balancing Act

Though the task may be daunting, the benefits of payments modernization make the transformation a necessity. For many organizations, an incremental approach is the best way forward.

“In the grand scheme of things in the industry, there’s no finish line to this,” Hirschfield said. “There’s never going to be a world without fraud—we have to be realistic about that—and there’s never going to be a world without payments. It’s all about continuing to progress so that we are working in a world with less fraud and with increasingly faster payment options.”

However, as organizations transition to faster payments, they can’t fully abandon legacy payment methods.

“Payments is a balancing act,” Watercott said. “You have to be both a master in defense, I call that checks, but also be on the offense by embracing digital payments. The sports cliché that defense wins championships doesn’t always apply to payments. It has to be a balance of embracing innovation, but doing it in a secure, risk-oriented way. Work with your partners towards setting a goal of making check issuance an exception and not the norm.”

The post Beyond Checks: Why Prepaid Cards and Digital Payments Are the Smarter Choice appeared first on PaymentsJournal.

Gift cards remain one of the most popular payment tools in the U.S., not just during the holidays but year-round. As consumer preferences shift and digital adoption grows, the types of gift cards people buy reveal larger trends in spending behavior. Categories like dining, retail, and entertainment continue to lead the pack, but newer segments are emerging as consumer priorities evolve. These patterns offer valuable insight into how and where people want to spend—and what brands are top of mind.

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Data for today’s episode is provided by Javelin Strategy & Research’s Report: 21st Annual U.S. Closed-Loop Prepaid Card Market Forecast, 2024-2028

Top Consumer Gift Card Purchase Categories

• 46% – Online-only merchandise retailers
• 45% – Mass merchandisers
• 31% – Coffee or specialty food shops
• 30% – Fast food restaurants/quick serve
• 24% – Department store retailers

Source: Javelin Strategy & Research

About Report

Javelin Strategy & Research’s latest report offers a fresh look at the current state of the closed-loop prepaid market, highlighting the forces shaping its growth and transformation. While the overall outlook remains steady, category-specific trends are unfolding. In-store gifting is expected to maintain solid momentum, while segments like transit show both strength and vulnerability to change. This year’s analysis also brings new attention to the surging demand in online gaming and gambling—a segment that now ranks among the largest and fastest-growing in prepaid.

Economic shifts are playing a significant role, with easing inflation creating tailwinds for some categories while tempering gains in others. U.S. consumers continue to embrace closed-loop cards as a key payment option, and Javelin’s findings point to a rebound in certain sectors, rising card load volumes, and untapped market potential—alongside a few areas that are losing ground.

The post Top 5 Gift Card Purchase Categories appeared first on PaymentsJournal.

Financial services providers across the spectrum have increasingly sought to leverage digital asset technologies over the past few years. Now, Raise plans to launch its digital gift card platform, built on blockchain technology.

The Chicago-based startup raised $63 million in its latest funding round, which further bolsters previous investments from companies like PayPal and Accel. In an interview with Coindesk, Raise Founder and CEO George Bousis said the company differentiates itself by offering a digital Smart Card that is a “fully on-chain, programmable retail currency.”

Gift cards have become one of the most popular gifts, both for others and for personal use. Consumers are buying gift cards not only for their flexibility but also because prepaid cards are increasingly integrated into loyalty programs and promotions.

Equal Popularity

While physical gift cards remain the top choice, data from Javelin suggests that digital gift cards could be equally popular by the end of the decade. Digital gift cards are much easier to purchase and send, and they also allow the sender to personalize their gift with videos or messages.

However, security concerns may impact digital prepaid cards. There’s the risk of fraud or unauthorized access, as well as the possibility that gift card details could be exposed in a data breach. Additionally, cybercriminals could duplicate and deplete a digital gift card before the recipient has a chance to use it.

Leveraging Smart Contracts

Blockchain mitigates many of these security risks because it doesn’t store information in a single location. As a decentralized platform, it shares financial data across the chain. The records stored on the blockchain are encrypted and immutable, making it harder for criminals to access and duplicate.

Blockchain also improves the gift card experience. Blockchain transactions happen nearly instantly, so gift cards balances are updated in real-time.

The decentralized model reduces the need for third-party intervention, which can lower the expense of blockchain transactions. Costs can also be further reduced by smart contracts—such as those that power Raise’s Smart Cards program—allowing actions like balance adjustments and refunds to be programmed and automatically executed.

The post Raise Gets Funding to Develop Blockchain-Based Digital Gift Cards appeared first on PaymentsJournal.

Gift cards continue to be a popular present, with more consumers increasingly using them to buy everyday essentials, leaving fewer unused and forgotten in the back of a drawer.

A new survey from CivicScience found that the most popular use of holiday gift cards was spending on essentials, such as gas and groceries—rising from 36% in 2023 to 38% in 2024.

A related trend shows that consumers are increasingly less likely to leave these cards unused. According to CivicScience, 39% of respondents said they aren’t sitting on any gift card balances, compared to 35% who said the same in 2023.

The results underscore a larger trend that has become apparent in the world of prepaid cards: consumers increasingly view them as a form of currency, no different from a $20 bill.

“This trend aligns with the stored value cycle that we’ve identified,” said Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research. “These cards are just augmenting people’s personal spending habits, even when they get them as a gift.”

Javelin’s research has found that nearly 60% of consumers use the entire value of a gift card in a single shopping trip. Over a third end up spending more than the value of that card, using it to augment a purchase they already planned to make, like a larger TV than they initially expected to buy.

Cards Are Being Spent Down

While data indicates that there is often a significant amount of unused money left on gift cards, this is due to a handful of outliers.

On physical gift cards, the average money left over is $11, while the median is just 70 cents. For digital gift cards, the pattern differs:  the average leftover balance is $9.58, but the median is zero.

“On a physical card, there’s no easy way to know how much money you have left over,” said Hirschfield. “On a digital card, you always see the remaining balance. The digital trend is driving the ability to be more efficient with these cards. The closer we get to that, the more people will spend to zero.”

Hirschfield added that the idea of issuers wanting gift cards to remain unspent is a myth. “Companies want people to spend the entire value of the card,” he said. “They bring in foot traffic, they create loyal customers—and they let people spend more.” 

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In an era of rising consumer debt and financial uncertainty, many individuals are seeking practical tools to manage their budgets and control spending. Prepaid cards have emerged as a popular option, offering a way to spend only what’s loaded onto the card—eliminating the risk of overdrafts or accumulating credit card debt. But are consumers likely to use prepaid cards?

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Data for today’s episode is provided by Javelin Strategy & Research’s Report: 2024 Prepaid Regulatory Update: Playing by the Rules

Consumers’ Likelihood of Using Prepaid Cards to Manage Budgets and Control Spending in the Next 12 Months

• 15% – Not at all likely
• 25% – Unlikely
• 30% – Likely
• 21% – Very Likely
• 8% – Don’t know

Source: Javelin Strategy & Research

About Report

Regulatory shifts in the prepaid industry slowed both domestically and internationally in 2024. Efforts to combat fraud and scams related to prepaid cards saw limited progress, except in Maryland, where a significant initiative could set the stage for future regulatory actions. On a positive note, more states moved forward with legalizing mobile sports betting and lotteries, expanding opportunities within the prepaid and stored-value market. However, states that have yet to legalize gambling continue to face external pressure to adopt legislation and capitalize on the potential tax revenue from gaming. Meanwhile, policymakers remained focused on tackling inflation, preventing a recession, and responding to broader economic challenges that significantly impact the prepaid sector.

Other factors influencing the prepaid market include routine cost-of-living adjustments for regulated programs like nutrition assistance and health savings accounts (HSAs). Additionally, uncertainty persists regarding the regulatory classification of earned wage access, as guidance from the Consumer Financial Protection Bureau conflicts with policies in several states.

Globally, regulatory discussions followed similar trends. Various governing bodies introduced measures to clarify tax policies and redemption rules for vouchers, gift cards, and coupons. Meanwhile, a proposal to integrate reward programs into TikTok was blocked in Europe, highlighting ongoing regulatory scrutiny in the digital space.

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Prepaid general-purpose reloadable (GPR) cards have become a popular alternative to traditional banking, offering convenience, flexibility, and accessibility to a wide range of consumers. However, despite their initial appeal, many users eventually stop using these cards, opting for other financial tools instead. Understanding why consumers abandon GPR cards can provide valuable insights into their limitations, evolving financial needs, and the broader shifts in payment preferences.

Don’t miss another episode of Truth In Data! Click on the red bell in the lower-left of your screen to receive notifications as soon as the episode publishes.

Data for today’s episode is provided by Javelin Strategy & Research’s Report: 2024 General-Purpose Reloadable Card Program Scorecard

Top 4 Reasons for Discontinuing Use of General-Purpose Reloadable Cards

• 33% – Reloading wasn’t convenient
• 31% – Fees were too high
• 15% – Able to qualify for a credit card instead
• 14% – Too many payment cards

Source: Javelin Strategy & Research, 2023

About Report

The 2024 General Purpose Reloadable (GPR) Card Program Scorecard offers a consumer-focused analysis of the competitive open-loop prepaid card market. With total load values reaching $234 billion in 2023 and a steady annual growth rate of 7%, these cards continue to play a critical role in financial access. They serve as a gateway for individuals without traditional credit or debit accounts while also providing a budgeting tool for those managing everyday expenses. The report examines key consumer priorities, including cost structures, security measures, ease of access, and technological convenience.

Among the 10 most popular card programs, the Serve Cash Back card earned the Best in Class distinction for its strong overall performance across multiple evaluation categories. While it did not lead in any single category, its top-three ranking in all three areas secured its high standing. The Target Circle card claimed second place, excelling in the Ongoing Experience category despite a lower score in Additional Benefits and Features. PayPal’s prepaid card followed a similar model to the Serve card, delivering a well-balanced performance across categories and aligning with consumer preferences.

The evaluation considered 51 criteria across three key categories: Ongoing Experience, Costs, and Additional Benefits and Features. Ongoing Experience carried the most weight at 50% of the total score, while Costs and Additional Benefits and Features each contributed 25% to the final rankings

The post Why do Consumers Stop Using Prepaid GPR Cards? appeared first on PaymentsJournal.

One theme underpins all the major trends in prepaid payments for 2025: security. Many of the industry’s developments stem from the desire to provide more secure payment options and enhanced protection for consumers.

“You need those cards to be secure both on the front end, with the actual card itself, and on the back end, with the technology that drives it and where the accounts are,” said Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research and author of Javelin’s 2025 Prepaid Payments Trends report. Hirschfield identified three key trends to keep an eye out for: security for prepaid cards, the growth of B2B opportunities, and the maturation of the HSA market.

Keeping the Customer Safe

Faced with pressure from consumers and regulators, prepaid payment vehicles have increasingly focused on promoting their security features. By staying ahead of the curve, prepaid programs and their affiliates can use a variety of options in technology, packaging, messaging, and consumer engagement to reassure users of a safe and reliable product.

A law passed in Maryland this year to fight gift card draining reflects growing concerns about these vulnerabilities and underscores the risks posed by inconsistent state-by-state regulations. The legislation requires tamper-proof packaging for gift cards and mandates employee training to spot altered cards.

In the coming months, Hirschfield said that we should expect a wave of similar legislation in other states. However, he also noted that the industry recognizes the importance of proactively adopting these measures. For example, Target’s recent safety-minded redesign of its gift cards was already in the works before the Maryland law passed. 

“Maryland is a drop in the bucket,” said Hirschfield. “The program managers, card producers, and retailers all are working in concert to create a better system than even what some of these one-off laws are doing. It’s going to show that the industry is ahead of things and prevent more regulatory oversight.”

While the legislation primarily addresses packaging, it also impacts back-end technology. Most importantly, it delivers a clear message from organizations to consumers: ensuring safety and security is their number one priority.

Opportunities in B2B

Prepaid and gift cards have become powerful tools for both commercial and business-to-business applications, offering various applications such as consumer rewards and employee incentives. While the current commercial market is smaller than the consumer-facing segment, it holds significant upside for both revenue and profitability.

Only 17% of employees report receiving an incentive from their employer in the form of a gift card. However, more than 80% of employees say they feel greater satisfaction with their employer when incentives are given.

“Trends around returning to office are really stressing out employees, making it a less positive environment,” said Hirschfield. “From that perspective, these are very inexpensive tools that make your employees feel better about their job.”

Incentive management companies can be a big help. They help defray the cost for sponsoring organizations offering incentives and have the advantage of selling large volumes of cards in bulk, as opposed to the typical one-off gift card transactions. While consumer gift card sales often involve small-dollar promotions that add to large-scale redemptions, programs like employee incentives, remittance, and travel and expense cards deliver long-lasting and high-load card activity.

“When someone buys a gift card at a retail outlet, you don’t know who they are,” said Hirschfield. “You might find out later, or you might find out who the recipient is, but you don’t know who that buyer is. In the B2B world, you know exactly who you are dealing with. You are developing long-term relationships that are beneficial to everyone involved.”

Security is a key component to this trend as well. By replacing corporate credit cards with prepaid cards, companies can gain better control over spending, setting limits and tracking transactions in real time.

The Beauty of the HSA

Prepaid cards in healthcare have become critical tools for managing out-of-pocket expenses through prescription benefits, health savings accounts (HSAs), and flexible spending accounts (FSAs). One reason for their growing popularity is the minimal downsides these products offer. Consumers benefit from greater efficiency, while many plans include employer matches or deposits directly into their accounts. The healthcare industry benefits from the efficiency and breadth of the accounts, and taxing agencies help control the process with their product-eligibility tables and through the administration of tax benefits.

“More organizations are moving to high-deductible healthcare plans to put more of the financial responsibility onto the employee,” said Hirschfield. “But while also reducing the amount per paycheck that the employees are paying, they’re potentially saving money if the users aren’t going to the doctor as much.”

People can use HSA plans to augment services not covered by their primary insurance plan. They can also use it to buy over-the-counter medication, in addition to prescriptions. Even without an eye-care plan, consumers can use a prepaid HSA card to purchase glasses.

In addition, the federal government continues to increase the amount consumers can contribute to their HSA. The money invested in these accounts remains with the employee, even if they leave their job. Since there’s no requirement to spend down the balance, many people use their HSA as a savings vehicle.

“As we’re getting closer to retirement, healthcare costs are going to go up,” Hirschfield said. “You are not necessarily going to have corporate insurance anymore, and I don’t know what Medicare is going to provide. It helps to have a little bit of a nest egg for healthcare spending. It’s an area where if you do it smartly, both can win.”

Peace of Mind for the User

Healthcare-related transactions involve a significant amount of personal information, making the security of HSA cards vitally important. With each of these trends, consumers need to know that the service—and their money—will be safe and reliable.

“I can’t stress enough how much security has become an overriding trend,” said Hirschfield. “Security in and of itself may not be one of the trends we write about at this time next year—but I guarantee it will be in the background of all of them.”

The post Security Is the Watchword for the Prepaid Card Market appeared first on PaymentsJournal.

Over the past five years, the U.S. has experienced an average of $18 billion annually in natural disaster-related damages. Millions of individuals are impacted by natural disasters each year, facing financial challenges such as damage to homes, the need for temporary shelter, and the replacement of personal belongings and food.

With delays in funds distribution due to legacy payout methods and outdated processes, there has been a focus on the benefits of using prepaid cards for payouts.

One popular solution to help people recover is prepaid cards. In a recent PaymentsJournal podcast, Marchelle Becher, Business Development Executive with B4B Payments and Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research, spoke about how these cards have become an essential tool for addressing the needs of disaster victims.

Looking for Ways to Help

The Federal Emergency Management Agency (FEMA) has been considering changes in the way it provides financial resources for victims of natural disasters. Given the frequency of disasters, aid programs and funders are becoming more proactive rather than reactive.

“We’ve seen this past year that while we’re reacting to Disaster A, Disaster B is hitting,” said Becher. “And when you look at what type of recovery aid is needed, there’s a gap between those who need immediate aid for basic necessities versus the need for long-term assistance.” Prepaid fills the critical gap to deliver funds immediately to those without bank accounts and to those who don’t have access to their bank cards due to disasters.

FEMA recognizes that prepaid cards are well suited to meet the distribution needs when disaster strikes. Traditional payment methods can be slow and costly, unlike prepaid cards that can be issued immediately, reloaded securely and simplify the reconciliation and reporting process. The flexibility of prepaid cards allows funders to set spend controls (closed-loop) for specific merchant purchases or (open-loop) allowing recipients to make purchases based on their individual family needs. Funders and recipients prefer the convenience and security of reloadable prepaid cards or virtual cards that can be used immediately for online purchases or loaded to a digital wallet. And the process is very streamlined.

Unfortunately, survivors of natural disasters are left to navigate complex bureaucratic processes and the painful task of putting their lives back together. Dealing with the loss of property, emotional trauma and potential change in employment is compounded when trying to navigate the complex financial aid paperwork leading to delays in aid disbursement,” said Becher.

“It can be months to years before funds are ever in the hands of those that need them. Most recently we’ve seen it with Maui, where over a year after those fires hit, there are still people who haven’t received any funds.”

Tracking Information

Another benefit of prepaid cards is the ability to track how the funds are being used. These programs receive funds from many different organizations, and often, the funders want to determine how the money should be spent. With a prepaid program, they can restrict those funds to be used solely for food and housing, or make them inaccessible via ATM.

At the same time, the ability to track spending gives funders insight into the needs of those affected. They can see how much is being spent in each category, as well as how quickly the funds are being used—whether that’s within the first couple days or over a longer period of time. Features like dynamic spend control and just-in-time funding help organizations improve cash flow and reduce fraud risk.

“Accountability by both the recipients of the funds and also those who are in charge of distribution of funds is extremely important,” said Becher. “This information will help in the coming months and years as we continue to deal with natural disasters and build humanitarian aid programs to help. Based on the configurability of a program, the reporting and analytics can show that funds were distributed and used as intended.”

Doing the Prep Work

It’s important that the entities behind these humanitarian efforts do their research and speak to various payment providers. Having multiple payout methods is key, whether it’s cash from a cardless ATM or a prepaid card. It could even be an ACH payment into someone’s existing bank account, although in the wake of a disaster, even those who are employed may not have access to their bank account or phone.

“I would much rather be providing a digital or physical card that has protection as opposed to giving somebody cash,” said Becher. “We’ve seen that in desperate times people will harm someone for very little financial gain.”

Another advantage of physical prepaid cards is that they can be pre-ordered and handed out to individuals in need, or at locations where food, water, and medical assistance is being provided.

“The beauty of prepaid programs is that for the most part, you don’t incur any expense until you actually start issuing cards,” said Hirschfield. “You can have a stack of cards that essentially have no value on them, and they’re valueless until you actually load and activate the card. What that means is that you’re not sitting on liability of cards for months at a time waiting for a disaster. You’re ready to act quickly and put these programs into place, because you have that setup work already done.”

While there’s a great deal of regulatory oversight in funding and distributing these cards, it’s even more important to be prepared and ensure that everyone is following the rules, collecting the information needed, and making sure the programs are compliant. Organizations providing aid to disaster victims should address all of these concerns in order to do the most possible good for those in need.

“No one’s bringing these disasters on themselves,” said Becher. “We can’t lose people when there are solutions out there that can help bridge the gap, get them back into the workplace and continue rebuilding their lives.”

The post Prepaid Cards: A Vital Aid for Disaster Relief appeared first on PaymentsJournal.

The Consumer Financial Protection Bureau (CFPB) has filed a lawsuit against Comerica Bank, alleging that it systematically failed members of its Direct Express government benefits program.

A partnership between the U.S. Department of the Treasury, Comerica Bank, and Mastercard, Direct Express provides millions of U.S. individuals with prepaid cards to receive federal benefit payments, like Social Security and Medicare. Most participants in the program are unbanked, and many are elderly or disabled.

Social Security recipients typically have payments directly deposited into their bank account. However, a significant number of unbanked recipients still receive paper checks, often incurring fees to them. In 2008, the Social Security Administration partnered with Comerica to manage Direct Express, allowing recipients without a bank account to have their Social Security proceeds load into a prepaid Mastercard card.

In April, Comerica announced that it had lost the DirectExpress contract renewal, which ended up going to BNY. However, Comerica is still managing the program during a three-year transition period.

“They may have decided to cut costs on servicing since they lost the contract,” said Don Apgar, Director of the Merchant Payments Practice at Javelin Strategy & Research. “The CFPB has stepped in to take enforcement action and make Comerica fulfill their obligations to cardholders until the new provider takes over the program.”

Chargeback Issues

Among other claims, CFPB alleges that Comerica led its cardholders to waive their legal protections in the event of a chargeback. Comerica required users to contact merchants to stop pre-authorized payment transfers from their account.

“Since the cards are Mastercard-branded, standard chargeback rules apply,” said Apgar. “If you call your bank about your Mastercard account and tell them that a merchant is applying a recurring charge that you didn’t authorize, the bank—in this case Comerica—is supposed to reverse the charges and charge back the transactions to the merchant. The CFPB says that Comerica was instructing the cardholder to call the merchant. In most cases the cardholder has already tried to deal with the merchant and is relying on Comerica to intervene and reverse the charges.”

According to the CFPB, Comerica’s vendors required thousands of cardholders to close their accounts to prevent pre-authorized payments. Consumers then had to pay additional fees to receive replacement debit cards more quickly, enabling them to regain access to their government benefits.

For its part, Comerica said in a lawsuit filed against the CFPB that it has “generally acted with the oversight and knowledge or approval of the federal government.” The suit asks for “a judgment declaring that the CFPB’s investigation is unlawful because it exceeds the scope of the CFPB’s statutory authority.”

The post What Brought Down Comerica’s Direct Express Prepaid Program? appeared first on PaymentsJournal.

On Me has signed a five-year deal with Mastercard and secured $1.7 million in venture capital to build out its personalized digital gift card platform.

Unlike the traditional single-store gift card model, On Me’s platform centers each gift card around a particular interest or hobby. For example, a recipient could use a “Running, On Me” gift card at a select group of retailers like Nike, Adidas, or Reebok.

The all-digital cards aim to replicate the customizable experience consumers get on social media, allowing users to enhance their gifts with videos, photos, and GIFs.

“The offering from On Me highlights the convergence of two emerging trends in gift carding,” said Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research. “First, the shift to digital issuance, which Javelin projects will reach a 50/50 split with physical cards in the next four to six years. Second, the small but rapidly growing category of open-loop restricted authorization network cards.”

“These cards run through open-loop networks like Mastercard, but restrict use to a limited amount of redemption options,” he said. “In effect, the recipient gets a tailored gift card that can be used at a wider variety of options. Javelin projects the open-loop RAN segment to grow at a CAGR of 10% through 2028, as highlighted in my recent report.”

Recipient Satisfaction

The shift to digital cards can help reduce gift card fraud, which cost consumers $217 million last year, according to the Federal Trade Commission. On Me believes that using digital cards with two-factor authentication built in can mitigate some of these risks, and its platform will also leverage the on-device encryption used in mobile payments.

Gift cards are the most requested gift for a reason—they let recipients choose the gift they want. Expanding the number of retailers where a single gift card can be used is likely to enhance recipient satisfaction, as will the platform’s personalization features.

On Me currently offers over 70 interest-based digital gift cards, but the platform hopes to add new products centered around hobbies like skydiving, horseback riding, cooking, and wine tasting.

The post On Me Secures Mastercard Partnership for Tailored Digital Gift Card Platform appeared first on PaymentsJournal.

Prepaid cards are in the midst of a dramatic transformation. With the incorporation of digital wallets, contactless payments, and artificial intelligence, prepaid cards have quickly become one of the most popular payment tools.

In a recent PaymentsJournal podcast, Mani Farhang, Vice President of Product at Fiserv Gift Solutions, and Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research, discussed the key innovations occurring in the prepaid space and the ways merchants can leverage them to drive customer engagement.

A Generational Shift

The prepaid card market was once dominated by financial giants like Visa and Mastercard, but PayPal and Apple have emerged in the industry. And it’s no coincidence that these two companies also offer two of the leading digital wallets.  

“The themes in the industry are the broader shift to digital payments and increasing integration into first-party and third-party wallets,” said Farhang. “Our research indicates that 70% of consumers have downloaded a merchant app to store gift cards and fulfill loyalty rewards. This is driven by a generational shift—millennials and Gen Z are more likely to use digital gifting and take advantage of stored value in loyalty programs.”

In the prepaid industry, Starbucks has been the beacon for other brands to follow due to its success with end-to-end loyalty programs. One important aspect of Starbucks’ prepaid program is how it bridges between physical and digital gift cards.

For many consumers, a physical gift card is their introduction to a brand. Organizations who follow Starbucks’ lead and offer customers the means to digitize their cards into a stored-value wallet can use the initial interaction to introduce consumers to their loyalty and reward program.

“That incentivization makes for a more immersive experience for the consumer, not just in gifting but in self-use,” Hirschfield said. “There is also the opportunity to engage customers beyond the value of the initial card. For merchants, they don’t want the initial prepaid card to be the only interaction—they want it to become the start of a cyclical relationship.”

Lifetime Value

Merchants have an opportunity to expand their prepaid program by upgrading their payments terminals to support contactless payments. Contactless payment through near-field communication (NFC) technology has revolutionized the payments industry, and NFC has begun to gain traction in prepaid.

There has also been the emergence of omnichannel, multi-purse wallets, which are first-party wallets that act as stored-value containers for multiple funding types. These wallets give consumers multiple ways to fund their stored-value wallet, whether through gift cards, pay-by-bank, debit cards, or credit. For merchants, it’s another way to engage and reward loyal customers.

“Moving forward, there is the opportunity for brands to offer rebates and rewards, and even integrate third-party health and wellness programs into their digital ecosystem,” Farhang said. “The orchestration of disparate payment instruments into one ledger is advancing the integration with contactless payments.”

These instruments are frequently contained in digital wallets, which are increasingly becoming the primary option for consumers, even in brick-and-mortar transactions. Businesses should have a strategy to leverage digital wallets so they can reward consumers and pre-load funds into wallets, which is a key opportunity to offer discounts and create exclusivity.

Many mid-tier businesses utilize platforms that provide white-labeled apps and digital wallets that can be integrated with a merchant’s existing app, which allows them to merge loyalty points from multiple brands into a single source. Though first-party wallets are a powerful tool, third-party wallets like Apple Pay and Google Wallet should also be incorporated in an end-to-end loyalty program.

“The more you engage with a customer the more you remove them from the traditional transaction process and bring them into a lifetime value scenario,” Farhang said. “Acquisition costs will decline because the brand is driving higher engagement. It can be a powerful tool for merchants because prepaid cards can increase the amount of the average order and drive repeated transactions.”

The Behaviors of Purchase

Making prepaid transactions more secure is another way to increase customer satisfaction. Fraud is a hot-button issue within the prepaid space, but it’s also an area where another emerging technology—artificial intelligence—can make an impact. AI’s superior pattern recognition abilities make it an efficient tool for detecting fraudulent activities in real-time.

“AI can be implemented to understand if the behaviors of purchase match the existing behaviors of the customer we have engaged with and understand,” Hirschfield said. “The less anonymous the purchases, the more those technologies can identify when purchases seem suspicious. Fraud and scams won’t ever be eliminated, but the prepaid industry can take more steps to mitigate them.”

E-commerce merchants can use AI to vet both B2B and B2C accounts, because machine learning can collate signals from a range of business data and fraud detection programs in near real-time. This functionality can help merchants with decisioning and authorizations, which is often a convoluted and cumbersome process.

There are also ways to implement technology that can reduce fraud at physical locations. At a retailer, a cashier might get an alert if something about a purchase looks suspicious, and they could ask the customer a series of questions to ensure the purchase is legitimate.

Overcoming Barriers

Although fraud will always be a concern, it hasn’t slowed the rapid expansion of the prepaid market. Many businesses want to offer branded prepaid cards, but there are often barriers to entry. For this reason, third-party platforms have emerged to provide merchants with a way to get their prepaid products to market sooner.

Prepaid-as-a-service has been driven by the overall shift to digital payments, but it is also extremely effective in certain use cases. In the gig economy, for instance, prepaid cards are often used as a payment instrument for freelance contractors.

Many governments utilize prepaid cards to disburse payments to their citizens for various reasons. Corporations are also increasingly giving prepaid cards to their employees as incentives for loyalty or performance.

“Whether it’s a retailer or a government entity, their priority is serving their customers or citizens,” Hirschfield said. “The best practice is often for them to focus on providing their products or services and implement best-in-class back-end systems to run their prepaid programs.”

The Core of Change

To achieve an optimized prepaid program, organizations will have to leverage new technologies, particularly platforms that facilitate personalization. Merchants have more customer information than ever, and AI can use that data to supercharge recommendation engines, making them more contextual and customized.

Artificial intelligence is also the engine used to create the artwork and messages that drive the personalized wrapping and unwrapping experiences that have become a popular part of digital gifting. “Digital gift cards are on the rise, and digital wallets will continue to be at the core of change as more of our lives become digitized,” Farhang said. “The move to digital will continue, and there will be a convergence with the physical in a single stored ledger. The ground is shifting rapidly in the prepaid space—though gift cards are one of the most common applications for prepaid.

The post Prepaid-Powered Loyalty Programs Drive Customer Engagement for Merchants appeared first on PaymentsJournal.

Gift cards have become a go-to solution for thoughtful and versatile gifting, offering recipients the freedom to choose something they truly want or need. Whether you’re celebrating a milestone, expressing gratitude, or simply looking for a convenient yet meaningful present, gift cards provide the perfect balance of practicality and personalization. From birthdays and holidays to corporate events and last-minute surprises, these little cards pack a big punch, making them suitable for a variety of occasions.

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Data for today’s episode is provided by Javelin Strategy & Research’s Report: 2024 Prepaid Holiday Preview

Top Occasions for Consumers’ Purchase of a Gift Card for Someone Else

• 77% of Gift Card Purchases were for Birthdays.
• 63% of Gift Card Purchases were for Christmas/Hanukkah/Kwanzaa.
• 23% of Gift Card Purchases were for Graduation.
• 23% of Gift Card Purchases were for Mother’s Day/Father’s Day.
• 19% of Gift Card Purchases were for Just because, no particular occasion.

Source: Javelin Strategy & Research, 2024

About Report

As the retail industry gears up for the 2024 holiday season, lessons from recent years are shaping strategies to navigate its unpredictable nature. While 2023 showed signs of recovery from a challenging 2022, the dynamic interplay of economic factors and consumer behavior continues to underscore the importance of proactive planning. Retailers, gift card providers, and industry players are leveraging insights to fine-tune their approaches, aiming to effectively engage shoppers and optimize performance during this critical period.

Gift cards remain a cornerstone of holiday gifting, offering value to both buyers and recipients while presenting significant opportunities for businesses. Research shows that their enduring popularity not only drives revenue but also serves as a powerful tool to convert one-time transactions into lasting customer relationships. Beyond consumer gifting, gift cards are increasingly pivotal in commercial sales strategies, enabling businesses to expand their reach through recipient-driven channels. With the end-of-year period demanding a well-executed approach, early planning is essential to fully capitalize on these opportunities.

The post Top 5 Occasions for a Gift Card Purchase appeared first on PaymentsJournal.

Just in time for the holiday gift-giving season, Target is redesigning its Target GiftCards to prevent tampering before it starts. Following a Maryland law that passed earlier this year, aimed at cracking down on gift card fraud, Target is one of the first major retailers to overhaul its gift card system.

According to Target, traditional gift cards have access codes printed on the back, which criminals can steal before the cards are sold, allowing them to drain the funds even after the purchase. Going forward, the new cards will feature a blank space where the codes once appeared, and at checkout, a team member will apply a security access label to further reduce the risk of fraud.

The redesign comports with a law that went into effect in Maryland over the summer, mandating tamper-proof packaging for most gift cards sold in person. The bill also requires mandatory employee training to help them detect tampered cards. The law will take full effect on October 1, 2025.

It was anticipated that major retailers would design cards to adhere to the Maryland standards, regardless of where the cards are sold.

“You can’t avoid making these changes almost universally, because you don’t want to have one process for Maryland and another for everywhere else,” said Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research. “From my conversations with people in the industry, the reality is they probably didn’t need the legislation anyway. They’re all seeing the trends of tampering, and they want to be proactive about it. Everyone that I’ve spoken with in the industry is wants to make this a better, more secure purchase experience.”

A Sizable Target

Target has long been a target for gift card fraud. Last holiday season, police in Virginia arrested two men who were stocking the shelves with altered gift cards in a Target outlet. They were later found to be in possession of nearly 1,000 Target gift cards.

“Remember, gift cards hold no value until they’re purchased and activated,” said Hirschfield. “Retailers want to show that they can have better packaging while also making it easier for that retail clerk who is not trained in gift card fraud to notice that something has been tampered with and say, ‘I’m going to remove this one. I’ll get you a different one.’”

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The closed-loop prepaid cards market is skyrocketing as organizations leverage prepaid programs to drive loyalty and engagement. While gift cards still anchor the prepaid space, the rising trend of self-use in stored-value accounts is propelling the closed-loop prepaid market to new heights.

In his latest report, 21st Annual U.S. Closed-Loop Prepaid Card Market Forecast, 2024-2028, Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research, delved into the ways companies leverage prepaid programs, the emerging segments in the space, and the forecast for the closed-loop prepaid market.

Pushing Prepaid

Starbucks has long been considered the gold standard for prepaid loyalty programs. Once a consumer funds their Starbucks account, they have effectively bought a gift card for self-use. As they spend their funds, they earn stars, which creates a powerful opportunity to drive loyalty. However, it’s just one of the benefits that prepaid cards provide.

If a user loads $25 into their Starbucks account and then makes five $5 transactions, Starbucks only pays one transaction fee. Comparatively, if the consumer makes those same transactions outside of the stored-value account, Starbucks will pay five transaction fees.

“It’s a money saver for them, and there’s another big benefit,” Hirschfield said. “Even though Starbucks doesn’t get to use the money they’re holding for customers in prepaid accounts, they can earn interest on it. These are the reasons why more companies are pushing prepaid programs, and it’s why the retail gift card market is going to continue to grow.”

The consumer price index measures the change over time of the prices consumers pay, and a CPI above 4% is generally considered to be strong growth. The CPI for retail gift cards is 9%, and self-use in loyalty plans is a large motivator behind that increase.

Card loads are a better yardstick for assessing the prepaid market because the use of prepaid cards can be fragmented over time. Hirschfield estimated that the card load value of the overall retail prepaid market will be roughly $455 billion in the next four years, up from $333 billion last year.

Leaps and Bounds

One of the segments driving that growth is digital gaming and gambling, which has exploded onto the scene in recent years. That is mainly due to the continued legalization of sports gambling in the U.S., which was nearly a non-existent market six years ago.

“Digital gaming and gambling have soared to approximately $219 billion in card load this year,” Hirschfield said. ““Much like the Starbucks model, users load their accounts with a designated amount of money and then draw from that as they place wagers. The growth rate in this segment is approximately 17%, which is incredible.”

The market will continue to grow by leaps and bounds as more states understand the opportunity to earn increased tax revenue through gambling. Missouri just legalized sports gambling in the most recent election, and more states are likely to follow suit.

Many U.S. states have already loosened restrictions on mobile games and websites that offer daily fantasy sports, which are essentially gambling. A separate portion of the gambling market is state lotteries. Many states have lottery apps, where consumers can buy lottery tickets for number draw games, but a growing number of those apps offer digital-only games as well.

Attractive Incentives

The incentives market might not be growing as fast as the digital gaming and gambling segment, but it is still on the rise. The space includes all consumer incentives, not just those that are given to drive sales. For instance, an organization that gives consumers incentives to give blood or plasma would be included in the space.

The market also includes employer incentives, which could be given to an employee for a job well done or as a sales motivator.

“Employer incentives are a growing market, and it’s an attractive segment for gift card providers and program managers,” Hirschfield said. “You’re going from many people purchasing individual cards to one entity purchasing many cards. The incentive market is smaller than retail, with the combined card load of employee and consumer incentives expected to increase from $35 billion to roughly $47 billion in the next four years.”

The demand for digital prepaid cards in the employer incentive segment is likely to increase as work environments continue to be remote. It isn’t feasible for companies with global scale to send physical gift cards to incentivize their employees.

A Proof Point

Campus cards have also been a growing use case for prepaid accounts, and they have included more aspects of the university experience. The cards can be used for dining plans, for vending machines, and other on-campus purchases.

Though the current crop of college students are a smaller population, the youngest generation, Gen Alpha, is expected to be the largest generation of all time. Those children will eventually make their way to college campuses in the coming years.

“Student populations offer an increasing growth opportunity,” Hirschfield said. “Many schools require students to have plans, at least in their first year. The technology there is an interesting play because it can be a proof point for other industries. It includes everything from access control to physical payments, and it ties it all together.”

The True Engine

Due to the emerging use cases, closed-loop prepaid cards are expected to continue their momentum. Another important trend is the rise of digital gift cards—digital cards are expected to reach a 50/50 market share split with physical gift cards by the end of the decade.

“The gifting aspect of prepaid cards isn’t going to decline because it’s the top choice for recipients, even over cash and physical gifts,” Hirschfield said. “However, the self-use opportunity is what is fueling the market. Loyalty programs in places like coffee shops and quick-serve restaurants are driving it, and then there’s the digital gaming and gambling segment. Self-use is the true engine behind the exponential growth in the closed-loop prepaid market.”

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 The holiday season is here, bringing with it a host of celebrations. From office parties to family gatherings, shoppers are navigating an evolving landscape of gift-giving traditions. In our latest podcast episode, we dive into how consumer trends, new technologies, and the timeless appeal of gift cards are shaping the way people are gifting this season.

In a recent PaymentsJournal podcast, Sarah Kositzke, Director of Research, and Jonathan Soffin, VP of Global Brand & Product Marketing at Blackhawk Network (BHN), chatted with Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research. They discussed the results of BHN’s Holiday 2024 Shopper and Gift Card Insights, the trends driving holiday gift card purchasing, and the accelerating momentum of the prepaid industry.

Moments of Celebration

One of the most notable trends in recent years is that consumers are no longer buying gifts for just a single occasion. Instead, they’re shopping for multiple events throughout the holiday season, including school occasions, office parties, and get-togethers with friends and extended family.

“There are all these great moments of celebration throughout the holiday season that often require gifts,” Kositzke said. “One of the things that we’ve been tracking is how consumers determine what the right gift is for different people across different events. How are they going to figure out what’s the right thing to bring for grandma, their daughter, or a co-worker?”

According to BHN’s research, roughly half of consumers will directly ask recipients what they want, while others will source ideas from family and friends. Some shoppers even check social media to see the products or services the recipient has liked on Instagram or Pinterest.

An emerging tool for holiday shopping this year is artificial intelligence, with about half of younger consumers planning to use it for their gift shopping. The ways they’re leveraging AI range from finding deals to generating unique gift ideas.

 “I have twin teenage boys, and when it comes to Christmas presents, they want to make sure one doesn’t get a better gift than the other,” Soffin said. “I asked ChatGPT which gift I should get them, and it came back with fashion tech gadget [recommendations] like wireless earbuds, gaming accessories, and sports gear. At the top of the list was a gift card to a gaming platform or a streaming service. If I’m not sure what specific brand of tech or fashion they want, a gift card to their favorite store is a great option.”

Shopping Motivations

Holiday shoppers are starting earlier than ever to find the perfect gifts for everyone on their list. Budgets are now spread across a longer period, beginning even before September and extending through December. However, only about a quarter of consumers’ holiday budgets are spent at the start of this period, with the remainder concentrated from Black Friday through the end of the season.

Younger consumers, in particular, are motivated by promotions and sales events. The BHN report found that Gen Z encounters more seasonal sales events than older generations, which drives many to wait for Black Friday and Cyber Monday promotions. What’s more, many Gen Z consumers have tighter budgets, as they may be recently out of school or in their first jobs.

“For all ages, what gets people out of bed are the sales and deals and promotions,” Kositzke said. “There are still concerns about the economy and inflation, coupled with the sheer number of people that consumers want to buy gifts for. Sales and deals have become an important factor in holiday budgets.”

Another consideration is there are five fewer days in the holiday season this year. The condensed holiday season is driving many retailers to push early holiday promotions to bolster sales.

“The shorter timeline could also impact the transition to digital formats,” Hirschfield said. “Many last-minute shoppers might not have time to mail a physical card, or maybe it’s just a consumer is concerned about misrouting or mail theft. Gift cards are shifting towards digital delivery in general, because it offers consumers the ability to send their gift quickly and confidently.”

Online and In-Store

Given the growing digital preference among consumers, some retailers may be unsure whether their promotional funds are best spent online or in-store. However, all indications show that shoppers will use every avenue that’s available to them, shopping both in-store and online.

“The short answer is that it’s really a blend of both,” said Soffin. “Customers still prefer doing their holiday shopping in store, but online is closing the gap. Today, 85% of all consumers plan to shop in-store. When we ask consumers why they shop for physical cards, they say the convenience of already being at the store and completing their shopping all in one trip is the top reason.”

When dialing down on where consumers purchase gift cards, Javelin’s data indicates that the number one choice is a gift card mall at a retail store. The malls at grocery stores or drug stores give consumers a place to browse for the right gift card and pick up cards for various recipients at once.

The second most popular place to purchase gift cards is at a retailer’s physical store. Consumers may already be shopping for other gifts and decide to pick up a gift card while checking out. A retailer’s website ranks as the third most popular venue for buying gift cards.

It might be tempting for merchants to focus on in-store sales, but 49% of consumers also plan to buy a gift card online. There is a growing cohort of consumers who prefer online because it’s easier than fighting the crowds. The speed of ordering without leaving the house is almost second nature to younger generations, and many consumers still have health concerns about physical stores that are lingering from the pandemic.

A Reliable Bet

Regardless of where consumers buy gift cards, they plan to keep buying them. Data from the National Retail Federation found that gift cards are the number one requested gift for the 18th year in a row.

BHN’s research found that the average holiday spend will be $760, and consumers said they will spend roughly half of that budget on gift cards. Younger generations are leading the way, and they expect to spend 54% of their budget on gift cards.  

Consumers were left wanting more gift cards after last year’s holiday season, and 84% of consumers say they will buy an average of 17 gift cards. The accelerating adoption should put gift cards at the forefront of a positive holiday season.

“With gift cards, the buyer doesn’t have to worry about the right color, the right size, or the right fit,” Kositzke said. “They don’t have to worry about their gift being returned. Maybe the recipient wants a bigger-ticket item that the buyer can’t afford, but they can give a gift card that can go toward the larger purchase. All those reasons are why people say gift cards are a reliable bet.”

To learn more, check out the resources below from BHN:

• 2024 Outlook
• eBook: Holiday 2024 Shopper and Gift Card Insights
• eBook: Your 2024 Holiday Readiness Checklist
• Webinar Recording: Consumer Shopping Insights to Transform your Holiday Gift Card Business

The post During a Hectic Holiday Season, Gift Cards Continue to Be a Reliable Bet appeared first on PaymentsJournal.

Holiday gift cards have a meaningful impact on employees and their teams worldwide.

In fact, a recent survey from CleverCards, which polled 600 employees in Ireland, revealed that 84% of respondents said receiving a holiday gift card from their employer would boost their engagement and make them less likely to consider switching jobs.

The main reason employees were motivated by gift cards was their flexibility—they could be spent anywhere. Workers also noted that they would use the funds to treat themselves instead of covering essential expenses. Indeed, the study found that only around a quarter of respondents planned to use their incentive to pay bills.

“As it is in Ireland, it is in the United States,” said Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research. “In Javelin’s U.S. survey, we asked employees if receiving a recognition benefit increases their satisfaction with their employer, and 83% said yes. Employees generally treat themselves with these incentives, and Javelin’s research shows that people will usually spend more than the value of that gift card.”

The Three Points

The rising popularity of gift cards as employee incentives creates powerful opportunities for retailers and gift card issuers. According to Hirschfield, when consumers receive a gift card from a new brand, 44% become repeat customers, and 41% join the company’s loyalty program.

Recognizing the benefits of employer incentive programs, more brands are now offering discounts on their business-to-business offerings to drive sales.

“The employers that participate in formal incentive purchase programs buy gift cards at a discount,” Hirschfield said. “That discount is worthwhile to the retailer because it can ramp up repeat purchases. Instead of offering a coupon, which is strictly money off, this is a slight discount which they then recoup by participating in these plans.”

“To link it back to the employers, their employees are more engaged and responsive, and they’re more likely to stick it out through the ups and downs of the workplace,” he said. “It’s a massively beneficial program for all three points that are involved: the employee, the employer, and the sponsor of the gift card.”

The post Holiday Gift Cards Go a Long Way Toward Inspiring Employee Loyalty appeared first on PaymentsJournal.

Regulatory changes affecting the prepaid industry slowed both domestically and globally, with two major exceptions. In most of the country, efforts to tamp down card scams took a backseat, but Maryland passed a packaging law that could have broader ramifications for other states as well. Meanwhile, more states have legalized mobile sports betting and lotteries, opening new markets within the prepaid and stored-value ecosystem.

A report from Javelin Strategy & Research, 2024 Prepaid Regulatory Outlook: Playing by the Rules, examines the impact of these changes on the gift card and related industries. More importantly, it delves into their implications for the future of prepaid.

Seeking a Tamper-Proof Package

This year, international, federal, and state authorities took limited action, leaving many prepaid markets largely unchanged. Although proposals to clamp down on scams and fraud were discussed at various levels—from city halls to Congress—only Maryland put pen to paper and passed legislation to curb illegal activities.

Maryland’s actions targeted the growing scourge of gift card draining. These scams can be as simple as persuading individuals to purchase a prepaid card and then relinquish access to criminals, to more complex operations. In some cases, criminal networks have replaced large quantities of gift cards with tampered versions, allowing them to claim funds unsuspectingly purchased by consumers. In response, the U.S. Department of Homeland Security launched a large-scale effort with local law enforcement, called Operation Red Hook, to identify these criminals and ensuring the safety of retail gift cards.

In response to these draining operations, Maryland passed The Gift Card Scams Prevention Act of 2024 in July. The bill mandates secure packaging, requires merchants selling gift cards to register with the state, and includes mandatory employee training. The industry has plenty of time to prepare, as the law does not take full effect until next October.

“Even though it’s only one state doing it, it’s the type of thing that you can’t avoid,” said Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research, and author of the report. “As a provider in the space, you can’t avoid making these changes almost universally, because you don’t want to have one process for Maryland and another for everywhere else. It’s not the type of product that you can segregate by a specific geographic location.”

The Extant Environment

The rules require that gift card packaging be designed to conceal any numbers or data necessary to drain the card. Industry players such as PLI claim to already produce secure packaging, using specialized materials, security measures, and tamper-evident adhesives to thwart criminals and give consumers better indicators of potential tampering.

Other states may consider similar legislation, although this may prove unnecessary if existing measures are effective. 

“States like New York and California have been more proactive on protecting consumers versus having a more business-focused legislative agenda,” Hirschfield said. “But in my conversations with people in the industry, they all say they probably didn’t need the legislation anyway. They’re all seeing the trends of the tampering, and they want to be proactive about it in the industry.”

Sports Gambling on the Rise

A significant opportunity for prepaid cards has emerged from the expansion of legalized sports betting and lottery play. Since the 2018 Supreme Court ruling lifted restrictions on state-authorized wagering, the market has experienced astronomical growth.

Mobile sports betting is now legal in more than 30 states, with Missouri joining the list after the recent election. In Q2 2024 alone, revenue from online sports gambling and iGaming surpassed $5 billion.

Participating players are required to deposit funds into stored-value accounts, which game sponsors hold as liabilities on their balance sheets. As with gift cards, operators frequently use loyalty programs and incentives to garner engagement, attract new customers, and discourage switching.

“It’s similar to a toll tag, where you deposit money into a prepaid stored value account,” said Hirschfield. “You prepay a sum of money to the provider, and to them, that money is a liability, just like a gift card.”

As additional legal options emerge and more competitors gain licenses, the market may begin to stabilize. But there is also potential for new offerings to support gaming, such as gift cards, expanded loyalty benefits, and other incentives typically seen in the retail gift card sector.

“From a gift-carding perspective, it’s a new industry for them to tap into,” said Hirschfield. “From the payment processing space, in the tech and infrastructure practices, there is a whole new set of companies that could be involved in that area of payment acceptance.”

The post Packaging Laws and Sports Betting Highlight Prepaid Regulatory Changes appeared first on PaymentsJournal.

TGI Fridays has declared bankruptcy, leaving holders of nearly $50 million in gift cards uncertain about how they will be able to redeem them. The main question is whether the parent company or its franchisees are responsible for this debt.

The bankruptcy filings include TGI Fridays’ 39 company-owned stores, but not the franchise locations. Franchisees operate 122 locations in the United States and another 316 overseas.

Under normal circumstances, when customers use gift cards at franchise restaurants, the company reimburses the franchise. However, according to court records, TGI Fridays’ franchises may be required to honor company-issued gift cards, even if reimbursement is uncertain.

To begin its restructuring under bankruptcy protection, the company borrowed $5.9 million. This has led many franchisees to worry that TGI Friday may not have the funds to cover the amounts owed to gift card holders.

The Consumer Side

From a consumer perspective, there is no differentiation between franchise-owned and corporate-owned restaurants; the gift cards are part of a unified program redeemable at any location.

“The issue arises in the franchisee-franchisor relationship,” said Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research. “The franchisor can theoretically refuse to pay back the franchisee when a gift card is redeemed, leaving the franchisee on the hook for the sunk cost of that transaction.”

Certainly, the restaurants aren’t expecting all gift card holders to redeem their cards immediately. According to court documents, some of these cards date back as far as 2003.

However, TGI Fridays has committed to honoring the gift cards at stores that remain open. The judge overseeing the case has permitted the company to continue its gift card program, which would give franchisees more time to review their finances and confer with corporate administration.

“In the short term, consumers with Fridays gift cards should be able to redeem them,” said Hirschfield. “In the long term, the perilous financial outlook of the chain means that if further restructuring occurs, those cards may be rendered valueless.

“It also highlights the dynamic between of long-term liability on unused cards,” he said. “I would assume that the chain recognized revenue on a good portion of those cards, as they date back to 2003, but would still have to honor the value due to regulations that prevent expiration of gift cards. But it’s likely that a high percentage of this liability is on cards well over five years old that individuals have lost or forgotten, or cards with little value remaining that the user just wrote off.”

The post After the TGI Fridays Bankruptcy, a Battle Over Gift Cards appeared first on PaymentsJournal.

In an era where consumer expectations and environmental consciousness are reshaping industries, payment cards are also undergoing a transformation. With an increasing shift toward sustainability, financial institutions and card issuers are rethinking the materials and designs of their cards. From recyclable options to customized designs that reflect consumers’ values, this trend not only minimizes environmental impact but also enhances customer engagement by allowing individuals to make choices that align with their personal and ecological preferences. How many cards to consumers have?

As payment card programs evolve, sustainability is becoming a key differentiator in an industry that traditionally relied on single-use PVC cards. Financial institutions are moving away from this outdated material, instead exploring alternatives like recycled plastics, biodegradable options, and even digital wallets as they embrace greener solutions. Beyond materials, customizable designs offer consumers a unique way to express their values, aligning their financial tools with their personal beliefs. This shift not only reduces waste but also encourages a more responsible consumer culture, with cardholders now empowered to support sustainable practices through their everyday transactions.

Don’t miss another episode of Truth In Data! Click on the red bell in the lower-left of your screen to receive notifications as soon as the episode publishes.

Data for today’s episode is provided by Javelin Strategy & Research’s Report: Eco-Focused Payment Cards: It Pays to Be Green.

Mean Number of Cards per Customer, by Type

• 2.6 – Major credit card usable anywhere
• 2.3 – Store branded credit card
• 2.2 – General-purpose prepaid reloadable cards
• 1.8 – Major debit or check card usable anywhere
• 1.7 – Co-branded credit card

Source: North American PaymentInsights, 2023

About Report

As financial institutions and card issuers commit more fully to sustainable practices, they’re introducing card programs that prioritize environmental impact. This includes the use of innovative, recyclable materials for physical cards and unique, customizable design options that allow consumers to express both individuality and eco-conscious values.

The recent report from Javelin Strategy & Research examines how traditional single-use PVC cards, which have long dominated the market, are giving way to more sustainable alternatives. It also explores how card issuers are appealing to environmentally aware consumers through card features that emphasize eco-friendly benefits and personal expression.

The post Top 5 Payment Card Types used by Customers appeared first on PaymentsJournal.

Want to give the people on your nice list a greeting card and a gift card this holiday season? Now you can do so with a single purchase. Hallmark’s newly announced line of Gift Card Greetings provides a QR code for a prepaid gift card contained within a greeting card.

The offering is a collaboration with gift card specialist InComm Payments, which is handling the technology behind the card through its e-commerce platform, the Gift Card Shop. Analysts see it as a well-suited partnership between two industry leaders.

“This is a simple and logical partnership of leading providers in each space,” said Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research. “With both markets moving closer to a digital-physical equilibrium, it has become important to maximize the opportunity to reach gift-givers in the medium in which they intend to deliver both gifts and messaging.”

The digital gift cards are available for use at more than 100 retailers, including Starbucks and Nordstrom. The inside of the card contains a QR code that works for the gift giver and the recipient. Those who are giving the cards will be able to scan the QR code, select the retailer they want the gift card for, then select the amount they want loaded onto the gift card. 

Once the recipient receives the card, they scan the same QR code to get access to the digital gift card. After they scan the code, they will need to input a four-digit code that’s on the inside of the card.

A Longstanding Relationship

The connections between InComm and Hallmark extend back several years. In 2019, InComm acquired Hallmark Business Connections, the business-to-business incentives subsidiary of Hallmark Cards. Hallmark Business Connections provides integrated, personalized solutions for organizations to boost employee engagement through incentive programs built around physical and digital gift cards.

This isn’t the first time Hallmark has grafted a payments product onto its cards. Last year, Hallmark teamed up with Venmo to allow consumers to send money securely with a greeting card. The idea was to bridge the gap between older generations who prefer to give cash gifts in physical greeting cards and the younger generations now accustomed to receiving everything, including cash, digitally. Gift Card Greetings represents a further, easier-to-use extension of that strategy.

The post Hallmark and InComm Combine Gift and Greeting Cards in One Package appeared first on PaymentsJournal.

When the topic is prepaid cards, the store-branded or general-purpose gift cards at grocery stores and retailers might come to mind. However, a substantial number of businesses and organizations continually use prepaid cards for a range of cases, including employee incentives and customer rebates.

In a recent PaymentsJournal podcast, Sheryl Shewman, Vice President of Business Development at U.S. Bank, and Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research, discussed the types of incentive programs and how organizations can leverage them to maximize employee engagement.

A Must-Have

More companies are offering some form of reward or incentive program. The reasons could be to improve productivity, increase engagement, or retain employees. A company might give a team member a prepaid card to recognize years of service or to show appreciation for hard work. Many organizations also give employees gift cards around the holidays.

Many businesses are increasingly giving employees health-and-wellness-oriented prepaid cards. Healthier employees are happier and more productive, and a prepaid card shows them that the employer cares about their well-being.

Even little incentives go a long way with a team. According to Hirschfield, Javelin’s data shows that roughly 83% of prepaid card recipients say an incentive increases their satisfaction with their employer.

“Over the years, rewards and incentive programs have gone from a nice-to-have to a must-have,” Shewman said. “Prepaid cards are now an integral part of those programs, but organizations are using them for many different functions. They’re being used for payroll cards, for expenses, and even for government disbursements.”

Fueling Sales

Companies are also increasingly using prepaid cards to drive sales in lieu of monetary rewards. Sales professionals are competitive by nature, and sales performance incentive funds are a great way to fuel their competitive fire.

A business could give a prepaid card as a reward for salespeople who achieve their objectives, such as when they meet their monthly quota or sell a specific product. A reward could also be given to the salesperson who cross-sells more products and services.

“Whether a company offers an incentive for perfect attendance or a sales accomplishment, there is still plenty of room to improve organizational rewards programs,” Hirschfield said. “According to Javelin’s annual prepaid survey, only 17% of all employees say they get any type of employee incentive. That’s a missed opportunity to establish a program that can benefit both employees and the organization.”

Brand Awareness

Manufacturers and dealers often give prepaid reward cards to build brand awareness and add value to their products and services. These incentives are best given as a reloadable card so the same customer can receive multiple incentives and loyalty can be built.

“At a tire store, there are multiple brands to choose from,” Shewman said. “So a tire manufacturer might give the store’s salespeople an incentive to promote their brand over another. Or it could be that the manufacturer is discontinuing a tire or launching a new product, so they offer a prepaid card to incentivize those purchases.”

Manufacturers and dealers might also offer a prepaid card as a rebate, as reimbursement for a product return, or as a reward for participating in a survey.

A Special Treat

Although there are many reasons for companies to give prepaid cards, organizations should also consider the type of card they are giving. In a small local company, the manager might want to personally deliver the reward to employees. Remote organizations, on the other hand, will have to rely on digital prepaid cards.

Rewarding employees with physical prepaid cards that can be digitized gives recipients the best of both worlds. They can use their cards in-store or load them into their Apple or Google wallets, where it can be reloadable.

Recipients also prefer open-loop cards like the Visa or MasterCard prepaid cards that can be used anywhere, as opposed to closed-loop options like branded gift cards.

“They want to use their reward for a special treat,” Hirschfield said. “They don’t want to use their incentive to pay a bill. In addition, organizations shouldn’t force employees into a gift card that doesn’t match their needs. Coffee shop cards are popular, especially when giving in lower denominations. However, only half of adults drink coffee daily, so that coffee gift card won’t exactly delight them, whereas a general-purpose card likely would.”

A Better Solution

In many businesses, managers still go to their local grocery store or retailer to buy the prepaid cards they give as incentives. That takes time and can also be more expensive—many gift cards, especially general-purpose gift cards, require a small activation fee.

There are also fraud risks. Gift card fraud is infrequent, but there is a risk that criminals might have tampered with in-store prepaid cards. There is also a chance that card-buying employees defraud their organizations by buying extra cards for themselves. Even if they are trustworthy, there is the possibility that the cards are lost or stolen after the purchase.

Purchasing rewards cards from a bank or a financial institution can mitigate those issues and add significant value for organizations.

“Financial institutions will often conduct a performance assessment to understand the rewards and incentives program at a company,” Shewman said. “That means asking how a company will use the cards and why, and who will be on the receiving end. It’s a great way to ensure that an organization has the most cost-effective and optimized program.”

Buying from a bank is typically less expensive than buying prepaid cards from a retailer. If a card is lost or stolen, it can be deactivated and replaced. Financial institutions can also deliver cards that have a company logo on them, creating a customized solution that keeps the brand top of mind.

“When managers go out to Walmart or a grocery store and buy cards off the rack, there is no way for payroll and auditing departments to report which manager got what cards from where, and who received them,” Shewman said. “When companies order cards from a financial institution, they can track and manage spending in real time. A bank can also provide detailed reporting if an organization needs to run any 1099s.”

Financial institutions can also do instant issues, in which an organization gets physical cards that have no funds on them. The business doesn’t load the prepaid cards until it is about to deliver the cards to the recipients, which adds an extra layer of security.

Incentive Expectations

An optimized reward and incentive program can keep employees engaged and maximize an organization’s productivity. The key to creating an effective incentive system is to keep the recipient in mind when the program is developed.

Companies should give themselves a variety of options to make sure they deliver maximum satisfaction to employees. However, they should also be sure that the incentive doesn’t become an expectation.

“One of my favorite stories is about a uniform company,” Shewman said. “Wire hangers are expensive, and drivers were given an incentive to pick up wire hangers after they dropped off new and cleaned uniforms. Originally, the uniform company added the incentive directly to the driver’s paycheck, but after a while, the drivers stopped picking up hangers.

“It turned out that the incentive had become part of the drivers’ compensation, and they came to expect it. Once the reward was delivered on a reloadable prepaid card, it became a true incentive for their drivers.”

The post Prepaid Cards Are Essential Components of Rewards and Incentives Programs appeared first on PaymentsJournal.

What’s the best reloadable card? That depends on the user.

Javelin Strategy & Research named the Serve Cash Back card as the best in its ranking of 10 popular card programs in the new 2024 General-Purpose Reloadable Card Program Scorecard.

However, the Serve card didn’t finish first in any of the three evaluated categories. Its consistency as a top three card in each category boosted its overall score. This highlights—as the study emphasizes—that there are many different ways people use and evaluate reloadable cards.

Javelin conducts a consumer sentiment survey on prepaid cards every year. Since general-purpose reloadable cards are a huge segment of the prepaid market, the survey consistently provides valuable data on how these cards are purchased and used.

“We wanted the scorecard to reflect the desires of those people who use the cards to make sure that the intended audience is getting the product that they value,” said Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research, and author of the study. “There is a plethora of good options for whatever the consumers need.”

A Card for Every Use

Each of the cards evaluated brings unique benefits to the table.

“Out of the 10 cards we evaluated, six different cards were recognized in one way or another,” Hirschfield said. “So 60% of the market is doing something really well, and that doesn’t mean the other 40% aren’t doing things well too. That goes back to the idea that consumers’ needs are going to be different.”

“Just because one card is better at ongoing experience, some consumers may value the cost process more and really will want to look at that,” he said.

Simple and Secure

Fraud and security issues are critical concerns for users of reloadable cards. For instance, users want the ability turn a gift card on and off if they misplace it, much like with a debit card or a credit card.

“When people go to that display of cards right next to the gift cards, they want to make sure that it’s a brand that they trust,” said Hirschfield. “They want to know that the packaging is safe, that they’re taking every precaution, both the brand of card that’s being offered as well as the retailer that’s selling it to make sure that the card is safe and secure.”

Evaluating the security of a card is often easier for those who sign up online because they can much more readily compare and contrast different options.

“That really empowers the consumer to do that research,” said Hirschfield. “Am I getting the card that fits me? Am I getting a card from someone that I trust that has the benefits that match what I need?”

Another benefit is that online cards are often free of charge, unlike the fees that are frequently incurred at retail stores. Indeed, low costs for setting up a card were found to be the most important feature when choosing a reloadable card.

Stop to Reload

The biggest concern among reloadable card buyers—the primary reason they may hesitate to purchase a specific card—is the difficulty of reloading it. Many issuers are addressing this by encouraging direct deposit, which not only automates  the loading process but can also reduce monthly or periodic charges.

Another vital aspect of convenience is the mobile app. When users can deposit a check through the app, much like with a bank account, they find access to be much easier.

Issuers like Target, Walmart, and Western Union, which have physical locations, make reloading much easier for their users. “That’s part of what makes those cards a little more identifiable to the consumers who want them,” Hirschfield said. “If you are someone who frequents one of those retail outlets, you know that it will be easy to deposit money in a physical location.”

The variety of card options is fueling the growth and popularity of this category, which represented a total load value of $234 billion in 2023.

“One card may be better at ongoing experience, while some consumers may value the cost process more and really will want to look at that,” Hirschfield said. “It comes down to the consumers educating themselves on what is the most valuable criteria to them.”

The post Exploring Reloadable Cards: Tailored Options for Every Consumer appeared first on PaymentsJournal.

It can be difficult to choose the perfect gift! This is just one reason why consumers are planning to purchase gift cards this year. Many believe that gift cards give recipients the freedom to choose what they really want—whether it’s a night out, a luxury item, or a grocery trip.

In a recent PaymentsJournal webinar, Sarah Kositzke, Director of Research and Jay Jaffin, Chief Marketing Officer at Blackhawk Network (BHN), along with Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research, discussed gift card purchasing and redemption trends, sustainability, year-round gifting and gift cards as incentives.

Economic Impacts and Key Trends

There are mixed messages in the macroeconomic environment. It appears that inflation is slowing, but prices are still 25% to 30% higher than just a few years ago. Consumer confidence is trending up, however, and retail sales are expected to rise by 3% year-over-year.

On the topic of omni-commerce, Kositzke noted that it has been redefined, and “it no longer means just a physical store and a website. It is evolving to include an entire ecosystem where consumers interact with brands from apps and social media to the influencers to the in-store experience.”

Continuing to trend this year is the shift to mobile payments. Around half of U.S. adults use mobile payments, which has, in turn, driven demand for digital gift cards. Buy-now-pay-later (BNPL), is also projected to grow by 50% next year. These emerging payment methods make it critical for merchants to offer multiple payment options at the point of sale.

Sustainability is also playing a larger role in purchasing decisions, with roughly two-thirds of consumers willing to pay a bit more for sustainable products.

“There is an opportunity here for the gift card industry,” Jaffin said. “They may seem like little pieces of plastic, but creating the raw materials for plastic gift cards takes about four times as much carbon as it does for durable paper stock gift cards. The reality is, it’s good for the planet, but it’s also good for business. Consumers want options like paper gift cards instead of plastic because they’re recyclable.”

Consumer Purchasing Habits

Not only do consumers spend the amount they receive on a gift card, but nearly six in 10 spend more than the value of the card.

“It’s really helping to increase the overall shopping basket, and also extending the brand beyond the traditional gift card value,” Kositzke said. “You get the chance to build a loyal customer, which often happens when they receive that initial gift card. About a quarter of people got a gift card to a new brand last holiday, which is a great opportunity for them to try something they never had on their radar.”

Thinking about where people are buying gift cards, consumers generally go to merchants they trust, both in-store or online. In-store gift card purchasing is often driven by convenience; the customer either happened to drive by or already had the stop scheduled along the way.

“In-store still dominates, but about half of consumers are buying cards online and it’s rising,” Kositzke said. “The key is putting your gift cards where people want to shop. A lot of folks use smartphones to make purchases and gift cards fall into that category, so optimizing that mobile strategy is important, especially as we see the demand for digital gift cards growing.”

Most digital gift cards are delivered by email, but SMS and messenger app delivery are increasing in popularity. That has been driven by preferences among younger consumers who expect a digital-first experience. For that reason, drop-to-wallet functionality will be critical going forward as more users adopt digital wallets.

Digital gift card growth will also accelerate due to the convenience factor. In many cases, a digital card might be the only option, like when the recipient lives far away or can only accept a digital card. Digital cards also offer more personalization options, where the sender can add a personalized video or picture.

“However, there is still room for improvement with digital gift cards,” Kositzke said. “There’s a demand for better digital delivery, because emails can be difficult to sift through. If the consumer can get a text message and upload the gift card seamlessly to a digital wallet, there’s a better chance they will use it. Today only about 45% of people are storing gift cards in wallets.”

Fraud Prevention

Financial crimes are an ongoing challenge, so a strong risk management and fraud prevention program is essential for protecting both your business, and your customers.

“Gift card fraud has gotten more attention lately, and, as an industry, it’s our responsibility to take on this challenge and protect our customers,” Jaffin said. “On the merchant end, businesses should report any suspicious activity to law enforcement immediately, because many times fraud is part of a larger operation.”

Another critical aspect of gift card fraud prevention is consumer education, especially around the holidays. Wherever consumers buy gift cards, there should be signage or e-mail communications directing customers to inspect the gift card’s packaging for tampering.

Year-Round Gifting

Birthdays are the number one occasion where gift cards are given, followed by the year-end holidays. However, gift cards are increasingly being given in all types of situations. In the workplace, for instance, they can be a powerful way to incentivize workers.

“It’s a great mechanism to motivate your teams,” Jaffin said. “For example, there is a platform that allows managers to deliver a gift card directly through Microsoft Teams in a team meeting. Not only do you get to recognize an employee, but the entire team gets to see it and it becomes an event.”

Many consumers are also using gift cards for personal spending. Prepaid and gift cards can be useful alternatives to high-interest credit cards in a tough economy. Many consumers report using prepaid cards to control their spending, and 19% said they use gift cards to manage their budget.

In the case of a customer dispute, merchants can offer a gift card as an appeasement, both resolving the issue and retaining the customer’s loyalty. Additionally, gift cards serve as a great reward for customers who have remained loyal to a brand.

“It’s really for any moment when you want to say thank you, whether it’s to the teachers, delivery drivers, or bus drivers,” Kositzke said. “It’s effective and it’s sought-after all year, so companies should have likewise have a gift card plan that stretches the entire year. From small moments to big moments, gift cards are given year-round.”

To learn more about U.S. shoppers’ attitudes toward gift cards, download BHN’s recent e-book, 2024 Could be a Shockingly New, Shockingly Normal Year for Gift Cards.

To learn more about what industry participants can do to mitigate gift card fraud, download BHN’s recent e-book, The Broad Report 2024, the State of Gift Card Fraud.

The post Exploring the Current Gift Cards Landscape appeared first on PaymentsJournal.

As digital commerce continues to grow, the use of gift cards has evolved, with online redemption becoming increasingly popular across various generations. While gift cards remain a convenient option for gifting, how different age groups redeem them is shifting. From tech-savvy Gen Z to digitally adept Millennials, and even Baby Boomers embracing online platforms, each generation has its own distinct approach to utilizing gift cards.

In particular, Gen Z and Millennials, who are highly accustomed to digital ecosystems, prefer the convenience of redeeming gift cards through online platforms and mobile apps, aligning with their broader shopping habits. Their comfort with technology drives demand for seamless, digital-first gift card experiences, often tied to e-commerce and social media integrations. Meanwhile, Baby Boomers, though traditionally associated with in-store gift card usage, are increasingly adapting to digital redemption options as they become more user-friendly and accessible. This shift not only reflects generational preferences but also points to a broader trend of digitization within the payments industry, where gift card providers are enhancing their offerings to meet the needs of a diverse consumer base.

Don’t miss another episode of Truth In Data! Click on the red bell in the lower-left of your screen to receive notifications as soon as the episode publishes.

Data for today’s episode is provided by Javelin Strategy & Research’s Report: Javelin Prepaid Consumer Sentiment: A Generational View

Gift Card Redemption Online by Generation in the Past 12 Months

• 76% of Gen Y / Millennial’s redeemed gift cards online.
• 68% of Gen Xer’s redeemed gift cards online.
• 67% of Gen Zer’s redeemed gift cards online.
• 61% of Baby Boomer’s redeemed gift cards online.

Source: Javelin Strategy & Research

About Report

Generational approaches to prepaid card usage highlight the potential for tailoring programs to meet the specific needs of different demographic groups. While the behavior of one generation may not always predict the habits of the next, valuable insights can still be gained by examining generational trends. These insights can help inform strategies that encourage new and innovative uses of prepaid cards.

The generational perspective also sheds light on the ongoing digital divide. As prepaid card programs expand into omnichannel and digital platforms, younger, tech-savvy generations like Millennials and Gen Z show distinct preferences in how they receive and use these cards. Meanwhile, Baby Boomers tend to maintain more traditional behaviors, with Generation X often positioned between the two, balancing both digital adoption and conventional redemption methods.

The post What Generation Redeems Gift Cards Online? appeared first on PaymentsJournal.

Low-income recipients of cash aid or Supplemental Nutrition Assistance Program benefits are especially vulnerable to crime. Since their benefits are usually loaded onto cards that rely on a simple magnetic stripe, thieves can use skimming devices at ATMs, grocery stores, and gas stations to steal card information when the cards are swiped. This allows them to drain the recipients’ accounts.

California, the most populous state in the nation and known for its generous social safety net policies, has been particularly hard hit. Over the three-year period ending in August 2024, low-income Californians reported $242 million in stolen cash aid and $119 million in food benefits.

That’s why California has become the first state to plan the implementation of embedded microchips in its electronic benefits transfer (EBT) cards for added security. This basic level of fraud protection, commonly known as EMV chips, has been available to debit and credit card users for over a decade.

As the largest and arguably most progressive state, California may serve as a bellwether for other states to adopt similar security measures.

“The move by California to equip EBT cards with chip security places them on the forefront of the trend to better secure all types of prepaid cards,” said Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research. “In this case the chip provides a simple and effective way to reduce fraud, protecting both the beneficiaries and state taxpayers who fund reimbursements to the cards.

“Retailers are already equipped to accept chip cards for credit and debit transactions,” he said. “That means only the state, as the issuer, needs to incur costs to implement the program, and the retailers should already be ready to go.”

Golden State Upgrades

California has recently taken several steps to overhaul its technical operations. The state’s DMV is testing support for ID cards that could be stored within the Google Wallet app. If approved, California would join 11 other states that have adopted digital IDs. Additionally, it became the first state to place all of its vehicle titles on the blockchain.

However, the EBT upgrade looks like it will take longer than anticipated. The state budgeted $50 million for the EBT system upgrades last year, with plans to distribute the new cards to families this summer. But the rollout was delayed due to what the state’s Department of Social Services described as “the complex technological changes required.” The cards are now expected to be in the hands of recipients within the next six months.

The post California Upgrades EBT Cards to Include Chips for Fraud Protection appeared first on PaymentsJournal.

With no relief from inflation in sight, consumers are bracing for an expensive holiday shopping season, especially with only 27 days between Thanksgiving and Christmas this year.

To stretch their budgets, consumers will leverage every available method, and merchants’ loyalty programs can save customers money while strengthening brand relationships. However, another key pillar of a merchant’s successful holiday strategy is its gift card program.

In a recent PaymentsJournal podcast, Tom Niedbalski, Vice President, Global Sales and Partnerships at Fiserv, and Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research, discussed the convergence of gift cards, loyalty programs, and technology—and the opportunities this creates for merchants in the upcoming holiday season.

Shopping Strategies

Tighter budgets have driven consumers to shop earlier and spread out their purchases, a trend that retailers have encouraged with events like Prime Day. Consumers are also expected to take advantage of upcoming events like Black Friday and Cyber Monday.

Loyalty programs greatly influence where consumers shop during the holidays, as savvy customers use them to bolster their holiday spending. That’s why major retailers like Target, Walmart, and Amazon continuously drive engagement with their loyalty programs; it directly encourages consumers to participate in sales and promotions.

Gift cards should also be integrated into a merchant’s loyalty program. For example, a customer might receive a gift card for spending a certain amount or redeeming a specific number of reward points. However, a merchant’s gift card program takes on added importance during the holiday season.

“Gift cards have become the most popular gift,” Hirschfield said. “Roughly 63% of consumers say they will buy a gift card this holiday season, and 16% expect to spend more than last year. A loyalty program that is tied in with gift cards not only helps buyers purchase the items they need, but it’s also an inducement to purchase gift cards for others during the holiday season and beyond.”

Omnichannel Experience

Brands need to meet customers where they shop and pay, so merchants must invest significant time ensuring their mobile experience includes payments, loyalty, and gift cards in an omnichannel wallet.

“The digital experience not only allows the brand to interact with its consumers, but consumers can see the value of interacting with the brand,” Niedbalski said. “For years, I’ve been saying that stored value is the vehicle that drives transactions out of interactions and interactions out of transactions. It’s a two-way street.”

A digital wallet can also serve as the platform for merchants to offer innovative loyalty programs, such as product-specific promotions. For instance, if a customer buys a particular product, they might receive a gift card from the manufacturer to buy related accessories.

Another growing trend is self-use, and consumers who use gift cards for themselves are heavily influenced by loyalty programs.

“It creates a cycle of promotions, and it all links back to the phone,” Hirschfield said. “The mobile phone holds a customer’s stored value account and their payment methods. The physical gift card is still the top seller, but nearly a third of consumers will redeem a gift card in a mobile app. That number is only going to grow.”

Personalization vs. Privacy

Gift card personalization is a powerful way to connect with different demographics. With many faiths celebrating during the holidays, it’s important for merchants to cater to the diversity of their customer base.

Some brands have started offering print-on-demand gift cards. In the past decade, there has been a shift from traditional Christmas cards to postcards featuring personal images. This same concept is now applied to gift cards, allowing consumers to upload a family photo and include it with their gift.

“It connects with consumers, and these designs jump off the shelves, or the pegs, if you will,” Niedbalski said. “With e-commerce, there are a substantial amount of personalization options that give the gift a life of its own. Senders can include a written personal message, or they can send a voice message for friends and family in different areas.”

While personalization is a powerful tool, merchants should be cautious not to ask for too much personal data. Over half of consumers have distanced themselves from brands that request excessive information or send too many notifications.

“By nature, gift cards are incredibly private for the recipient—they can choose to utilize the card’s value without disclosing any personal information,” Hirschfield said. “That’s where merchants must strike a balance. They need to capture some customer data, but they don’t want to push too hard.”

Maximizing Visibility

With a wide range of products and services available in-store, many merchants can often struggle to boost gift card visibility. However, as the holiday season nears, in-store gift card displays can be highly effective. Equally important is catering to online shoppers—gift cards should be prominently featured in website banners, included in customer email campaigns, and promoted across social media channels.

Merchants should also ensure proper in-store placement and signage for gift cards, and maintain sufficient inventory to compensate for stockouts on other merchandise. Gift card displays don’t have to be limited to the point of purchase; there’s a growing trend of retailers offering themed gift cards in each department.

“Imagine a sporting goods store, and in the golf section you have golf-themed gift cards, and in the athletic shoe section you have shoe-themed gift cards,” Niedbalski said. “You’re giving the consumer multiple points of purchase. Maybe they can’t find the item they want, but instead of leaving the store, they purchase a gift card.”

Improving gift card visibility can also mitigate fraud and theft. Criminals often take gift cards off the rack, steal their data, and return them. If cards are in an unmonitored location, it creates risk for both consumers and merchants.

“This is a perfect time of year for merchants to retrain their staffs, especially if they are hiring temporary help,” Niedbalski said. “Employees should know how to spot suspicious behavior and check gift card packaging for tampering, even at the point of sale. Fraud is a threat in the gift card marketplace, but oftentimes it can be avoided if a merchant’s staff knows what to look for.”

Flawless Execution

Persistent inflation and the shortened holiday season make it critical for merchants to develop a holiday strategy now. That means establishing early holiday promotions and marketing them through appropriate channels.

“The key for all merchants is to create a plan early and execute it flawlessly,” Niedbalski said. “By running deeper promotions with longer promotional windows, it will not only encourage consumers to purchase gift cards for the financial benefits, but it’s also going to drive consumer loyalty. That will help merchants both retain existing customers and acquire new customers for their brand.”

The post Merging Loyalty and Gift Card Programs for an Optimal Holiday Shopping Season appeared first on PaymentsJournal.

Digital gift cards now account for over half (52%) of the UK gift card market share in what is being called a “pivotal shift” in the industry.

In the first half of the year, digital gift card sales increased by 17.1%, according to a report from the Gift Card & Voucher Association (GCVA). Over the past five years, this figure has grown by 30% as UK companies have increasingly incorporated digital gift cards into their loyalty and rewards programs.

“The surge in digital gifting in the UK is impressive and it is ahead of the pace in the U.S.,” said Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research. “Javelin firmly believes that the U.S. will reach a 50/50 split between physical and digital gift cards by the end of the decade. That is driven by similar features of loyalty and rewards that link easily to consumers’ apps and stored value accounts.”

Getting Creative

The leisure and entertainment sector outperformed the retail sector in the UK gift card market, with sales of entertainment-oriented cards increasing by 15.5% year-over-year. However, digital gift card sales in the retail sector still saw a 23.2% year-over-year growth, with grocery stores being the most popular choice among consumers.

Retailers have continued to find creative ways to drive gift card sales. This includes offering a bonus gift card with a purchase or rewarding extra loyalty points to customers who make purchases using their stored value accounts.

A Landmark Moment

Digital gift cards can be a strong component of a loyalty program, driving both engagement with a company’s app and fueling greater spending—consumers typically spend more than the gift card’s value.

“The rise of digital gift cards is a landmark moment for our industry, highlighting the shifting preferences of both consumers and businesses,” said Hannah Shimko, Managing Director of the GCVA in a prepared statement. “This trend underscores the innovation and flexibility inherent in the gift card market, which continues to adapt and grow despite economic headwinds. As we approach the crucial Christmas period, it will be intriguing to see how these trends evolve and shape the future of the market.”

The post Digital Gift Cards Outpace Physical Cards in the UK appeared first on PaymentsJournal.

Prepaid and gift cards have become increasingly popular as convenient financial tools and versatile gifting options. However, their widespread use comes with a distinct set of challenges and potential risks that consumers must consider. From vulnerabilities like theft and unauthorized usage to the complications of expiration dates and hidden fees, what are the issues consumers have to consider?

Don’t miss another episode of Truth In Data! Click on the red bell in the lower-left of your screen to receive notifications as soon as the episode publishes.

Data for today’s episode is provided by Javelin Strategy & Research’s Report: Mitigating Risk in Prepaid Card Programs

Top 3 Security Issues and Lost-Value Risks When Using Prepaid/Gift Cards

• 44% – Loss of funds due to expiration of card
• 43% – The card becoming lost or stolen
• 34% – Inability to access the prepaid balance at the time of use due to technical issues

About Report

Risk in any business is inevitable. Prepaid card programs start with risk as soon as the financial liability of a card appears on the balance sheet. From the time of issuance, all parties in the value chain must be aware of the many risks associated with that liability and understand how best to mitigate them, knowing that eliminating risk is an impossibility. 

The risks start with the seemingly simple task of understanding customer sentiments and managing their expectations. However, that is much more difficult than it appears. Other risks include store policies, theft scams, and fraud, the successful management of which compounds into ensuring customers feel secure in their purchases. Strong back-end technology and policies create an overlying, invisible shield that helps further reduce risk to acceptable levels.

The post Top 3 Concerning Security Issues Using Prepaid/Gift Cards appeared first on PaymentsJournal.

Maryland has become the first state to pass a law combatting gift card draining, mandating tamper-proof packaging for most gift cards sold in person. The intent is to curb the growing problem of buying prepaid cards only to find their balances have been emptied.

Card draining involves thieves removing gift cards from stores, taking their numeric codes, and putting the products back on display. When a genuine customer later loads money onto a tampered card, criminals can access it online and steal the balance.

Card draining grew sharply during the pandemic, thanks to the ingenuity of Chinese organized crime rings. Big box retailers operated with little traffic or supervision during the COVID-19 lockdowns, leaving hundreds of gift cards available to the public on their racks. According to an investigation by ProPublica, criminals learned to remove and replace the security stickers and packaging that conceal the card’s codes.

Open-loop gift cards, such as those issued by Visa, Mastercard, or American Express, are particularly popular with draining gangs. These cards can be redeemed at any business that accepts debit payments, as opposed to closed-loop cards that can be spent only at a single business.

An Expensive Problem

The Maryland law, which passed in May and will go into effect in June 2025, faced strong opposition from retailers. Lobbyists from Walmart, Target, and Home Depot argued that changing their card packaging to comply with the new rule would be very costly to design and manufacture.

However, the problem is also very costly for consumers. ProPublica cited research from Javelin Strategy & Research, which estimated that $570 billion is loaded onto gift and prepaid cards each year in the United States. A 2022 AARP study found that a quarter of U.S. respondents had been given or received a card with no balance, presumably because it had been tampered with.

At the same time, Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research, is not so sure the Maryland law will have a significant impact. “I think it will have limited effect,” he told PaymentsJournal. “It’s limited in scope to not just one state, but a state where a large percent of the population can and does live and work in a multi-jurisdiction geography.

“The problems are known, and the industry is working to improve packaging and processes,” he said. “To be truly effective I believe there needs to be more of a partnership between regulators and the industry to agree on parameters that eliminate state-by-state regulations.”

The post Can Maryland’s New Law Stop Gift Card Draining? appeared first on PaymentsJournal.

Prepaid cards continue to be the preferred gift for both recipients and givers, as retailers develop new ways to make them attractive to customers. This engagement extends revenue opportunities for merchants and can turn anonymous gift cards into distinct customer loyalty vehicles.

Retailers are already gearing up for the holiday shopping rush, making this the right time to look at trends that will affect gift card purchasing towards the end of the year. Nearly two-thirds of consumers who buy a gift card do so during the holiday season. In his report, 2024 Prepaid Holiday Preview, Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research, looks at the trends likely to impact prepaid card purchases for the remainder of the year, considering factors from buying patterns to macroeconomic influences.

An Adaptable Solution

Retailers have devised creative ways to use their gift cards, spurring loyalty and encouraging consumers to expand their initial purchases. Some organizations now offer bonus gift cards—for example, buying a $50 card from Target might come with an additional card with $10 at no extra cost.

“It’s effectively a coupon except that it’s a coupon promising future benefit back to Target versus just straight money off,” said Hirschfield.

This additional bonus card can provide sizable benefits. Generally, people who use a gift card spend more than the card’s value, often purchasing more profitable, expensive items. By offering an incentive card with the purchase of another gift card or a general purchase, merchants not only improve their revenue but also foster customer loyalty.

Hirschfield contrasts gift cards with coupons, which have many similarities. “Couponing is such a simple transaction,” he said. “Here is a piece of paper or a code and you get X percent off and are encouraged to go back to the store.”

Gift cards enable retailers to be much more creative. For instance, if  Target has a department with slow sales, they can try to boost activity by offering a promotion such as an additional $10 card specific to the housewares department with the purchase of a $50 card. Alternatively, they could structure the card to encourage the consumer to bring a friend into the store. These innovative promotions not only drive sales but also engender loyalty.

Starbucks is another example of a merchant adding creativity to its gift card program. If a consumer makes a purchase at Starbucks using their card stored-value account, they receive twice the Star benefits compared to a regular payment. This approach builds customer loyalty while providing Starbucks with more data and analytics on their most dedicated customers.

One category that has seen a slight decline in usage is the general-purpose gift card, such as those from Visa, Mastercard or American Express. These cards remain the top choice for gift-giving, but many people have turned to peer-to-peer apps to give money to friends and family. The number of people listing general-purpose cards as their preferred gift slipped from 26% in 2023 to 23% this year. 

Macroeconomic Factors

Heading into the busy season, Hirschfield sees interest rates as a factor that might boost sales. The Federal Reserve has kept interest rates steady for the past year, but many observers expect rates to be cut before the holidays. If that happens, consumers could see their credit card interest rates go down, which would induce them to spend more. Gift cards would be a logical beneficiary of that additional spending.

Hirschfield describes gift cards as the “most resilient” of gifting options. His research shows that 16% of holiday card buyers are likely to spend more this year, while 83% are going to spend a similar amount, and only 2% intend to spend less. These numbers could improve further if the economy strengthens or if interest rates decrease.

“Gift cards still [seem to be] a segment in holiday spending where people will spend more in total than they did last year,” Hirschfield said. “Almost 100% of card buyers are likely to buy gift cards again for the holidays, so it’s incredibly resilient no matter what the economic conditions are. Any easing of spending pressure can only improve that more.”

One downside of gift card sales for retailers is that they don’t receive the revenue immediately. When a card is purchased, it becomes a liability on the store’s balance sheet. Unlike a direct sale, where the store gets that money right away, the funds from a gift card remain unclaimed until the card is redeemed.

However, the situation does have a silver lining. Often, gift cards are redeemed in the first quarter, which is typically a slower period for retailers. As a result, the redemption of these cards can help offset some of the seasonal dips in cash flow.

“The upside of more frequent visits, increased spending, buying more expensive items, and trying new brands and services often offset the downside of the financial liability,” Hirschfield said. “There’s so much opportunity to push more gifts out of that product.”

The post Retailers’ Creativity Continues to Fuel Gift Card Acceptance appeared first on PaymentsJournal.

Home Depot has agreed to pay $750,000 to settle a California lawsuit that alleged the big-box retailer didn’t follow existing state laws regarding gift card redemption. Like several other states, California requires retailers to provide an option for gift card holders to redeem the value of their card if it’s below $10.

“There are a series of states that have laws requiring stores to cash out gift cards if they fall under a certain value,” said Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research. “Typically, the consumer has to request the cash-out, and the store must comply with the request.”

The $750,000 payment will cover civil penalties and investigative costs, rather than reimbursing customers. The settlement, though minor, seems like it could have been avoided.

As part of the agreement, the Los Angeles County Superior Court ordered Home Depot to change its gift card transaction processes. Home Depot will be required to program its check stands and registers that disburse cash to automatically pay out gift cards in cash if they have a balance of less than $10. Additionally, Home Depot will have to provide notices about the law on its physical gift cards, on any websites where the cards can be purchased or redeemed, and at the customer service and returns sections of its California stores.

The Importance of Education

One key aspect of this settlement is that Home Depot has agreed to provide its California employees with additional training regarding card redemption.

“I’d assume they didn’t properly train local employees,” said Hirschfield. “My guess would be that they train in a national standard and didn’t clarify the specific rules that apply in California.”

California isn’t the only state where store employees need to know the specific gift card regulations. New York, for example, enacted new cash-out options at the end of 2022 for balances less than $5.

Previously, California levied a similar fine of $85,500 to Taco Bell for violating cash-back options. While the amount paid may seem small, Hirschfield pointed out that the costs of defending such actions increase the total cost for organizations that have not been following regulations.

Gift cards are an important part of Home Depot’s business cycle. The company’s performance obligations for unredeemed gift cards reached roughly $1 billion as of January 2024.

The post Home Depot’s Gift Card Woes Could Have Been Avoided appeared first on PaymentsJournal.

In an era marked by rising inflation, prepaid cards have become more than mere financial tools. They are increasingly seen as strategic assets in managing the economic pressures felt by consumers and retailers alike. The benefits of gift cards extend beyond financial transactions, helping retailers build personal relationships and loyalty with their customers.

In a recent PaymentsJournal podcast, Sam Lituchy, Vice President and Head of Gift Solutions at Fiserv, spoke with Jordan Hirschfield, Director of Prepaid Payments at Javelin Strategy & Research, about how prepaid cards have evolved into multifaceted tools and how the benefits for consumers can also benefit the issuers.

Advantages from All Angles

The reasons for businesses to offer strong gift card programs are many. Fiserv data shows that revenue growth is about 15% to 25% greater when customers are engaged in a merchant’s loyalty offering or program. That tends to show up in a variety of ways, whether from increased frequency or greater average order value. 

On top of that, prepaid cards can provide a more cost-efficient customer acquisition tool than other competitive advertising or marketing channels. “A strong loyalty program can turn a traditional consumer or user of that program into a great advocate,” Lituchy said. “Once that happens, the user often starts a social recruitment journey, bringing in friends or family members into that program.”

Lastly, the data captured from these loyalty programs is extremely powerful. 

Merchants have an opportunity to leverage this data, gaining insights into demographics, engagement patterns, and purchasing behavior. It allows them to analyze what is working well, what is not, and what they should double down on.

“Customer acquisition costs are worth keeping an eye on here,” Hirschfield said. “What we see in our research is if you use incentives in concert with your loyalty program, you might get $20 savings to acquire a new customer. That’s pretty impactful, and all those benefits have a knock-on effect on spend.”

 There’s also a spending uplift when a retailer can rely on loyal customers. The small things you might do to bring customers into your loyalty program pay off time and again through not only the first customer but also the social aspect of getting more customers in.

More Than the Value

Prepaid cards can also be a more cost-effective payment method, driving top-line growth and bottom-line savings. Many merchants are unaware of the benefits of the upfront cash that a gift card sale can generate for merchants. Those funds can be invested in a variety of ways. 

Consumers tend to spend more than the face value of the card when they come in. They may come into a store with a $50 card and ultimately spend more than that. Javelin’s research indicates that 40% of gift card recipients will always or usually spend more than the value of a card. Another 25% splurge on a more expensive item than the card’s value, and 30% say they will visit the store more often. By getting people to come into their store and have that tactile experience, merchants might have another 20% that try a new brand or product or service. 

“The TV that my kids use for their video gaming went out,” Hirschfield said. “I used a gift card and ended up buying a more expensive TV than I was anticipating. It was a better brand than maybe I would have normally done for the less technical TV they play their video games on. Without really planning to, I maximized the value of that gift card that I had sitting here.”

The Self-Use Cycle

On the flip side, smaller balances do get left on cards. Those unused balances over time can continue to build and ultimately get recognized as revenue, which is obviously a benefit for the business. A few businesses have been able to build a lot of remaining balance, which increases revenue. 

The self-use cycle allows those stored values to always remain in the merchant’s account. That merchant can put that money to work while the consumer is waiting to use it. While those funds are a liability on the balance sheet against future use, they can be interest-bearing.

Consumers in the loyalty program provide more value to the retailer when they reload the card. It may have started as a gift, but the card becomes a cyclical self-use item if it’s constantly being decreased, never reaching zero but always providing continued benefits to the consumer and the merchant. That arms the merchant with much more powerful information and at a reduced cost rather than doing such research through a third party. These cost advantages become amplified because 80% of self-purchasers anticipate buying more cards for self-use in the coming year. 

Beyond Gifts

“Gift card” has become in many ways a misnomer because self-use is what drives the repeatable business for prepaid cards. When people buy a gift card for themselves, they’re doing it to earn rewards. Javelin’s research shows that among people buying prepaid cards for self-use, 40% do it to earn loyalty points, while 48% do it to take advantage of a promotion.

One of the least-known benefits of offering gift or stored-value cards is that payment processing fees are reduced. The total cost between a gift card sale and its subsequent usage tends to be lower than a traditional interchange driven payment. There are further savings when merchants can incentivize consumers into their first-party app or wallet, to continue bringing them into the merchant ecosystem. 

A handful of examples in the marketplace, like Starbucks and Walmart, have done an exemplary job of bringing consumers into their experience, keeping them involved in that ecosystem. That drives down the cost of acceptance for those merchants on each transaction. The most successful gift card programs will use synergy and consumer habits to bring advantages of all kinds to the issuers and the customers.

“I have been a loyal Delta flyer for years, and my Delta account is tied to my Starbucks account,” Hirschfield noted. “If I load up my card with $25, I get something like 250 miles.  If I load $100, it’s more like 2,000 miles, for money that I’m going to spend at Starbucks anyway. These programs not only reward regular use but can tie in like-minded partners to do so in ways that engage the consumer on multiple aspects to do a bigger initial purchase. And that $25 to $100 purchase at Starbucks reduces their cost, when you consider the average price of going to Starbucks is probably somewhere between $5 and $10 per person.”

Any well-run loyalty program combines all those advantages. It’s not just about enticing people to buy a gift; it’s getting them to also buy for themselves, to be more engaged, earn those points, earn those rewards, and build that loyalty. 

Learn More About Fiserv Stored Value and Loyalty.

The post It’s a Gift: The Hidden Benefits of Prepaid Cards appeared first on PaymentsJournal.

The U.S. open-loop commercial prepaid market is experiencing significant growth, driven by increasing corporate demand for versatile and efficient financial solutions. This dynamic sector encompasses a wide range of commercial prepaid products, such as payroll cards, expense management cards, and incentive cards, offering businesses flexible payment options and streamlined financial operations. As technological advancements continue to enhance transaction efficiency and security features, the commercial prepaid market is poised to expand further, reflecting broader trends in corporate financial management and digital payments.

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Data for today’s episode is provided by Javelin Strategy & Research’s Report: 2024 State of the Industry: Commercial Prepaid Cards

2023 U.S. Open-Loop Commercial Prepaid Loads by Segment (In Billions of U.S. Dollars)

• $96 – other commercial open-loop
• $94 – government open-loop
• $19 – consumer incentives
• $6 – employee incentives

Source: Javelin Strategy & Research

About Report

The commercial prepaid market should see moderate growth in coming years, with an increased opportunity for non-governmental products such as employee and health incentives in open-loop and closed-loop networks. 

With this report, Javelin Strategy & Research continues its annual series on prepaid market trends. Overall, prepaid continues to represent a small but significant share of the overall commercial payments market. The consistency of that share provides stability for vendors offering commercial prepaid programs, and a continuation of high interest rates could create the potential for growth beyond Javelin’s current expectations.

The post Top 4 Segments for U.S. Open-Loop Commercial Prepaid Loads appeared first on PaymentsJournal.

With gift card spend projected to reach $267.3 billion by 2028, it’s clear that gift cards  are an influential force in the market. And the rise of digital gift cards, a trend that continues to gain momentum, is opening up new avenues to engage younger generations.

During a recent PaymentsJournal podcast, Blackhawk Network’s (BHN) Sarah Kositzke, Director of Research and Hilary Spidaliere, Director of Product Marketing, as well as Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research, explored, analyzed, and amplified the insights from this year’s Benchmark Report: 2024 Digital Gift Card Leaders, conducted by NAPCO research in partnership with BHN. This market-leading report on the gift card industry, which evaluated the digital gift card programs of 100 U.S. merchants, identifies best practices and opportunities for how retailers can optimize their own gift card programs.  

Gift Card Industry Trends

During the 2023 holiday season, the average individual received around three gift cards, totaling roughly $160 in value. However, when recipients made their purchases, they spent an average of $78 more than the card’s value¹. Leveraging a gift card to purchase a bigger-ticket item is commonplace and one of the reasons why gift cards are so valuable to retailers – driving that additional overspend and store visits.

“About a third of people said their favorite gift was a gift card,” Kositzke said. “Most people are still getting single-branded cards, like Starbucks or Amazon, which account for 75% of gift card buys. The Visa and Mastercard options and multi-branded cards are picking up steam though¹.”

According to BHN, 77% of purchases were physical cards, even when the transactions occurred online. Physical cards are considered more personal, especially when there’s an option to customize the card. Despite the increasing popularity of online shopping, most gift card transactions still happen in-store, making up 85% of purchases¹. But that is likely to change.

“Looking a little further out to 2030, digital cards are going to continue to gain ground,” Hirschfield said. “By the end of the decade, it’s likely to be a 50/50 split. That’s driven by Gen Z and Millennials, who are also significantly more likely to extend their purchases beyond the gifted amount. Digital options are going to be a great way to reach those generations.”

2024 Gift Card Benchmark Report Criteria

NAPCO Research, in partnership with BHN, examined the gift card programs of 100 U.S. merchants with a specific emphasis on the e-commerce gift card experience. NAPCO developed 130 criteria, across to four major categories.

“First and foremost is discoverability,” Spidaliere said. “How easy is it to find that brand’s gift card program? Next, they’re looking at personalization. Can I pick my own gift card design, or add a personal message? Third, they’re evaluating the checkout experience for efficiency and payment flexibility. Finally, they’re evaluating the recipient experience. Does the card feel like a gift? Is it easy to redeem?”

The end goal was to fully evaluate the purchase and recipient experience for each of the merchants across all platforms.

Speaking to the assessors who reviewed each gift card program, “They’re like a secret shopper,” Spidaliere said. “During the process, they capture hundreds of screenshots and use them to score each of the merchants across the established criteria. Then they crunch the numbers and not only come up with the rankings list, they also identify industry trends and best practices.”

Areas of Opportunity

One of the main takeaways from the study is there’s plenty of room for improvement—even for the companies that ranked in the top ten.

“Everybody across the board has something that can be fine-tuned,” Kositkze said. “These are opportunities to drive additional revenue. It could be the placement of cards  or making the most of the fact that 9 out of 10 people are buying other gifts are the same time they’re buying gift cards. That’s a perfect chance to build loyalty¹.”

The report found several common denominators among the bottom 20 companies. For one, they were less likely to sell cards across all their devices and channels. Lower-ranked companies were also less likely to support gift card purchases in their app, which is a missed opportunity with younger users especially. But that wasn’t the only issue.

“The most concerning thing with the bottom 20, in some cases the assessors just were not able to fulfill the purchase,” Kositzke said. “They tried several times, probably more times than a customer would, and it doesn’t go through. ”

Issues in the gift card experience can be costly because it can be a customers’ first impression of a company.

“A gift card often kicks off a customer’s relationship with your brand,” Hirschfield said. “It’s a challenging, but also an amazing opportunity, because many times the gift card leads to additional purchases of both your material items and more gift cards.”

Best Practices of Top Performers

One of the key differentiators for the top performers in the benchmark report was a dedicated gifting section on their website and app.

“All the top-performing brands had a clear path to gift cards,” Spidaliere said. “It was clear what customers needed to do, how to personalize, all the ways they could buy the card. The best-performing brands promoted their cards on multiple places on their site, and marketed their program outside of the website and app.”

Top-tier gift programs used social media and emails to attract new customers. Those merchants  also found innovative ways to offer personalization, like giving buyers the ability to upload a photo or video to accompany the card. Top-ranked programs also connected their gift card programs to their loyalty programs to incentivize gift card purchases.

“The recommendation here is to get creative,” Spidaliere said. “Align your promotions to what’s most important to your brand. The top performers had recipient experiences that were really thoughtful and considered both the recipient and the buyer. What’s meaningful to your customers? For instance, you could consider a partnership with other brands that are important to your customers and produce a co-branded promotion that leverages both audiences.”

Key Takeaways

The 2024 evaluation offers clear takeaways merchants can use to identify untapped opportunities for their gift card program –

Companies should continuously strive to raise awareness of their program, prioritize creating an optimal customer experience with a mobile-first approach, and consider offering options for gift card personalization.

Integrating loyalty programs with gift card programs is another best practice. Companies should explore opportunities to sell and redeem gift cards across all customer touchpoints.  A great gift card program also requires the ability to detect and prevent fraud `, often requiring a partnership with a third-party expert.

Finally, functionality should be the top priority. Companies should regularly evaluate their gift card programs through the eyes of the customer to ensure seamless processes. This approach not only ensures efficiency but also helps identify opportunities for improvement and ways to differentiate the program. Company websites should include site search keywords that make it easier for customers to find gift cards.

“Gift cards pay off,” Hirschfield said. “It’s an easy and low-cost way to turn someone from a stranger to your business into not only a loyal consumer, but an advocate for your brand.”

Source: ^1. BHN EQ Global Spring Gifting Study, n=2,019 US consumers 18+, Feb 2024

Learn more about  this year’s Benchmark Report: 2024 Digital Gift Card Leaders, conducted by NAPCO Research in partnership with BHN.

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In the past twelve months, the landscape of consumer spending has witnessed a notable shift towards prepaid cards, reflecting broader economic trends and evolving consumer preferences. This surge in popularity has not only reshaped the way people manage their finances but also highlighted the diverse uses of these financial tools. From budgeting and gift-giving to online transactions and travel, prepaid cards have carved a niche as a versatile and accessible option for a wide array of users.

Don’t miss another episode of Truth In Data! Click on the red bell in the lower-left of your screen to receive notifications as soon as the episode publishes.

Data for today’s episode is provided by Javelin Strategy & Research’s Report:2024 Prepaid Card Data Book

Top 5 Prepaid Cards Purchased, Reloaded or Received in Past 12 Months

• 72% – Retailer-specific gift card
• 42% – General-purpose non-reloadable prepaid card
• 29% – General-purpose reloadable prepaid card
• 17% – Gas prepaid card
• 11% – Phone prepaid card

Source: Javelin Strategy & Research

About Report

Open-loop and closed-loop prepaid segments have stabilized after periods of economic uncertainty, and many have had gains even as counter products to inflationary pressure. Into 2024, we expect stable short- and long-term growth potential. The immediate impact in most segments will track closely to our projected compounded growth rates, with most segments tracking between 5% and 7% growth in 2024 and a total industry CAGR of 7% through 2027. 

Business and consumer segments are emerging into a new and more stable overall environment. The past year highlighted that economic, political, and market forces have different impacts on various segments while allowing for an overall steady state in the broad prepaid market. This gives the industry the ability to plan accordingly to ensure continued growth and immediately maximize the specific segments that have the most short-term potential. 

Specific areas that will have a particular short-term lift include business and corporate prepaid, such as incentives, with estimated year-over-year growth of 12%, retail gift cards at 7%, and open-loop general-purpose cards at 7%. Products tied to cost-of-living adjustments will likely see less immediate growth, with a specific impact on government prepaid programs such as Social Security, nutritional assistance, and Temporary Assistance for Needy Families, all with an estimated 2024 growth of 3%, which comes in slightly lower than the 2027 CAGR of 4%.

The post What Prepaid Cards Dominate the Market? appeared first on PaymentsJournal.

Though most people still refer to prepaid products as gift cards, that term has almost become a misnomer in today’s payments industry. Prepaid cards do so much more than carry gifts—not just for consumers but also for issuers. Savvy businesses use them to drive more consumer spending while increasing brand loyalty. 

To that end, Fiserv recently worked with Javelin Strategy & Research on a survey of more than 500 buyers in the incentives area to find out what’s driving their purposes. The survey provided a jumping-off point for a recent PaymentsJournal podcast with Tom Niedbalski, Vice President, Global Sales and Partnerships at Fiserv, and Jordan Hirschfield, Director of Prepaid Advisory Services with Javelin Strategy & Research.

The survey was conducted from the buyer’s perspective rather than that of the consumer. Javelin spoke with individuals who are buying incentives for purchasers of their brands, spanning a wide variety of companies, each with revenue of $20 million or more. Their responses provided an incisive look at what the benefits these buyers are seeking in an incentive. 

Seeing the Buyers’ Side

Javelin’s research has shown that loyalty programs and rebates are highly beneficial for building long-term relationships. This can have a significant impact on customer retention but can also improve the efficiency of onboarding new customers as well.  

“It’s expensive to acquire a new customer, but these incentives had a very material impact on lowering acquisition costs and subsequently on improving customer retention,” Hirschfield said. “With so many useful benefits of offering an incentive to a consumer, you can have a material impact on your bottom line.” 

Despite a reliance on physical gift cards, the shift to digital formats is going strong, consumers by and large prefer digital, and the research shows that the balance is continuing to shift that way.  On the buyer side, people are still purchasing incentives by going to physical stores and buying hundreds of gift cards. They don’t seem to realize they could be doing this through a relationship with a provider in an easier distribution model that can save on costs. 

On the consumer side as well, retail purchases remain popular. There’s an opportunity here to bring in a provider and transition those purchases to a digital distribution method. That can be easier for the buyer and can foster a positive ongoing relationship with consumers or employees. It tells the employee “we value you.” 

“Many buyers do not realize that there can be an economic benefit to buy through an aggregator, or through a brand’s website,” Niedbalski said. “In many cases, they will not only get a discount for that purchase but also build a strategic relationship with the brand, where there could be additional cobranded opportunities and synergies for the two companies to leverage.” 

Consumers Are Controlling Digital

According to the research, 40% of consumers will receive some sort of incentive this year. 

“When we look on the buyer side for the B2B side of the equation as opposed to the B2C side, that’s where the digital’s coming in,” Hirschfield said. “On the buyer side, 60% of purchases are digital, which makes sense, because around 70% of the recipients prefer that.” 

But the survey found that 39% of buyers are still giving out physical cards, even though 46% of them preferred digital. On the consumer side, the individual will control that relationship. 

Niedbalski noted that Fiserv is seeing use cases evolve because digital enables integration into various distribution vehicles. “Brands are now using this platform not only for loyalty but for rebates, for warranties, for specific product couponing, and for customer appeasement,” he said. “And of course you’ve got the foundation of a giftable program as well, where the card just remains a gift.”

Everything’s Digital

Everything seems to be moving to a digital format, whether it’s credit cards, library cards, gift cards, or loyalty cards. Wallets, like George Costanza’s in the famous Seinfeld episode, have gotten too stretched to carry around those cards in a physical format. 

“But even our digital wallets are also starting to get overcrowded in some sense,” Niedbalski said. “With Google Wallet and Apple Wallet, we’re seeing a lot more brands invest in their own vaulting solutions. They’re creating branded apps to drive consumer engagement. The convergence of all their payments along with their loyalty programs into a branded wallet could prove to be a pivotal point for adoption of digital both at the consumer level as well as the merchant level.”

Since the pandemic, brands have reprioritized their consumer engagement model. Although they still want foot traffic in their stores, they’re seeing a lot more traffic outside of their stores, whether it’s via curbside drive-through, delivery, or online shopping. How do you maintain personal engagement with a consumer virtually? 

Many brands are dealing with this by bringing the in-store experience into a mobile environment. “They need to provide enough value within their app to keep the customer clicking that icon on their mobile phone,” Niedbalski said. “A lot of these use cases are being integrated in a way that makes it easy for brands to connect with their buyers and with their consumers.  Along the way, it’s driving convenience and value.”

A virtual card has another value over a physical card: It is easier to use, even in impromptu shopping situations. “I’ve got a stack of probably 20 to 30 gift cards sitting at home on my on my office desk,” Niedbalski said. “Some of those gift cards are 20 years old and still have value on them. I’ve never redeemed them because I’ve got too many cards. I can’t carry these around with me every day. With digital, you are able to access your gift cards on demand anywhere, anytime, which helps drive that redemption of those gift cards.”

In modern society, our phones are always with us, which means that our digital wallets are always with us. For many people, their phone is their wallet. “Last week I was traveling, and when I got to the airport, I realized I forgot my wallet at home,” Niedbalski said. “I had no credit cards, no driver’s license, and I’m already trying to figure out how to get through airport security without an ID. Luckily, I was able to pull up my driver’s license through the DMV app for California. I was able to pay for my hotel and my meals using my Apple wallet and the credit cards that I had stored in there. Airline tickets, hotel reservations, loyalty programs, everything I needed was there. I would panic more not having my phone than not having my wallet.”

Learn More About Fiserv Stored Value and Loyalty.

The post The New Strategies Driving Digital Gift Cards appeared first on PaymentsJournal.

Recipients of government program funds prefer not to receive checks, according to data from Morning Consult on behalf of Visa. Over two-thirds of U.S. adults have received monetary disbursements from the federal government, with the majority opting for  direct deposit as their preferred method of payment.

Three-quarters of those surveyed said they currently receive payments via direct deposit, and an even higher percentage (80%) expressed a preference for it. Meanwhile, the use of checks shows the opposite effect. While 23% of recipients have received government benefits through checks or vouchers, only 13% prefer to get their funds that way.

The survey drilled down on the reasons behind this preference, uncovering various challenges associated with receiving payments via checks. A majority of respondents said it took a long time to receive a check.  More than half (52%) who received funds through a check or voucher reported waiting four weeks or longer for their payment, with 20% waiting more than eight weeks. 

Advantages of Prepaid Cards

Recipients of prepaid cards agreed on their convenience compared to checks. Respondents appreciated that a prepaid card was delivered faster, offered more flexibility, and was more secure.

In addition, more than half said they liked not having to visit a bank. The ability to avoid that was the second-most cited reason for preferring prepaid cards, just slightly trailing the ease of making online purchases with a card.

These preferences also resonate with the unbanked population. Two-thirds of unbanked respondents indicated a preference for receiving government-issued payments—including tax refunds, social security payments, unemployment benefits, disaster relief, and other types of government disbursements—in the form of a physical prepaid card or digital card over cash (24%) or check/voucher (18%).

A Long, Slow Process

The U.S government has set several goals toward moving away from checks, but progress has been gradual. The Bureau of the Fiscal Service set a target to decrease the number of checks printed from 49 million in FY 2021 to 44.1 million by FY 2023.

Meanwhile, the Australian government said it will phase out of checks by 2030. In the last decade, check use in Australia dropped by 90%.  

The post Even Recipients of Government Funds Are Trying to Move Away from Checks appeared first on PaymentsJournal.

The evolution of digital card management has given financial institutions new opportunities to cultivate enduring customer relationships. By making consumers’ lives more convenient and complimenting physical cards, so consumers have the options that work for their lives at a particular time, issuers can foster ease of use and brand loyalty, leading to decades-long relationships.  

In a recent PaymentsJournal podcast, Wesley Suter, Senior Director of Product Solutions at Fiserv, spoke with Elisa Tavilla, Director of Debit Advisory Services for Javelin Strategy & Research, about the future of digital cards. They discussed what strategies can make cardholders develop loyalty to their issuer—or lead them to end the relationship.

The Advantages of Digital Cards

Digital card management addresses two issues: Making it easier to do business with a financial institution and making consumers’ lives more convenient. The goal is to ensure that customers are more willing to use your card over a competing card in their wallet.

To understand where we are today, it helps to take a step back. During the COVID-19 era, many merchants amplified their touchless point-of-sale capabilities, and thus digital wallets such as Apple Pay and Google Pay became even more attractive.

“COVID accelerated consumers’ preferences toward the digital channel,” Tavilla said. “Our Javelin research has shown that consumers are using both credit and debit cards in digital and mobile wallets. And the expectations that consumers have, whether it’s in commerce or in online mobile banking, have trended more toward digital capabilities.”

In this digital environment, cardholders can handle most service issues more easily than calling into a call center or discussing their card relationship by going into an in-person branch.

Consider how information is more readily available with a tap of a finger: When you use Uber or Lyft, you can track the precise location of a vehicle. And when you order packages online, you can track every movement of the shipment—from the order confirmation to when the packages leave the warehouse to when they arrive on your doorstep—solely through your phone.

“I don’t necessarily walk out of the out of the house or out of the room with my wallet, but I always have my phone on me,” Suter said. “As we can drive more of that phone experience into the digital banking platforms that many financial institutions leverage, that’s going to create the adoption and loyalty that many issuers are looking for.”

Said Tavilla: “Just a few days ago, I left my house without my wallet, and it was an hour or two later that I realized I didn’t have it. If I had left my phone, I’d have realized that in two seconds. But I had my credit card and debit card loaded into a digital wallet, so I was able to make it through the rest of my evening without needing my physical wallet. I find that to be very convenient and a positive customer experience, and I’m sure I’m not the only customer who feels that way.”

Building Relationships

When it comes to digital card management, banks do not differentiate themselves based on the ability to activate a card or set a PIN. The focus should be on acquiring new relationships or leveraging newly onboarded customers for cross-selling opportunities at a later stage in the relationship.

“CardHub, the digital card management solution from Fiserv, handles all the other stuff while our issuers are really focused on that acquisition of new relationships,” Suter said. “We’re focused on deploying CardHub in a manner that makes it easy and convenient for a consumer but also drives that necessary relationship into all of those subscriptions, recurring payments, card-on-file merchants.”

“Let’s say Elisa opens up a Hulu account and puts her preferred payment to that relationship,” he said. “The likelihood for her to swap that out with a competing card is very, very low. How do we generate more of that type of card-on-file connectivity in relationships so that our card issuers are winning that default card position? That leads to customer loyalty and bringing the ideal customer experience through their entire journey.”

If FIs can get to a position where they can educate cardholders that a digital card is more secure and a more convenient checkout experience, they’re going to attract Apple Pay and Google Pay wallet experiences as a default.

Another factor involves the proprietary apps that every merchant built after the pandemic. How do you drive those interconnected relationships with in-app payment experiences? If FIs provide solutions to those with their own card portfolios, they’re going to win in the long term across debit and credit payments.

Helping Customers Solve Their Problems

If consumers lose their physical card, they can call and ask for a replacement that could be sent traditionally through the mail. But it’s not instant. With digital issuance, FIs can replace that card and have it in the customer’s phone or hand in minutes. That ensures a continuous, seamless experience that allows the customer to keep using the card as top of wallet. That’s important because lag time could cause customers to use a different mode of payment.

The most sensitive chapters in the relationship between a cardholder and the card issuer are those disruption events when the customer has to replace the card or get a new PIN. That’s a vulnerable position for the consumer because if a replacement card isn’t received quickly, they’re likely to move on to a different form of payment—perhaps a competitive card in their wallet.

“If I’m a debit card holder, I’m doing 25 transactions on average per month,” Suter said. “So you do not want to miss that gap where there is a disruption.”

The post FIs Are Building Long-Lasting Relationships Through Digital Card Programs appeared first on PaymentsJournal.

The largest driver of the commercial prepaid market in future years will likely be employee benefits like health savings accounts (HSAs) and flexible spending accounts (FSAs).

The incentives for employees and the organizations they work for are aligned with these programs and bolstered by legislative policy, says Jordan Hirschfield, Director of Prepaid Payments for Javelin Strategy & Research in his new study, 2024 State of the Industry: Commercial Prepaid Cards.

After wild pandemic-related fluctuations, the commercial prepaid market stabilized in 2022. Ever since, it has shown a positive but moderate outlook, with no single area providing a compounded annual growth rate above 9%. Most prepaid commercial segments have been hovering just above inflationary growth, putting the whole of the market at a CAGR of 4%.

Overall, Hirschfield expects that moderate growth to continue for this category in coming years. But there may be an increased opportunity for non-governmental products such as employee and health incentives in open-loop and closed-loop networks.

A Benefit for Employees and Employers

As high-deductible health care plans become more popular, HSAs provide several benefits for employers.

“Those are enormous programs that are growing at substantial increases,” Hirschfield said. “Much of that is driven that is by the government continuing to raise the spending limits, because they want to encourage growth. I think we’ll continue to see legislative actions that increase these limits.”

There are also significant tax benefits to FSAs and HSAs, which generally are considered pre-tax benefits. As federal tax policy encourages consumers to use those accounts and their affiliated cards more, the buyer, which in this case is the employer, is encouraged to invest in these programs.

One key difference to keep in mind is that FSA deposits are “use it or lose it” each year. They tend to get more traction toward the end of the year as consumers are focused on redeeming their benefit. HSA cards, on the other hand, don’t expire. They represent a long-term, tax-advantaged method that allows users to be prepared for sizable medical expenses or to pay for expensive medications. That’s especially valuable for consumers with health insurance that comes with high deductibles.

“With consumers starting to see the benefits and employers pushing high-deductible health care plans, it’s a huge growth opportunity,” Hirschfield said. “It’s the benefit that employers want to push, and thus it’s the benefit that the consumer needs to utilize to maximize their employer-provided healthcare plans. It just requires some education to the end user.”

Although employee incentive programs made up only 14% of the total value of the commercial prepaid market in 2023, Hirschfield said that they are growing at about twice the rate of the overall market. Employers can see a direct effect on employee morale, and businesses can provide custom opportunities to connect with their customers or clients.

“Incentives are not just one of the leading growth areas for commercial purchases, but they are probably the best way to engage the individual end user,” Hirschfield said. “When you have free money in your pocket, in your mind, you’re going to treat yourself. Employers are seeing better results in terms of employee satisfaction from incentive programs, and consumer brands understand that incentive programs result in consumers spending more money with them, often buying more expensive items. An incentive program encourages upward spending in a crowded consumer spending environment.”

A Significant Role for Government

Governments retain an outsized portion of the prepaid market, especially in the closed-loop environment. The growth rates for these programs will always be tied to trends in government spending. During the pandemic, for instance, those growth rates soared.

In areas like nutritional assistance, a closed-loop government program that provides for grocery shopping, there will probably be a reliance on prepaid for the foreseeable future. The growth rate will always be determined to a certain extent by how many people are eligible and increases in the cost of living. But the sector also represents an incredibly stable environment for the prepaid providers.

“What we’ll see in the government spending is not necessarily increases in how much money people are getting, but rather enhancements to how the programs are executed,” Hirschfield said. “We’re seeing some government programs that are being digitized, where recipients are getting virtual cards. That gives people  the ability to put that card in their mobile wallet.  These developments need to keep up in order to allow the market to be as useful as possible.

“That’s where the growth is going to come from. It’s not necessarily from the amount going up. It’s how these cards are utilized and whether they can continue to catch up to the market environment.”

The post HSAs and FSAs Will Fuel the Growth of Prepaid Cards appeared first on PaymentsJournal.

You’re given a gift card, but when you attempt to use it, you find it has zero balance. While you might be the butt of a bad joke, you and the card’s purchaser could be the victims of an increasingly prevalent form of gift card fraud called “card draining.”

Bad actors visit retailers and pilfer gift cards. They remove the packaging to access the card’s number and pin, which they either record or alter. Then they repackage the gift card and return it to the rack. When the card is legitimately purchased and loaded, fraudsters can easily siphon off the funds.

Initially considered to be a small-scale problem, card draining scams have spiraled into an epidemic that has drawn the attention of federal law enforcement. The U.S. Department of Homeland Security just launched a massive operation targeting a card draining ring with ties to Chinese organized crime. In the past 18 months, the Homeland Security task force has arrested 100 individuals involved in card draining. The agent in charge of the task force, Adam Parks, estimates there are still another 1,000 people involved. Parks speculated that scammers have drained hundreds of millions of dollars to date.

A Change in Regulations

As hard as it is to apprehend card drainers, it can be even harder to prosecute them. Jordan Hirschfield, Director of Prepaid for Javelin Strategy and Research, discussed those difficulties in his recent report, Mitigating Risk in Prepaid Card Programs. “Federal authorities utilize any existing statutes they can to investigate and prosecute organized criminal rings,” he noted. “These statutes are often adjacent to the actual payments, and fall under unauthorized computer access, once balances are drained online.”

That lack of relevant statutes is another stumbling block to shutting down card draining schemes.

A Steep Cost

One victory for the Homeland Security team came in late 2023, when a Canadian man was convicted for running a card draining scheme valued at $22 million. While it was a win for law enforcement, it underscores the massive dollar amounts card scammers have been able to drain.

Gift card fraud impacts both companies and consumers. Target leadership estimated that $300 million has been stolen from its customers in card draining scams. Walmart and Apple have both been sued after customers found their gift cards drained. Apple agreed to a $1.8 million settlement in January after a class-action lawsuit.

“Moving forward, regulations should be updated to reflect the technological advances of prepaid cards, both physical and digital, to keep up with criminal activity,” Hirschfield noted.

The post Gift Card Draining Scams Cost Users Millions appeared first on PaymentsJournal.

In the swiftly evolving landscape of digital payments, mobile wallets have emerged as a cornerstone for transactions, offering users unprecedented ease, security, and speed. These digital vaults not only streamline purchases but also serve as hubs for loyalty rewards, tickets, and coupons, melding the physical and digital realms of commerce. Yet, the foundation of their functionality—the methods consumers use to fund these wallets—varies widely and plays a pivotal role in their adoption and usage. From direct bank transfers and linkages to credit and debit cards, to more innovative approaches like linking loyalty points or even cryptocurrency accounts, the ways in which users can fuel their mobile wallets are expanding.

Don’t miss another episode of Truth In Data! Click on the red bell in the lower-left of your screen to receive notifications as soon as the episode publishes.

Data for today’s episode is provided by Javelin Strategy & Research’s Report: Incentivizing Consumers Toward Debit Payments with Rewards

Top 5 Methods Consumers Use to Fund Mobile Wallets

• 65% of consumers use debit card to fund mobile wallet.
• 53% of consumers use credit card to fund mobile wallet.
• 36% of consumers use the balance within the app to fund mobile wallet.
• 26% of consumers use direct debit from a bank account to fund mobile wallet.
• 16% use prepaid card to fund mobile wallet.

Source: Javelin Strategy North American PaymentsInsights, July 2023

About Report

Consumers increasingly use debit cards for various payments. Most consumers regularly pay for everyday purchases and bills with debit cards across physical and online channels. Rewards can help expand debit card spending to other categories. Always cost-conscious, consumers seek rewards that can lower their overall cost. Cashback is the most appealing incentive.

Many issuers have shifted their focus from debit card rewards to value-added features. Most large issuers do not offer debit card rewards but provide other checking account benefits. And with consumers buying more on mobile devices, issuers and retailers are collaborating to target e-commerce shoppers and drive transaction volumes. The opportunity is large.

The post How Are Consumers Funding Mobile Wallets? appeared first on PaymentsJournal.

The next big development for the gift card industry could well be online gaming. While retail and dining continue to dominate as the top two categories for gift cards, online gaming has emerged as a solid third contender and is poised for further growth. The vast majority of consumers who bought their first online cards this year said they plan to do more in this space.

That’s according to Clover’s Q1 Gift Card Gauge survey, which polled 1,000 U.S. consumers on their gift card purchasing patterns. Clover is the point-of-sale and business management platform from Fiserv.

Key Findings

In 2023, nearly a third of respondents bought gaming gift cards, surpassing both the health & wellness (25%) and hospitality (21%) industries for the first time. What’s more, a whopping 84% of those who bought online gaming gift cards for the first time last year said they plan to do so again.

The online gaming market seemed to reach an inflection point during the pandemic, particularly as many Americans began working from home. Gift card spending on gaming increased in both 2019 and 2020, with consumers who bought gaming gift cards purchasing 70% more gift cards per quarter compared to the previous year.

Retail stores and restaurants remain the most popular areas in this space, with 57% and 52% of respondents purchasing gift cards in these categories, respectively.  

Marking Milestones

Clover’s survey confirms that milestone events remain the biggest driver of gift card purchases. It revealed that 56% of consumers are planning to purchase a card in 2024 for milestone events. The most frequently cited events include weddings (36%), anniversaries (35%), and new family additions (31%).

The survey also found that digital wallets are an increasingly popular option, with 60% of respondents saying they plan to use them more in 2024. “The growth in digital wallets remains incredibly important given the industry and consumer trends,” said Jordan Hirschfield, Director, Prepaid Payments for Javelin Strategy & Research. “At Javelin we see a significant growth in moving from physical cards to digital cards, resulting in the market moving from 30% digital currently to 50% by the end of the decade.”

One counterintuitive result from the study was that consumers were slightly more likely to forget about using the balance on a virtual card than they are on a traditional one. While 41% of respondents said they had forgotten about a physical card, 39% said the same about a virtual card.

Hirschfield notes that there is an upside to this for the card issuers. “Unused balances highlight the opportunity to use balances and self-use stored-value accounts as constant touch points with consumers,” he said. “These allow for cyclical investment in prepaid stored-value accounts that rise from forgotten balances to revolving, loyal use items.” 

The post Online Gaming Is Driving the Gift Card Spend appeared first on PaymentsJournal.

Receiving gift cards spurs consumers to make purchases of higher value, exceeding the card’s initial worth. That’s one key finding from the State of the Nation 2024 research conducted by the UK’s Gift Card & Voucher Association (GCVA) and Global Data, further affirming the notion that gift cards encourage shoppers to spend more money.

The study reveals that more than two-thirds (68%) of respondents who redeemed their cards in the past 12 months ended up spending more than the card’s value. Specifically, 43% spent an average of £10 beyond the £30value of the gift card, an increase of 33%.

These gift card spending patterns have also taken hold in the U.S.

“The data that GVCA has collected on spending aligns with data Javelin collects in our annual survey of U.S. consumers,” said Jordan Hirschfield, Director of Prepaid in Javelin Strategy & Research. “Javelin shows that not only will card spending result in increased spend and splurges, but will also help draw consumers back into retail locations. The power of retail gift cards creates this triple threat of additional spending, more profitable spending and increased traffic.”

Bigger Spending Among the Young

The GCVA study broke down gift card spending patterns across different generations. Millennials ranked at the head of the pack when it comes to surpassing the value of their cards. Within this cohort, 36% spent an average of £10 more than the card’s value, while 34% spent at least an additional £30. The desire to spend beyond the card’s value was lowest among Baby Boomers, with only 17% of this group spending an additional £30 or more. Gen Z fell somewhat in the middle, with 24% making additional purchases.

This tracks with earlier findings that younger generations are more receptive to gift cards. Javelin research has found that among Gen Z and millennials, 20% of their total populations intended to buy more cards than they had in the previous 12 months. Only 9% and 6% of those in Gex X and Baby Boomer generations, respectively, intended to purchase more.

The post Gift Cards Lead to Even More Consumer Spending appeared first on PaymentsJournal.

In the evolving landscape of personal finance, reloadable prepaid cards are emerging as a pivotal tool for consumers seeking flexibility, security, and control over their spending. As these products gain popularity, understanding the likelihood of consumers to adopt reloadable prepaid cards becomes crucial for financial institutions, retailers, and fintech companies aiming to meet the changing needs of the market.

Don’t miss another episode of Truth In Data! Click on the red bell in the lower-left of your screen to receive notifications as soon as the episode publishes.

Data for today’s episode is provided by Javelin Strategy & Research’s Report: 20th Annual U.S. Open-Loop Prepaid Card Market Forecast, 2023-2027

In the next 12 months, do you intend to purchase more or less reloadable prepaid card products?

• More likely to purchase: 21%
• Purchases will stay the same: 35%
• Less likely to purchase: 16%
• Will not purchase any reloadable prepaid cards: 16%
• Don’t know: 11%

Source: Javelin Strategy & Research

About Report

Javelin Strategy & Research continues its annual series on market trends with this focus on the open-loop prepaid market. Javelin forecasts strong and steady growth in the open-loop prepaid ecosystem, with the largest segments, general-purpose open-loop gift and financial services cards, trending strongly to drive the overall market. Consistent with past years, economic conditions play a large role in the outlook of individual products, and trends will be graded against comparisons with overall economic activity. Regulatory advances and reduced inflationary pressure should help advance products such as benefit cards and general-purpose cards, which can offset higher-interest credit spending. Conversely, macro factors such as positive economic trends, reduced unemployment, and political division will slow products such as unemployment benefit cards and cards related to Temporary Assistance for Needy Families.

Javelin’s research indicates that American buyers have a positive outlook on the prepaid market as a whole, with strong usage and upward trends in intent to buy. The research highlights healthy spending patterns in prepaid cards as well as in the frequency of purchases.

The post Will You Purchase Reloadable Prepaid Cards? appeared first on PaymentsJournal.

The landscape of payment cards has witnessed significant shifts, reflecting broader changes in consumer preferences, technological advancements, and the evolving financial ecosystem. As individuals and businesses navigate through the complexities of the global economy, the types of payment cards used—ranging from traditional credit and debit cards to innovative digital wallets and prepaid cards—play a pivotal role in shaping purchasing behaviors.

Don’t miss another episode of Truth In Data! Click on the red bell in the lower-left of your screen to receive notifications as soon as the episode publishes.

Data for today’s episode is provided by Javelin Strategy & Research’s Report: 20th Annual U.S. Closed-Loop Prepaid Card Market Forecast, 2023-2027

Top 5 Payment Cards Used in 2023

• 82% – Major credit card usable anywhere
• 67% – Major debit card usable anywhere
• 37% – In-store gift card
• 33% – General prepaid gift card (non-reloadable)
• 32% – Store branded credit card

Source: Javelin Strategy & Research

About Report

With this report, Javelin Strategy & Research continues its annual series on market trends in the closed-loop prepaid market. In general, Javelin expects a stable environment for the prepaid ecosystem. Top categories such as in-store gifting should enjoy continued healthy growth, whereas other areas, such as transit, are strong but ripe for disruption. Economic conditions continue to make a large impact on overall market growth. Lessening budgetary and inflationary pressure should benefit the areas of consumer choice but inhibit the growth of items that depend on cost-of-living adjustments. Products such as campus cards and tolling will continue to rebound from the 2020-21 pandemic era.

Consumer sentiments remain positive overall, with American buyers showing strong belief in the closed-loop market. Javelin research highlights healthy spending patterns in prepaid cards as well as the frequency of purchases, with a prime opportunity to capitalize on consumers’ willingness to purchase more prepaid cards in the coming year.

The post What Payment Cards Have Been Used the Most? appeared first on PaymentsJournal.

In a move that solidifies the importance of the commercial prepaid space and the continuing shifts to digital platforms and payments, Blackhawk Network announced its intended acquisition of Tango Card, a pioneer in the digital incentives space. BHN CEO and President Talbott Roche noted the existing partnership when announcing the purchase:

“‘Tango pioneered the digital-first reward experience through its powerful API, coupled with world-class service and exceptional breadth of global content, making it the perfect complement to BHN’s global product portfolio,’ said Talbott Roche, CEO & president, BHN. ‘We have been a longtime partner to Tango and were also an early investor. We are thrilled with the opportunity to combine the best of BHN with the best of Tango to provide leading, global, scalable solutions and innovation to the rewards and incentives industry.’”

The move comes as the two pillars of Tango’s business model—incentives and digital—factor into significant growth areas in the prepaid market. BHN, which already had invested considerably in digital channels at the consumer and bulk levels, signifies to the market that continued investments in digital products will drive future business. This is consistent with Javelin’s 2024 Trends & Predictions: Prepaid Payments report, which predicted a movement to from the current approximate 70/30 physical; to digital split to an eventual 50/50 split by the end of the current decade.

While some of the movement comes from the need to be more environmentally conscious and decrease the use of plastics, the larger opportunity come from the buyer and user opportunity to digitize as much of the experience as possible. Focusing on digital card programs feeds into the growing consumer classes, led by digitally native consumer and creates other implicit benefits for sponsoring programs and consumers. As an incentive, a digital card eases the distribution to multiple recipients and also creates a better relationship between the end recipient, the incentive giver and the incentive card itself. For instance, a digital card attached to a loyalty program creates a linked relationship between both parties, allowing for better promotion, rewards, and messaging rather than a simple anonymous transaction. This remains true for gifts and self-use.

The combination of BHN and Tango also signifies the growth opportunity in the incentives market. The press release highlighted Tango’s 800% growth since equity investor FTV Capital invested in 2018. Javelin shares in the belief of continued incentive market growth. Both closed-loop and open-loop incentive markets shine as growth engines in the industry. The Javelin Prepaid Practice will provide more details in the upcoming U.S. Commercial Prepaid Market Forecast in February. Javelin believes that both consumer and employee incentives show better than average growth opportunities, with slightly better growth rates for consumer incentives as the employment marketplace continues to recon with economic challenges and functional issues such as return-to-office.

The post Blackhawk Network Agrees to Acquire Tango Card appeared first on PaymentsJournal.

Anthony Anton and Rachel Smith, presidents of the Washington Hospitality Association and the Seattle Metropolitan Chamber of Commerce, respectively, responded to potential escheatment legislation that would impose stringent three-year limits before the state would escheat unused funds.

The business interest association leaders described their opposition in an op/ed in the Seattle Times commenting on Washington’s already consumer favorable gift card regulations:

“Current gift card law in Washington is among the most consumer-friendly in the nation — and has been for two decades. In the early 2000s, the Legislature unanimously passed a bill that our Democratic government signed into law guaranteeing that gift cards would never expire, that government would never seize gift card balances as “unclaimed property,” and that there would be no fees to buy or use them.”

The business organizations believe that the escheatment regulations would be punitive not only to the business that would need to work out new policies for compliance, but also to consumers who could see the value of misplaced or otherwise unused cards disappear. They also point out that in order to protect value for the end consumer, individuals would be forced to provide contact information to register gift cards, an unlikely scenario for many cards, especially lower-value cards.

The article also points out the difference between accounting for breakage of unused funds and the reality that even after absorbing the income through breakage, retailers must still honor the value of the unused card, due to the lack of an expiration date. As Anton and Smith noted:

“If you received a home improvement store gift card 15 years ago on your wedding day and found it in your garage yesterday, it can still be used to help pay for your teenager’s room makeover project tomorrow.”

The accounting function of breakage operates completely separately for the recognition of gift card value. Any new income received in the scenario Anton and Smith exemplify would reduce the amount of breakage recognized in that future year. The sponsoring retailer would not earn any additional income and the consumer, already protected by the previous legislation removing expiration dates, received full value of their gift. In addition, the sponsoring retailer would continue to incur the costs of managing gift card programs, which they see as a solid investment. These costs include program management fees, third-party retail discounts, technology investments and other potential expenses.

The continued growth of retail gift cards, which Javelin projects in our 20th Annual U.S. Closed-Loop Prepaid Card Market Forecast, 2023-2027 to grow at a compounded growth rate of 8% through 2027. Retail gift cards represent both the largest closed-loop segment with more than half of annual load value across all segments as well one of the strongest growing segments, validating the costs incurred.

The post Washington Business Leaders Respond to Potential Escheatment Legislation appeared first on PaymentsJournal.

Shell is facing a class action lawsuit in California, alleging its gas stations have charged customers using a prepaid Shell gift card the credit card price instead of the cash price. What the suit really asks is, are prepaid cards more akin to cash, or more akin to credit cards?

It is understandable that consumers might not see any difference between a gift card and cash. The California civil code requires that any gift card sold after January 1, 1997, can be redeemed for its cash value—and the law also stipulates that a gift card cannot contain a service fee.  California also requires that a gift certificate with a cash value of less than $10 is redeemable for cash.

Given that, the lawsuit claims that gift cards should be valid for the cash price at Shell gas stations. But the extra charges that some gas stations incur aren’t result of the “credit” part of the equation. They’re a result of the “card” part.

Swiping any type of card, whether it’s credit debit or prepaid, will always cost merchants extra. The cash discount arises from merchants trying to avoid those interchange fees. While the fees may be lower for debit or prepaid transactions, the station still has to pay them.

Other States Have Made This Clear

Other states have dealt with this issue more directly than California has. New Jersey law, for instance, states that a “retail dealer may sell similar fuels at different prices to cash and credit customers.” It also requires a “conspicuous sign … posting the price per gallon (or per gallon and per liter) reduction for cash purchases of fuels.”

A spokesperson for New Jersey Consumer Affairs clarified this practice to a reporter for NJ. Com. “Retailers often do not distinguish between debit or credit card purchases due to similar transactional processing fees, and therefore charge the credit card price on all such transactions,” she said. “N.J.A.C. 18:19-2.7 does not prohibit that practice.”

On the other hand, gas stations may benefit from a little sleight of hand in this area. Researchers have long known that issuers tend to see greater sales in stores where gift card purchases are eligible for rewards programs. In the specific case of Shell, holders of their credit cards also earn an immediate discount at the pump.

Customers may perceive that the stations are encouraging them to use gift cards, as opposed to cash. And given the consumer-friendly regulatory environment in California, it’s impossible to say the suit will fail. In the meantime, though, retailers that offer discounts for cash may wish to emphasize that it’s not credit cards that cost more—it’s cards of any kind.

The post Shell Lawsuit Asks: Is a Gift Card the Same as Cash? appeared first on PaymentsJournal.

Disbursing funds in an efficient and accessible way is critical to a good customer experience. But new economic realities and mobile adoption have challenged organizations to evolve how they pay to meet consumer demands.

In a recent PaymentsJournal podcast, two experts from Blackhawk Network, Sarah Kositzke, Director of Research, and Scott Lapp, Director of Product Marketing and Incentives, along with Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research, discussed the latest research on consumer payments preferences. The conversation focused on Blackhawk’s research into business-to-consumer disbursements.   

Defining the Terms

Disbursements are typically issued when a customer is owed a credit or refund. Examples include a property management company returning a security deposit, or an airline handing out compensation because a flight was canceled. Blackhawk wanted to better understand customers’ payment preferences, specifically in terms of their banking classification —whether unbanked, underbanked, or fully banked.

According to the FDIC¹, the fully banked—representing 80% of U.S. households—have established relationships with banks and use them for all types of services. About 5% of U.S. households are unbanked, meaning they do not have any established relationship with a bank. The remaining households are underbanked: They have a checking and/or savings account with a bank but also leverage other nonbank transactions, like those through rent-to-own services, payday loans, pawn shop loans, and tax refund anticipation loans. They are likely to be 34 and under, Black or Hispanic, have a high school education or less, and have a household income of $50,000 or less.  

Strong Feelings About Printed Checks

One of the strongest results from Blackhawk’s research was consumers’ antipathy toward physical checks. Nearly three-quarters of those in unbanked and underbanked households said they were frustrated by receiving a paper check. But nearly half (48%) of the fully banked households are also frustrated by receiving a paper check.   

Much of the frustration around checks is that they are a small but real burden.. “Even to deposit a check via mobile phone, you have to set aside time to do that,” Lapp said. “If you’re not using mobile banking, then you have to find a bank or an ATM. Sometimes the person needs to go to the issuing bank, and if there is no local branch, they may have to go to a check-cashing place, which means paying check-cashing fees. And depending on the size of the disbursement, there can be a hold time on those funds.”

According to Hirschfield, Javelin’s research shows that 92% of adults have a checking account. “But even with those checking accounts, most of the money is moved in a card-based or digital format,” Hirschfield said. “Even as they’re making payments, not just receiving payments, they want to use a non-paper-based method.”

Payments You Can Feel Good About

People are most excited about disbursement payments that are flexible and convenient—and that encourage them to splurge. The most popular methods include physical and digital gift cards; payments through vehicles like Venmo, PayPal, and Cash App; or directly deposited funds. 

“We asked people about their ‘emotional payment connections,’ which is not something usually under consideration when sending a payment,” Kositzke said. “When selecting a physical or digital prepaid card from Visa or Mastercard, or a merchant gift card, these are viewed as treats that allow people to splurge on things they want. It’s splurging for the new dress, shoes, books, a night out. Other payment types, like a paper check, direct deposit, Venmo or Cash App were seen as a way to pay for things they need, like rent.”

Blackhawk found that gift card recipients often plan to spend more than the value of the gift card. If they receive a card valued at $50, on average they will spend nearly $60 beyond the value. If they receive a card valued at $500, they will spend slightly more than $100 beyond the value on the card.

“We agree from our own research that gift cards prompt additional spending,” Hirschfield said. “About 40% of consumers will generally spend more than they typically would when using a gift card, and 25% will generally purchase a more expensive item than they normally purchase.” 

Physical or Digital

Blackhawk also asked customers whether they preferred a physical or digital disbursement. Fully banked customers split 50-50 on whether they would prefer a physical payment, but two-thirds of the unbanked and underbanked respondents preferred digital delivery. If the value of the payment is close to or more than $200, most people prefer digital delivery. Javelin’s research shows that although volumes are significantly lower on digital cards, which make up 28% of all cards, the average load values are significantly higher, at $115 versus $95 for physical cards. 

The least desired form of disbursement, according to Blackhawk’s research, is a bill credit. Bill credits are often viewed as simply a way to pay for things. If the person is not paying close attention to the monthly statement or credit card bill, the credit may not even be noticed.  

People were also surprisingly open to sacrificing some of the funds to receive their payment faster, especially among the underbanked population. Nearly a third of underbanked people were willing to give up between 1% and 3% of that payment to receive it faster. The fully banked were less enthusiastic, but 13% were willing to sacrifice at least 1% of those funds to get it faster.

Key Takeaways

Behavioral factors should never be dismissed by those working with disbursements. It’s critical to understand whether your payment is likely to be considered a reward or a treat, and those notions can be reinforced by issuing something like a prepaid gift card. People will likely splurge with that payment type, spending up to twice the card’s value.

It’s also important to consider the friction that printed checks cause, even for the fully banked. And keep in mind that bill credits are the least desired form of payment. “Emotional payment connections” may be largely overlooked factors in disbursements, but they can have a huge effect on how those payments are used once they are received.

¹Source: Federal Deposit Insurance Corporation (FDIC), 2021 FDIC National Survey of Unbanked and Under-banked Households (October 2022)

To learn more, download the eBook: B2C Payment Preferences: How people want to receive payments

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The post Digging Deep into Consumer Preferences for Disbursements appeared first on PaymentsJournal.

Retailers are learning that they can use prepaid cards as a personalized product, which opens up many opportunities for the issuers. That’s just one of the many trends Javelin Strategy & Research expects to unfold next year.

Gift cards are generally an anonymous product, but companies have learned that digitizing them can result in much more personalization. If issuers make a prepaid card digital, it can be the trigger point for much fuller engagement. Once you digitize that gift card, issuers can track where the funds are spent and what gets bought.

The Rise of Gift Cards

Retailers already know a lot about their customers through their loyalty accounts. They know if someone normally buys standard-priced items at Target but uses a gift card to buy a luxury item.

“People with gift cards often use them differently from standard payment methods,” said Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research and the author of the recent 2024 Trends and Predictions: Prepaid Payments report. “There’s a great deal of data that stores can glean from that.”

There’s a similar dynamic at play with prepaid cards that aren’t retail-related, such as health savings account (HSA) or flexible savings account (FSA) cards. Digitizing them allows the issuer to know where and when that money is being spent and get greater interaction with the card’s constituency.

Building on that user engagement is a trend that is likely to take off. Javelin’s research shows that a little less than 30% of prepaid cards are digital right now, but that figure is expected to rise to 50% by the end of the decade.

“Our recommendation is that when you use prepaid to engage your audience, give them the incentive to digitize it to make it a more personal tool,” Hirschfield said. “Let’s say you’re at your local drugstore to buy a greeting card and the gift cards are right there. Right now, it’s so easy to put the gift card into the greeting card, but I think we’ll see new ways to digitize that. You might have a code to scan and then enter a phone number and email address, but it’s not going to be a physical card.”

Digitizing also helps with safety and security issues. When a card is digitized, it becomes much easier to protect from many of the current theft and fraud issues. Digitized cards are susceptible to large-scale IT security issues, but physical cards fall victim to a range of criminal activity, including organized crime and petty theft.

For HSA and FSA and other non-gift prepaid cards, lost card replacement becomes less of an issue when they’re digitized. Issuers can also save on the physical cost of producing and mailing the cards.

California came very close to banning plastic retail gift cards this year, simply to cut down on the environmental impact of all that single-use plastic. The governor vetoed the measure, over concerns about how it would affect small businesses. But that type of legislation is likely to come back at some point. Future prepaid cards could be constructed out of recycled materials or cardboard, but no one wants to start producing different stock of gift cards for different states to comply with local laws. Digital cards make a lot more sense.

Taking Advantage of Shifting Liability

Another trend Javelin anticipates concerns the back-end, technical methods of how gift cards are used. When a gift card is purchased, a liability is created from the retailer’s perspective. Its accounting statements have to reflect that it has a certain number of unused gift cards, totaling a certain dollar amount, on the market.

These cards are a liability until they’re used, at which point the transaction turns them into revenue. Until then, a card is simply a promise to pay. Some upstart groups have been taking on that liability, selling the gift card and holding the liability as a third party. This allows the merchant to enjoy the revenue from the gift cards without carrying the liability, which lets them employ different financial planning strategies for those assets.

Distressed retailers may want to assure their customers that if they buy a gift card, it will still have value even if the stores go under. When Bed Bath & Beyond entered Chapter 11 bankruptcy, its gift cards were unsecured liabilities and one of the first things that got wiped away in the bankruptcy. They were worthless.

It offers a great deal of financial flexibility if a retailer can say another company holds that liability. If the company goes under, you can transfer that credit, in a sense, to another organization.

Multi-Retailer Cards

Multi-retailer cards, which present great marketing opportunities, are another growing trend.

“There could be a dinner-and-a-movie card, combining a movie theater chain with a restaurant chain, and the buyer can use it at both,” Hirschfield said. “These themed cards match the desire of both givers and receivers and gift cards. According to our research, givers of gift cards enjoy retail gift cards because it feels more personal.”

But receivers of gift cards want Visa and Mastercard gift cards because they want to choose what they use the cards for. These multi-brand cards offer a more personal gift for the giver and more choice for the recipient. Hirschfield expects the multi-brand cards to grow at a stronger pace than the regular cards.

Prepaid is a payment sector that is battle-tested through any kind of economy. Some are up and down depending on how the economy goes, but overall, Hirschfield sees a resilient set of products designed to withstand any kind of turmoil.

“People are worried that inflation is going to stop people from shopping, and that will impact gift cards,” Hirschfield said. “But we have found that both gift cards and general shopping habits aren’t affected by inflationary pressures. Most people spend that gift card within 30 days. There’s a fallacy that gift cards sit unused for months, but in general, our research shows that people are going to spend more than that gift card is worth within one month and generally in one visit.

“That stability is going to be a benefit to really across the payments infrastructure because people will be able to plan better. Combined with strategies like digitizing and creating better loyalty platforms, issuers can make sure that people do use their cards in a less anonymous way.”

The post Digitization and Multi-Brand Cards: Prepaid Trends to Watch in 2024 appeared first on PaymentsJournal.

Citizens Financial Group got a very favorable stock bump after unveiling its new eco-friendly Mastercard debit and ATM card this week. Given the existing pressures toward more environmentally-friendly cards, this could be the start of a larger trend.  

The card is made from 90% recycled PVC and carries the Mastercard sustainable card badge, reflecting its lower environmental impact in terms of energy, material consumption, and carbon footprint.

The response from Wall Street was immediate. Citizens Financial Group’s stock jumped 7.61% in a single day, ending a two-day losing streak.

Mastercard itself plans to produce all of its plastic payment cards using sustainable materials by 2028. This would include not just recycled PVC plastic as in the Citizens Financial card, but substances like Polylactic Acid and recycled Polyethylene terephthalate plastic as well.  

New Modes of Eco-Friendly Cards

The Citizens Financial card is the latest in a series of moves designed to make plastic less of a factor in the cards we carry. California came very close to banning plastic retail gift cards this year, simply to cut down on the environmental impact of single-use plastic.

Governor Gavin Newsom vetoed the measure over concerns about how it would affect small businesses, but that type of legislation is likely to come back at some point as concern for the environment grows.

The trend could possibly make even more of an impact on prepaid cards—which are single use—than on long-term credit cards. Future prepaid cards could be constructed out of eco-friendly recycled materials or even cardboard, depending on local laws and trends. If it becomes unrealistic for issuers to produce different stock of gift cards for different states, that could accelerate the move to digital cards.

“Debit and credit card products realize the benefit of being ahead of potential legislation on environmental topics,” said Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research. “In this way, they’re much like other card stock products in gift carding or even access cards, hotel keys, and such. Issuers also understand that the option creates goodwill among customers who value eco-friendly products, providing residual benefits in customer acquisition and retention.”

The post Eco-Friendly Debit Card Gives Bank a Bump appeared first on PaymentsJournal.

State lawmakers in Washington continue to push legislation regarding escheatment and breakage in gift cards.

As reported by KIRO in Seattle, two state senators announced plans to introduce legislation to escheat unused funds after a three year period:

“Sen. Yasmin Trudeau and Rep. Emily Alvarado highlighted the pressing need for reforms in state laws governing gift cards and mobile app funds. According to Trudeau, ‘We don’t buy gift cards expecting a large corporation is going to find ways to keep as much money as they can—that’s what we are here to address.’”

The potential legislation conflates three separate issues: expiration dates, breakage, and escheatment. The primary issue remains that despite the senators’ statements, gift card balances technically will never expire and will be honored even after the three- or five- year period that many companies use to account for unused funds. As is clearly stated in Amazon’s gift card terms and conditions, with specific mention of Washinton, for example:

“The portion of your Amazon.com Balance made up of Gift Cards issued after October 1, 2005 does not expire and may be applied to your Amazon.com account and applied to eligible purchases despite any stated expiration date. Expiration dates also do not apply for the portion of your Amazon.com Balance made up of any Gift Cards issued prior to October 1, 2005 in CA, CT, LA, ME, MD, MA, MT, NH, ND, OK, RI, VT, WA, or in any other jurisdiction solely to the extent prohibited or limited by law.”

Applying Breakage Rules

This brings up the issue of breakage. Retailers utilize breakage as an accounting function when dealing with gift cards to resolve the outstanding liability on their balance sheets. The monies already in the organizations’ coffers move from liability to asset. This does not remove the obligation of a retailer to honor the gift card balance at a later date, which would just reduce the amount of recognized revenue in later years if breakage had already been applied. Breakage also allows the merchant to offset the costs of supplying gift cards, inclusive of technology investments, discounting, commissions, and other fees required to properly administer a successful program.

In addition, the issue of breakage and unused funds continues to be a minor issue, with retailers constantly engaging customers to use cards and customers’ behavior showing quick redemption of the majority of gift cards. This was highlighted in Javelin’s recent report, Unused Value in Prepaid Cards: Breaking the Misconceptions.

The Challenge of Returning Unused Funds

The final unique issue revolves around escheatment of unused funds. States escheating gift card funds generally pocket these funds. The vast majority of gift cards are sold as anonymous purchases, with no known holder of the card. This makes the return of unused funds a relative impossibility.

As such, the law would only transfer the unspent funds from the organizations that support and maintain the costs of gift cards to state reserves. The notion that taking these funds away from companies and returning it to the owners remains a clear misreading of the total gift card landscape that legislative action cannot solve.

The post Washington State Lawmakers Push for Tougher Escheatment Regulations appeared first on PaymentsJournal.

The gift card industry’s continuing growth is highlighted by an announcement from British retailer Marks & Spencer (M&S) that its gift card revenue has grown a whopping 245% in the past year. One of the keys to that record was its partnership with Runa, a digital value payments infrastructure and network.

Prior to working with Runa, M&S didn’t just lack the infrastructure to properly process gift card payments, but also didn’t have sufficient means to distribute them to customers. The retailer previously had difficulty in selling and delivering digital gift cards to business buyers without a platform in place to support it. Runa was able to help M&S streamline its ordering process, which allowed the retailer to build out a new customer base with B2B sales.

Marks & Spencer operates more than 950 stores across the United Kingdom and hundreds more in 29 additional countries. “Since signing up with Runa, we’ve been able to reach new customers and make it easier than ever for them to order from us,” said William Wilford, B2B Customer Success Manager at Marks & Spencer in a prepared statement.

Distribution Is Key

The distribution network is an easily overlooked part of the gift card process. “Retailers want to quickly increase their gift card distribution options,” said Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research. “The utilization of digital delivery eases the entry points into commercial B2B sales and adds a variety of new distribution points through bulk sales, incentive programs and other related one-buyer-to-multiple-recipient options.”

Gift cards have reached a saturation point where 43% of this year’s holiday spending is expected to be through that vehicle, according to a recent PaymentsJournal podcast. Retailers that lack a solid infrastructure for distributing and processing gift cards will be left behind.

“With reduced sales friction, retailers can multiply the gift card benefits that Javelin’s research has identified, including card users spending more than the value of cards, purchasing more expensive items than planned, and increasing in-store visits,” Hirschfield said.

Javelin’s own research has found that 40% of consumers will generally spend more than they typically would when using a gift card, and 25% will generally purchase a more expensive item that they normally purchase. 

The post Marks & Spencer Sees 245% Growth in Gift Card Revenues appeared first on PaymentsJournal.

I’ve said it before and I’ll say it again: cards aren’t fit for digital commerce. They’re costly, they’re clunky, and they provide an experience that’s stuck in the past. At a time when consumers want fast and frictionless online payment experiences, cards just can’t keep up.

This is why I believe we are at an important inflection point. Account-to-account (A2A) payments, powered by open banking rails, are gaining traction. At the same time, card payments are slowly losing payment share. 

So I still see a future without cards—or, at the very least—a world where cards are no longer the incumbent. In this future, which is far closer than you think, we’ll all be paying (and getting paid) by bank. 

What’s the Problem with Cards?

There’s a saying in business that we all need a nemesis. And it’s easy to pitch cards, owned and operated by behemoth companies, as that nemesis. It’s just as easy to see why I, the CEO of an open banking payments network, want to position TrueLayer as the David to the card Goliaths.

But let’s recognise the reason we all, myself included, still rely on cards. Cards enabled digital commerce. They paved the way for us to do exactly what TrueLayer is doing today, seizing the opportunity to rewire and reinvent the way we transact online. 

The simple reason that a world without cards is so important is that cards were never designed for online commerce. They’ve been retrofitted from a physical payment method into an imperfect online option. Whether it’s the sixteen-digit number you need to input before a transaction, the ongoing battle of card-not-present fraud (for which 3Ds2 has been built, yet hampers conversion), or the various fees that are so painful to SMEs, cards are no longer fit for purpose. 

That’s why the next generation of payments are being built from the ground up, with online commerce in mind.

What will Replace Cards?

So what does a perfect digital payment experience look like? Ideally, payments should flow directly from the payer’s bank to the recipient. No plastic you need to carry around, obviously, and very few intermediaries to keep the process simple and low cost. 

Most importantly, the process of paying should be easy. No long numbers or passwords to remember, while still knowing the method is secure by design. In short, a good UX.

Open banking payments can deliver this experience. You may have seen them called bank to bank payments, A2A payments, pay by bank or instant bank payments. But whatever we call them, the core of it is a native mobile experience, where payments are made directly from the bank to the merchant (and vice versa).

Collaboration is Key to the Future of Bank Payments 

When it comes to account to account payments, we are on a journey. Four or five years ago, open banking was basically just a concept. It’s now grown to an industry that handles 11 million payments every month in the UK, with over 7 million active users. 

That growth has been strong and consistent, but we shouldn’t pretend we can sit back and relax. There are still many things we need to improve and fix in the name of creating a payment experience that works for everyone.

Bank payments benefit everyone in the value chain—the banks, the merchants, the consumers, the third party providers. Understanding that will unlock the kind of long-term growth to challenge the card incumbents. For example, when we first started out, we realised we were lacking a payment feature entirely. Collectively, as an industry, we came together and made that happen. The fact that we’ve done it already—and there were naysayers back then—shows that we can do it again.

Earlier this year, I chatted to Megan Bramlette, Director of North America & EU Payment Acceptance at Amazon, as well as Mark Bryant, Chief Payments Officer at NatWest Group. The core of the conversation was collaboration. As Mark so succinctly explained. “We [banks, merchants, TPPs] need to work together to find the right way for bank payments to succeed, on behalf of the customer.”

I’m so energised because I see the likes of NatWest going beyond what was originally mandated by PSD2, and Amazon actively working towards embedding bank payments in their checkout flow. 

As Megan explained: “My job is to ensure [Amazon] customers have all payment options that meet their needs. We want to do that in the most low cost, frictionless and easy-to-use way possible. Bank payments are a part of that revolution.”

This proves everyone involved sees the future on the horizon, but we still have a way to go. One of those areas for improvement is the payment experience.

Payment Experience is Customer Experience

During the Money2020 panel, Megan said something that I think sums up the biggest step we need to take to really unseat card payments: “In order for bank payments to take flight, the customer experience (CX) will have to be better than cards.”

Mark, looking at it from the banks’ point of view, agreed: “With bank payments, and our suite of APIs, we’re enabled to take things to market quickly, and test and learn. But at the heart of it, we need a great CX for the user.”

I think CX goes double when we’re talking about ecommerce. We’ve seen bank payments gain traction in iGaming and financial services, but ecommerce is a much bigger step, where we need to improve the experience for every use case and fill in any missing gaps.

“Gone are the days when cards were a necessary part of online payments.

Take VRPs for example, which can enhance the shopping experience for merchants and consumers when it comes to recurring payments. In a YouGov survey, more than half of the respondents said they would sign up for more subscriptions if they had one easy way to cancel them. 

As I said before, we’re on a journey. That journey will take more than a decade, but card payments have had 50 years to get where they are now. When you think in those terms, the pace of change for bank payments is much more exciting.

A World Without Cards? Or a World with More Choice?

I know the title of this piece is bold. A world without cards entirely? A more reasonable prediction is that we will all have more choice. Merchants won’t need to default to cards because, despite their shortcomings, they’ve historically been the only way to give customers something approaching a good customer experience.

From the merchant’s point of view, Megan believes that payment choices at checkout will be more varied: “I think the online paying experience is going to get a lot more diverse… my job is to make sure we offer the full complement of payment methods to customers in the best way possible. Bank payments are part of that, and a huge area for growth.”

So no: cards aren’t going to vanish in the blink of an eye. But don’t let that lull you into complacency. Gone are the days when cards were a necessary part of online payments. More choice and a better experience are out there. And it’s only a matter of time before people realise there’s a better way forward.

The post Are We Approaching a World Without Cards? appeared first on PaymentsJournal.

Reports continue to surface of people buying gift cards that represent well-known companies like Visa, only to find the balances on them to be at or near zero. The latest is from the investigative unit at a Boston TV station, following similar reports last month from local news outlets in Atlanta, Charlotte, and Raleigh.

But this is more than a local story. The complaints center on InComm, an Atlanta-based company that sells its own proprietary Visa Vanilla gift cards, as well as Mastercard, American Express, and other brands. Although InComm hasn’t been accused of participating in the fraud, the company’s security measures have come under increased scrutiny.

According to WFTV in Orlando, more than 1,300 complaints have been filed against InComm with the Better Business Bureau over the past year, with many of the customers complaining that their cards were not working or that the balance had all been spent before the consumer had even obtained the card. WFTV spoke to one woman who was told that her Vanilla Visa card’s balance had all been spent on PlayStation games—even though she doesn’t own a PlayStation.

InComm Facing Lawsuits

Earlier this month, San Francisco City Attorney David Chiu filed a lawsuit against InComm. Chiu alleges that thieves take gift cards from a rack, steal the codes, then place the cards back on the rack for unsuspecting buyers to purchase. Chiu blamed InComm’s “inadequate security” for the problem.

In addition, Graham LippSmith, an attorney from Los Angeles, has filed a class-action lawsuit against Incomm on behalf of Vanilla gift card users. The lawsuit alleges three possible reasons for the continuing problems: an inside job by a rogue InComm employee, a breach of InComm’s cybersecurity protocols, or that hackers have cracked InComm’s algorithm for creating card numbers. LippSmith also claims that InComm put up “barriers through difficult and time-consuming customer service processes” that have made it difficult for defrauded consumers to get their money back.

It’s important to keep in mind that most gift cards are safe and secure. “This type of theft continues to be worrisome in the industry, but overall these issues occur less than 10% of the time across all prepaid card products, according to Javelin’s research,” said Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research.  “In addition, our research indicates that consumers are nearly twice as worried about losing a card as they are about balance depletion theft.”

A Longstanding Problem

InComm has been addressing these issues for some time; the company was singled out for scrutiny in a Reddit post as many as eight years ago. Although InComm hasn’t addressed individual cases, it has said it is working on the problem. “Our privacy and policy restrictions prevent us from commenting on individual consumer situations, but we are reviewing their information and will contact each of them to provide an update,” the company said in a prepared statement. “Fraud prevention is a top priority across our company. We are constantly working to ensure consumers can safely use their gift cards by developing new methods and techniques that mitigate the risk of potential fraud.”

For consumers who think they may have received a tampered gift card, InComm recommends reviewing “the account balance on their product’s official website, which is printed on the back of their card.” InComm also asked that people call the customer care phone number on the back of their card immediately to report an issue.

The post Complaints About Empty Gift Cards Continue into the Holiday Season appeared first on PaymentsJournal.

The holiday season is quickly approaching, and consumers and retailers are gearing up for what’s to come in the world of gift-giving. The economic roller coaster of the past year has given rise to a cautious but optimistic consumer mindset where value and deals reign supreme.

Changing consumer sentiment is driving retailers to adapt and provide attractive incentives to draw shoppers in. Not surprisingly, gift cards are emerging as the stars of the upcoming holiday season and are expected to make up a substantial 43% of the holiday budget, according to Blackhawk Networks’ recent “Better & Better: 2023 Holiday Gift Card Shopper Research.”

To shed light on what to expect this holiday season and offer valuable insights into consumer behaviors, gift card trends, and retail strategies, PaymentsJournal sat down with three industry experts: Jay Jaffin, Chief Marketing Officer at Blackhawk Network; Sarah Kositzke, Director of Research at Blackhawk Network; and Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research. They dug into Blackhawk Networks’ research, which explores:

• The current state of the economy and how it’s affecting holiday shopping
• The increasing role of digital and physical gift cards
• What retailers should focus on to make the most of this holiday season and beyond.

‘Tis the Season for Deals

Although concerns around inflation and job security are top of mind for many consumers as the economy continues to fluctuate, consumer confidence is increasing. According to Jaffin, this year’s retail outlook looks positive, with more consumers planning to shop for the holidays. That said, consumers are erring on the side of caution, shifting toward fewer shopping trips and fewer locations, conducting most of their shopping online. As a result, retailers need to maximize each visit and focus on providing incentives to attract shoppers.

“I would encourage retailers to really focus on value and deals,” Jaffin said. “When we talk to consumers, roughly two-thirds are planning to change their shopping behavior in some way this year. What we hear is that they’re moving more of their purchases to store brands or off-brands, buying more on sale, and using more coupons.

“In general, they’re buying a little less, and that’s some of the things to keep in mind as we enter the busy holiday season.” 

Javelin research backs up many of these points, Hirschfield pointed out. Confidence is on the rise, with many consumers planning to buy gift cards this holiday season. The key to capturing their interest lies in providing promotional incentives and flexible choices. “We’ve found that (roughly) 84% of consumers plan to buy gift cards, with 72% motivated to make a purchase if a gift card is offered as a promotional incentive,” he said.

Holiday Planning

Research from Blackhawk Network is finding that holiday shopping will start a little later this year. That’s because there will be five holiday shopping weekends, which will give consumers more time to find promotions and discounts.

“It’s really this mid-late November to early December shopping time when folks are about to begin,” Kositzke said. “For Gen Z, they’re almost entirely beginning their holiday shopping in November and December in particular.” Sarah noted that much of GenZ will be kicking off their shopping on Black Friday, and that they are out there looking for those sales and promotions, and they’re often looking at those new product releases as well.

Consumer Behavior this Holiday Season: What’s Trending

On average, consumers plan to spend about $770 on gifts this holiday season. Although this amount is relatively flat compared with last year, gift cards are expected to account for 43% of that spending, a significant increase from the prior year.

Gen Z specifically is a driving force, with a 12-point year-over-year increase in its share of holiday spending allocated to gift cards, Jaffin says.

Overall, younger generations, including Gen Z and Millennials, are leading the way in purchasing physical and digital gift cards. Gen Z, in particular, plans to purchase approximately 17 gift cards, with a nearly equal split between physical and digital cards. Older generations are more inclined to buy physical gift cards.

“Gen Z loves to gift, they have more people to think about on their holiday list, and the value and the ability to give them those digital options is really where we’re seeing  that love for gift cards,” Kositzke said. “Not only do they love to give gift cards, but they want to receive them.”

Hirschfield also noted that there’s a growing interest in multi-brand gift cards and open-loop options, and stressed that retailers should consider offering more choice in their gift card programs, with an emphasis on flexible value loads.

Paying Attention to Gen Z

When it comes to holiday shopping, younger generations are keen on using digital wallets and stored value. Digital wallets enable consumers to store and spend their gift cards conveniently, and as a result, 72% of consumers who prefer digital gift cards are likely to store and spend them through their mobile wallets.

Sustainability is also becoming a crucial consideration. According to Jaffin, 57% of consumers are interested in gift cards made from recycled materials. That’s a key focus for retailers today, as more are focusing on eco-friendly options, pledging to convert plastic gift cards to paper substrates. As sustainability gains momentum, this aspect will become more important for consumers and retailers.

“Consumers are becoming more conscious of not only the gift card brand or type, but what the gift cards are actually made of,” Jaffin said. “We made a pledge last year to work with our partners to convert the majority of their plastic gift cards to paper substrates by the end of next year. This is going to be a trend that gains more and more momentum.”

How Retailers Can Prepare for a Successful Holiday Season

Retailers should take an offline and online strategy this holiday season, making the most of all their channels—including in-store displays, online options, and multi-brand gift card displays. Capturing consumer attention in various areas enhances the chances of gift card sales. In fact, by implementing a “be everywhere” strategy, retailers can see benefits that extend into Q1 and beyond, with increased consumer spending, visits, and engagement.

“We don’t always know exactly what people need or want, so having the flexible options available around every corner for consumers is helpful,” Kositzke said.

Emphasizing flexibility in payment options, promoting the value of digital wallets and stored value, and offering a range of digital and physical gift cards can also help retailers cater to different consumer preferences, Kositzke noted.

It’s key that retailers use all available channels to capture the benefits of gift card strategies. According to Hirschfield, 40% of consumers tend to spend more than they normally would when they have a gift card, and 25% opt for more expensive items. What’s more, 30% are inclined to visit stores more often, leading to long-lasting advantages well into 2024.

Your Employees Love Gift Cards Too!

Shifting the discussion toward employees, Jaffin underlined the value of gift cards as a holiday gesture from employers. He shared insights from Blackhawk Network’s research, which revealed that employees highly appreciate receiving gifts.

“When you hand out gifts at the end of the year, it makes employees feel valued and really helps bring a new energy for the year,” Jaffin said. “Last year, very few employees received gifts and fewer are expecting anything this year, and there’s nothing better than a nice surprise.

“Gift cards are an affordable holiday gift, and they can easily be delivered because with digital gifting, it doesn’t matter where you are.”

Key Takeaways

The 2023 holiday shopping season is poised for change, with gift cards playing a central role. Retailers that embrace digital and physical gift cards, focus on promoting flexibility, and take a more sustainable approach will be well-positioned to meet the needs of diverse consumer preferences and ensure a successful holiday season.

Despite concerns about the economy, consumers are planning to hit the stores, shifting their focus to value and deals. Retailers need to provide promotional incentives and flexible choices to capture consumers’ interest. Meanwhile, Gen Z is playing a significant role in driving holiday spending toward gift cards, favoring physical and digital options—and retailers should take note not to overlook this group.

Finally, retailers are encouraged to take an omnichannel approach, combining in-store displays, online options, and multi-brand gift card displays to maximize their efforts. By offering a diverse range of gift card options—and, again, emphasizing flexibility in payment methods—retailers can create goodwill, increase spending, and enhance brand loyalty during the holiday season and beyond.

To Learn More:

To download BHN’s, Better & Better: 2023 Holiday Gift Card Shopper Research, ebook, click here.

To learn more about rewarding employees during the holiday season, click here to download, The Holidays & Rewards: It’s Good Business, an easy-to-read BHN infographic.

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One of the hottest holiday gift items this year is shaping up to be travel gift cards. The latest company to jump on this bandwagon is travel app Hopper, which announced at the beginning of November that they’re offering gift cards that can be used towards flights, hotels, rental cars, and rental homes purchased through its app, with card amounts starting at $25. You can even use one to top off your gas tank.

Hopper joins the travel and experiences company Get Your Guide, a marketplace for tours, excursions and outings of all kinds. Get Your Guide offers gift cards that can be used for travel experiences ranging from sightseeing tours to cooking classes.

“Gift cards provide a great opportunity to allow recipients to get the gift they want,” said Jordan Hirschfeld, Director of Prepaid at Javelin Strategy & Research. “In our Prepaid Holiday Preview report, we highlight that recipients and givers both enjoy the benefits of gift cards, and this would be especially true to help with travel. It’s unlikely that a giver would directly buy a plane ticket or an on-site experience, but a gift card to offset those costs or provides a more meaningful opportunity and a treasured gift.”

A Growing Market

The market for such cards is potentially significant. A recent study from Get Your Guide reported that 92% of Millennials and Gen Z would prefer to receive the gift of travel or an experience like a concert or sporting event, as opposed to material goods.

And this group is desperate to travel: In a separate study conducted by Credit Karma, 50% of Gen Z respondents said that to cover the costs of travel, they have sacrificed on things like dining out and meal delivery. Some 47% have cut back on shopping for clothing and electronics, while 35% say they plan to take on an additional job, and 19% say they’re willing to give up necessities to pay for travel. This cohort has shown that travel gift cards are right in their sweet spot.

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In times of economic uncertainty, effectively managing one’s finances becomes paramount. Prepaid cards have emerged as a powerful tool for individuals seeking to navigate turbulent financial waters with greater control and confidence. Unlike traditional credit or debit cards, prepaid cards allow users to set specific spending limits, ensuring that they only access funds they have allocated for specific purposes. This innovative financial instrument offers a practical solution for those looking to maintain disciplined budgets and exercise prudent fiscal habits, ultimately empowering individuals to weather economic challenges with resilience and foresight.

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Data for today’s episode is provided by Javelin Strategy & Research’s Report: 2023 Prepaid Regulatory Update

Likelihood to use prepaid cards to manage budget and control spending in the next 12 months

• 17.48% – Not at all likely to use prepaid cards to manage budget and control spending
• 21.17% – Unlikely to use prepaid cards to manage budget and control spending
• 27.3% – Likely to use prepaid cards to manage budget and control spending
• 28.83% – Very likely to use prepaid cards to manage budget and control spending
• 5.21% – Don’t know to use prepaid cards to manage budget and control spending

About Report

The prepaid industry continued to adapt to new regulatory and policy changes enacted in 2023. Policy changes meant to fight inflation, avoid recession, and address other macro conditions continue to be the primary drivers of change in the prepaid market. Secondary drivers include annual cost of living adjustments to regulated programs such as nutrition assistance and health savings accounts (HSAs).

Other specific changes reflect the need to specify products in the broader ecosystem. In retail these include efforts to curb theft and fraud as well as tighter enforcement of cash refund and escheatment policies. Legislative actions had broad coverage from allowing additional states to permit sports gambling to working to reduce use of plastics in the card industry.

Global changes reflected similar themes. Top regulatory concerns continue to be money laundering, theft, and fraud as well as reducing environmental waste. Other global focus areas include regulations on fees and charges and availability cross-border payments.

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New data from prepaid card provider Blackhawk Networks shows the high demand for gift cards to fulfill shopper needs in the coming holiday season. Blackhawk’s announcement also indicates that newer shoppers lead the way on the current gift card trend:

“Reported increases in gift card spend are fueled by Gen Z shoppers’ love for gift cards. Younger generations surveyed plan to buy 70% more gift cards than older generations this holiday season. Surveyed Gen Z consumers also plan to spend 56% more on gift cards and 9% more on gifting overall when compared to last year.”

Javelin research and reporting on consumer preferences correlates with the Blackhawk findings that 43% of gift spend will be spent on gift cards. The Javelin 2023 Prepaid Holiday Preview, published in July, highlights the buyer preferences for gift carding as both a preferred gift to give and receive. Javelin’s research show that 26% of consumers prefer a general purpose gift card, one bearing the logo of a major credit card. An additional 21% prefer to receive a retailer specific gift card for use at their favorite store.

More importantly, consumer purchase preferences also back up the gift carding need. While reception spurs later use, purchases start the revenue cycle and actually determine which cards are bought and utilized. This changes the dynamic slightly, with retailer cards leading purchase preference at nearly 30%, closely followed by general purpose cards at nearly 25%.

Looking more closely at generational use, all generations follow similar preferences for both purchase and receipt of gifts. What separates generations in Javelin research would be intent to purchase additional prepaid cards products. Both Gen Z and Gen Y top 20% of total population intending to buy more gift cards than they did in the previous 12 months. As a comparison, while older generations also intend to purchase more gift cards, only 9% and 6% of those in Gex X and Baby Boomer generations—respectively—intend to purchase more.

The growth in gift carding among younger generations also points to the continued shift towards digital gifting versus physical cards. Comparing the polar ends of the generational spectrum, Gen Z will receive 30% more digital cards on average compared to Baby Boomers. Conversely, Gen Z will receive 30% fewer physical cards than Baby Boomers. The digitization movement should continue to expand in the coming years with the holiday season serving as a major inflection point to a leveling of gift carding from 70% physical to closer to a 50-50 split by the end of the decade.

Overview by Jordan Hirschfield, Director of the Prepaid Advisory Service at Javelin Strategy and Research.

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In an era defined by convenience and flexibility, general-purpose prepaid cards have emerged as powerful financial tools, revolutionizing the way consumers manage their money. These versatile cards offer a dynamic alternative to traditional banking, allowing individuals to navigate a range of transactions with unprecedented ease and security.

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Data for today’s episode is provided by Javelin Strategy & Research’s Report: Prepaid Healthcare Options Expanding

Top 5 Sources Used to Receive a General-Purpose Prepaid Card in the Past 12 Months

• 55% – another source (examples include payroll cards, unemployment, EIP program, commissions)
• 36% – consumer rebate or incentive payment
• 24% – government programs (i.e. unemployment, SNAP, EIP, etc.)
• 16% – store credit/returns
• 16% – redeemed points or cash rewards

About Report

The prepaid healthcare payments market remains a robust and growing opportunity. Financial institutions, fintechs, and other players within the payments side of healthcare can benefit from rising use cases of existing and emerging products to spur an increased volume of transactions and higher spending totals. Costs of healthcare services continue to outpace inflation, which provides ample opportunity to grow revenues through participation in programs such as flexible spending accounts and health savings accounts.

Employers can also better serve their employees in a competitive environment by increasing benefits and incentives. These programs can be as simple as small-value incentive programs linked to employer-sponsored healthcare plans that reward individuals with gift cards or other financial rewards for good health outcomes. While all sides of the ecosystem must be aware of regulatory changes, the overall market continues to push for greater inclusion rather than restriction.

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Regulatory changes are coming to the prepaid market. As the industry combats inflation and tries to sidestep recession, adjustments will need to be made to reflect these macro-economic conditions.

In “2023 Prepaid Regulatory Update,”  Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research, discusses what adjustments need to be made concerning prepaid cards due to macro conditions, how the current economic landscape will affect policies aimed at the prepaid market, and how changes in regulation at the international level will affect the global prepaid market.

Upcoming Regulatory Changes in Prepaid Cards

Although Hirschfield pointed out that there are not a lot of changes, adjustments have been needed, especially within health savings accounts (HSA), flexible spending accounts (FSA), and other government programs to reflect the cost-of-living increases.

Hirschfield said it’s important for sponsors to communicate these changes. He gives an example of how employees can now increase the deduction on their HSA cards by anywhere between $300 to $700, depending on whether it’s a single or family plan.

Moreover, states are looking to reinforce current regulations, especially regarding payouts.

“I think there’s a lot more emphasis on enforcement of existing regulations. You see a lot of states looking to enforce their regulation, especially on gift card payouts,” Hirschfield said. “If you have less than $5 or $10 balances, the sponsoring retailer may be required to pay you out, based on certain conditions that differ in each state. You’re seeing a little bit more enforcement of that.”

Not issuing these payouts could result in fines. Although such fines won’t necessarily break the bank, Hirschfield said that it is less of a hassle to simply issue the payouts.

How Economic Conditions Will Affect Prepaid Market Regulation

Regulatory bodies are concerned about the welfare of consumers and therefore have focused their efforts on ensuring consumers get the most benefit from prepaid programs. This includes receiving payouts easily and appropriately.

“In a lot of the programs that are kind of government-regulated—HSA, FSA, nutritional assistance—the economy and inflation is going to add to cost-of-living adjustments and other increases,” Hirschfield said.

“It’s just keeping up with the cost of money in those programs.”

International Regulatory Changes and the Global Prepaid Landscape

When it comes to adhering to international regulations, it is best to err on the side of caution, Hirschfield said. Europe is known to have the most rigorous regulations, and therefore it is best to be overly cautious and follow its protocols to avoid penalization, he noted.

“When you’re looking at international policies and especially program managers and retailers that operate across borders, there’s the need to pay attention to what are the most stringent regulations,” he said.

“A lot of times those come out of Europe, so it really makes sense for those organizations to follow the most stringent rules possible to make sure that they have a simplicity about their program across all of their stores or all across all their employees.”

Learn more about how policy changes will change the prepaid landscape and how changes on the international scale are poised to affect the global prepaid environment.

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Gift cards continue to grow in popularity in the United States, with roughly 75% of consumers having purchased a gift card within the past 12 months, according to recent data from BHN (Blackhawk Network) research.

For the sixth year in a row, BHN has joined forces with NAPCO Research to conduct a comprehensive benchmark study, examining the gift card programs of more than 100 merchants in the U.S. Based on 175 criteria, the report assesses their in-store, online and mobile gift card offerings, including the consumer purchase and recipient experience. This year a limited assessment of 25 digitally ascendant brands was also included.

During a PaymentsJournal podcast, Sarah Kositzke, Sr. Global Market Research Manager at Blackhawk Network, Andrew Solomon, Vice President of Sales at Blackhawk Network, and Jordan Hirschfield, Head of Prepaid at Javelin Strategy & Research, discussed how businesses can build—or evolve—their gift card programs.

The Increasing Benefits of Gift Cards

The 2023 Merchant Gift Card Omnicommerce Evaluation examined gift card programs across various platforms, including physical stores, websites, and mobile apps. By evaluating criteria such as accessibility, options, and recipient experience, the study revealed crucial insights for merchants seeking to optimize their gift card initiatives.

The U.S. gift card market is expected to reach $260 billion by 2026. The digital gift card market is also seeing significant growth and is expected to reach nearly $135 billion by that same year.

“Digital gift cards continue to be the most requested gift for 16 consecutive years,” Solomon said.¹

Although the rise of digital gift cards is undeniable, a significant portion of gift card purchases still occur in-store at physical retailers, including grocery stores, convenience stores, and pharmacies. When it comes to the types of gift cards customers prefer that is also shifting toward versatile options like Visa or Mastercard gift cards and multi-branded gift cards that offer a range of choices of where to shop/dine.

“Blackhawk’s findings align with our research and reveal similar patterns,” Hirschfield said. “Third-party retailers, including big-box stores, supermarkets, and online retailers, continue to be popular destinations for purchasing gift cards, whether for personal use or as gifts for others.”

Gift cards also can expose consumers to new stores.

“During the holidays, we discovered that almost a quarter of gift card recipients received a gift card to a new place they hadn’t tried before,” Kositzke said. This means gift cards not only allow recipients to explore new products at stores they already know and love, they also open the door for consumers to explore entirely new brands and retailers.”

Gift cards can also help strengthen loyalty programs. Across various industries, belonging to a loyalty program increases spending and encourages the self-use of gift cards.

“Blackhawk’s report found that around four in 10 people tend to use gift cards for themselves, similar to what we have observed,” Hirschfield said. “Loyalty programs provide ongoing benefits and create a lasting relationship with customers, rather than being a one-time use experience.”

Where to Begin

For merchants looking to start or improve a gift card program, there are some best practices to consider. When it comes to the placement of gift card fixtures in stores, for example, it’s important to consider consumer behavior, particularly when many consumers tend to pair a gift card with another gift item.

“Strategically placing the gift card displays near related items can make it convenient for customers,” Kositzke said. “For example, place them near the greeting card section and near chocolates and flowers, which are commonly paired with gift cards.”

Solomon agreed that it’s important to think about the size, appearance, and placement of the fixtures in a physical store. “Can you make them more eye-catching with colors and lighting? Consider using special displays or holiday-themed shippers at checkout. Pay attention to the marketing and theme around the gift cards and make the carrier (the packaging) feel special and different for holidays,” he said.  

“On the digital side, focus on creating a great mobile experience,” he added. “Innovations like unwrapping the gift card in a mobile setting can enhance the user experience. We actually had to add in rewrapping the gift card because people like unwrapping and rewrapping it.”

Lastly, don’t forget about loyalty programs, which play a significant role in today’s retail landscape. Retailers can attract customer loyalty by offering incentives like earning points when they purchase multiple gift cards. This not only encourages customers to choose that retailer but also provides them with additional benefits, such as fuel savings or rewards.

“Mobile apps are a key driver in enhancing loyalty programs,” Hirschfield said. “They allow customers to easily link physical gift card purchases and load their balances digitally, creating a seamless experience. By offering instant rewards and bonuses, such as a $5 digital gift card, customers feel valued and motivated to try new products or indulge in extras.”

The Impact of Digital on Gift Cards

Digital gift cards are gaining ground. According to the NAPCO research, there’s now roughly a 60/40% split between physical and digital cards, with digital gift cards growing in popularity.

“Currently, the average value of digital cards is slightly lower, around $30, compared to physical cards,” Hirschfield said. “However, what’s interesting is that people are using digital cards just as much, if not more, than physical cards. When it comes to unused balances, the median remaining balance for physical cards is about $1, which can be difficult to use. But for digital cards, the median remaining balance is zero, meaning people are able to use the full value of their digital cards.”

According to Solomon, it’s crucial to focus on a few key aspects to ensure a successful digital program:

• Invest in a risk management system that knows the difference between a fraudulent transaction and a legitimate one. False declines can damage your reputation.  
• Sell your own branded gift cards across various channels, including your own website.
• Offer multiple payment options, such as Venmo, crypto, and buy now, pay later.
• Enhance the recipient’s experience, even in digital formats, through animated cards or interactive elements.
• Notify customers about their purchases and gift card deliveries, si they don’t forget about their gift cards.

“Digital channels also allow for higher initial gift loads compared to physical cards. Moreover, digital options are beneficial for those who can’t travel during the holiday season,” Kositzke said. “It ensures that gifts can be delivered safely and easily, making it a great alternative for sending presents to others.”

Conclusion

The gift card industry is experiencing significant growth, and this presents valuable opportunities for merchants. The BHN and NAPCO research emphasize the importance of enhancing the recipient experience, offering multiple payment options, and leveraging digital platforms to cater to consumers’ evolving needs. Furthermore, digital gift cards are a convenient and effective solution for corporate incentives, particularly for businesses with dispersed employees. By embracing digital channels, merchants can expand their customer base and provide a seamless gift-giving experience.

¹ Source: *NRF and Prosper Insights & Analytics 2022 Consumer Holiday Survey

Click HERE to receive the full 2023 Merchant Gift Card Omnicommerce Evaluation report.  

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Instacart is now accepting food stamp payments across 50 U.S. states. 

Last week, on the heels of the company announcing that Alaska was the latest state to accept Electronic Benefits Transfer for Supplemental Nutrition Assistance Program (EBT SNAP) payments, Instacart also revealed that more than 10,000 stores are accepting SNAP. The company first introduced SNAP as a payment method in 2020. With more than 42 million people enrolled in EBT SNAP, the expansion means that Instacart can now service roughly 12% of the U.S. population.  

According to Dani Dudeck, Chief Corporate Affairs Officer at Instacart, this is in line with the company’s mission to bring healthy and affordable food to more communities. It also marks the fulfillment of a new health and nutrition initiative launched in September 2022, in partnership with the USDA, which outlines a goal to extend these benefits to its more than 650 grocery partners by 2030.  

Driving Accessibility Via Prepaid Debit Cards 

Using prepaid programs to make healthy food more accessible for low-income populations is certainly not a new concept. In June, About Fresh announced that it would help Medicaid-supported individuals get access to healthier food options. Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research, covered how About Fresh’s partnership with the FIS Filtered Spend program would give Fresh Connect cardholders the ability to have eligible healthy food items deducted from their total spend if they used the program funded prepaid cardat checkout. Healthcare providers financially support this effort in order to reduce medical expenses for patients who experience food insecurity.  

According to research put out last year from the Center on Budget and Policy Priorities, many are benefiting from these government prepaid programs . The SNAP program has been credited with lowering heart disease risk, lower obesity, and better overall health.  

And in an effort to make SNAP even more accessible, the USDA has been piloting contactless mobile payments in five states. At a time where a large portion of consumers are still underbanked, these initiatives aim to better serve these communities .  

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Retailers are gearing up for the upcoming holiday season, and although various strategies are in place to generate consumer shopping intent, prepaid products, including gift cards, will be key drivers in boosting the bottom line and maximizing revenue.

Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research, recently released a report titled Prepaid Holiday Preview, which delves into what retailers need to know as they prepare for this essential shopping season. PaymentsJournal recently sat down with Hirschfield to discuss some of the prepaid card trends he anticipates and what retailers should keep in mind.

Retailers have been prepping for the 2023 holiday season since the 2022 holiday shopping season ended. As they continue to flesh out their plans, what are some of the biggest takeaways from your report?

Gift cards are kind of prime time now. You have to think about: What’s your retail gift card strategy? How do you want to sell them, and how do you want to package them? Because there’s production involved in that, there’s promotion involved in that. And then there’s the strategy of how do you utilize gift cards to help spur additional sales?

In the report, I covered summer sales, and Target, Amazon, and Walmart have been really proactive, utilizing gift cards as a discounting mechanism. Instead of putting something on sale or a class of things on sale, there was a promotion. For example, buy $50 worth of health and beauty items and you get a $10 gift card. There’s really nothing magical about it, but it incentivizes the purchaser to purchase again.

There’s so much more marketing around gift cards, particularly targeting last-minute shoppers. Do you anticipate more of that this holiday season?

Absolutely, that last-minute option is always going to be there. That’s the beauty of the next four or five months—how do you not only get your physical strategy in place, but how you augment that with a digital strategy that can be that last-minute opportunity where you don’t need a stock of cards or a stock of packaging.

In the broad scheme of retail gift cards, we’re going to see a transference of the percentage that’s going to digital, where it’s kind of a 70-30, 60-40 ratio, depending on who you ask. That’s going to be 50-50 pretty soon, and at some point—for a variety of reasons—digital is going to take over.

Is it going to be 50-50 this year, or are physical cards still dominating?

In-store is still going to dominate this year, but by a lesser margin than it has in the past. We’re hitting that tipping point in the next couple of years.

Do you anticipate that retailers will leverage familiar tactics that they used last year?

We’re going to see more of an emphasis on that incentive tactic—instead of a sale price, get an incentive gift card back, which then invites you to shop more.

The stats that we have at Javelin show that’s where the real benefit of the gift card is. It’s that consumer behavior—they usually buy more expensive items than they would have and use the full value pretty quickly, and a lot of times it’s a treat. If it’s an electronic store, for example, instead of buying the $250 TV, I’m going to buy the $350 TV because I have this extra money in my pocket.

Anything retailers should avoid doing?

You want to avoid overstocking, especially themed gift cards that you know will become dead stock. With digital, there are more options to have a themed look and feel. I don’t think there’s a need to over-invest in the pure kind of art of the holiday theme for physical when digital can replicate that in a zero-production-cost environment.

I would also avoid tunnel vision. You’ve got to look at all the various opportunities—the gifting opportunity, the incentive opportunity, the self-purchase opportunity. Consumers use these holiday opportunities to treat themselves, and that’s one that you really shouldn’t avoid.

Also, don’t avoid selling at the multi-retailer displays. Obviously, selling it your own in your own store is going to be the best opportunity. There’s a lot of cost advantage to that if you’re a retailer, but our research says the No. 1 place to buy a card is the multi-retailer displays. Those are huge opportunities, and you have to invest in that the right way to make sure that you’re working with your partners to ensure that you have a good display and you’re in a prominent location.

Learn more about how retailers are preparing for the peak holiday shopping season.

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As healthcare costs rise, employers are moving towards high-deductible health plans, leaving consumers to have to pay more out of pocket. To help alleviate the high costs of healthcare services, many companies are deploying prepaid options for employees that offer some benefits.

In a recent report, “Prepaid Healthcare Options Expanding,” Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research, discusses the two fields of prepaid that are expanding dramatically: HSA accounts and health incentives.

Health Savings Accounts (HSAs)

Prepaid accounts play a significant role in the healthcare industry, particularly in relation to insurance. With high-deductible health plans, you pay a smaller amount for your deductible every month through your paycheck. These plans often offer a health savings account (HSA), which is similar to a prepaid account—money is deposited into the HSA before taxes are taken out, so you save money. When visiting a doctor, funds can be used via the HSA, thus in turn, saving on taxes too.

One of the advantages of HSAs is that the money deposited never expires.

“If you’re a healthy person and don’t need much medical care, you can keep accumulating funds in your HSA over time,” Hirschfield said. “When you do need healthcare—whether it’s for something like braces or buying medication—you can use the money in your HSA to cover the costs.”

There’s also a similar prepaid option called Flexible Spending Account (FSA). The FSA works in a similar way to the HSA, but the main difference is that the funds in the FSA expire at the end of each year.

Both the HSA and FSA provide tax benefits and can help people save money on healthcare expenses. Many employers offer these prepaid accounts as a benefit, and some even contribute to them. However, these accounts are often underutilized, even though they can be valuable tools for managing healthcare costs.

Incentive Programs

Prepaid cards are used within the healthcare space for various incentive programs—including  participation in activities such as drug trials, plasma donations, and blood drives. Participants may receive small gift cards as a token of appreciation for their involvement.

Incentive programs are also common in employer-sponsored healthcare plans. Many major healthcare insurers offer these programs to motivate individuals to engage in healthy behaviors. Participants can earn credits or rewards, such as a dollar credit for walking 10,000 steps a day. These rewards can be redeemed for gift cards, which can be specific to certain retailers or general purpose cards such as Amex, Mastercard, or Visa.

These incentive programs are especially prevalent in Medicare plans for retirees. They aim to promote an active lifestyle, as it’s believed that being active can lead to lower healthcare costs. Participants can accumulate points or credits by reaching certain milestones, and these points can then be converted into gift cards as a reward.

“Using prepaid cards as incentives benefits the insurers because it motivates individuals to adopt healthy habits, ultimately reducing healthcare costs,” Hirschfield said. “People perceive the prepaid cards as rewards, regardless of the amount, and find value in using them for purchases at their favorite retailers or as general spending cards.”

But Do Incentive Programs Work?

The idea behind using incentives is to motivate people to engage in healthier behavior. For the most part, healthy individuals who may already be walking 10,000 steps a day will likely  participate in these activities anyway and receive rewards for what they would do normally. In contrast, individuals who are not already engaged in healthy behaviors may not be as influenced to change.

“While there may not be specific studies to prove the direct impact of incentives on behavior change, insurance companies continue to use these programs because they believe they can reduce overall healthcare costs,” Hirschfield said.  

“There’s a good likelihood that incentive programs are also a sales tactic for insurance companies selling their plans to insurance brokers into organizations,” he said. “They say, ‘we’ll help your employees stay healthy and happy.’ Health insurance is not just there for the good of the people—it’s also a business.”

Regardless, the incentive market in healthcare and the use of prepaid cards in these programs are areas of potential growth.

“They provide an opportunity for companies in the prepaid industry to participate in B2B relationships and offer high-value rewards,” Hirschfield said. “It also creates a positive connection between consumers and the companies providing the incentives, enhancing goodwill and customer satisfaction.”

The post HSAs and Employee Health Incentives Drive Prepaid in Healthcare appeared first on PaymentsJournal.

Gift cards have become an increasingly popular option for gifting in recent years. They are convenient for both the giver and the recipient, as well as being more personal than simply giving cash. They also offer flexibility, as they can be used for a variety of items and the recipient can choose when and where they want to use it. Additionally, they are a great last-minute gift option for those who may have forgotten a special occasion. With a wide range of options available, from popular retailers to specialized businesses, there is sure to be a gift card to suit every taste and interest.

Don’t miss another episode of Truth In Data! Click on the red bell in the lower-left of your screen to receive notifications as soon as the episode publishes.

Data for today’s episode is provided by Javelin Strategy & Research’s Report: Unused Value in Prepaid Cards: Breaking the Misconceptions

Top 5 Gift Card Purchase Locations

• 36% purchased at mass merchandisers
• 35% purchased at online-only merchandisers
• 23% purchased at coffee/specialty food shops
• 22% purchased at fast food restaurants
• 18% purchased at supermarkets/grocery stores

About Report

There’s a misconception that gift cards and other prepaid products go unused, but the trends of consumer use and product growth defy that belief, creating profit centers for issuing organizations. The fact that gift cards encourage additional spending and have many other uses, such as receiving loyalty cards as an employee incentive or creating goodwill opportunities, promotes rapid redemption, thus mitigating issues with unused funds. The use of stored-value accounts emphasizes that loyalty provides extra benefits and encourages repetitive reloads, reducing the amount of unused funds that companies must account for.

To strengthen and maintain prepaid programs, organizations should communicate often with the appropriate stakeholders, such as consumers, shareholders, and employees. Communication encourages the spending of unused balances, highlights the value of loyalty programs associated with stored-value accounts, and can act as a way to avoid escheatment where it is regulated. Retailers must also be clear with policies to ensure compliance with various states’ cash-out and escheatment regulations, which can be accomplished through universal policies, proper staff training, and regular reviews of applicable regulations by location.

The post Where do Consumers Purchase Gift Cards? appeared first on PaymentsJournal.

Multiple recent announcements underscore the desire of retailers and their partners to focus on sustainability within the prepaid card markets. Two key themes seem apparent, focusing on reuse of cards and utilizing more environmentally friendly materials.

Reuse provides a key message for sustainability while also encouraging increased spending, loyalty, and rewards for the card recipient. As Sarah Clark reports in NFCW, fashion retailer Zara is working to replace single-use cards with NFC-enabled contactless key fobs. In her reporting, David Maisey, CEO of MultiPay Global Solutions brings additional context to the issue with a focus on long term customer experience:

“‘Gift cards provide a vital connection between retailer and customer, and like any payment method, is always in need of innovation,’ Maisey says. ‘The arrival of a reusable NFC-powered keychain not only enhances the customer experience by making it easier to carry but also helps reduce single-use plastic consumption.’”

Maisey’s point highlights the results of Javelin Strategy & Research findings that show that in nearly every vertical, belonging to loyalty programs increases spend and increases self-use of gift cards. Making a gift card a permanent item on a keychain, and potentially expanding into a fashion accessory outwardly provides a great message of sustainability while also encouraging reloads, repeat visits, and increased spending.

Card suppliers are also jumping on the sustainability focus and seeking to receive industry certification to provide objective approval of their efforts. CPI Card Group, which reports sales of over 95 million units in its eco-friendly card products recently announced its certification in the Forest Stewardship Council® (FSC®) Chain of Custody (CoC) program:

“FSC CoC certification ensures that certified wood products are tracked from responsibly managed forests to final paper products to verify that FSC-certified material is identified or kept separate from noncertified material throughout the chain. Through the certification process, SCS conducted an independent review of CPI’s sustainability efforts and verified its use of responsibly sourced products.”

These efforts go above and beyond the actual production quality and investment by getting additional, independent approval of their key sustainability efforts. Both sustainability and reuse will be key topics as the industry prepares for the 2023 holiday season and moves into production for 2024 plans. Augmenting these efforts will be continual gradual shifts into digital cards, which are close to representing 40% of the market and provide a third leg of the sustainability message. Each of these pillars will be required to show full commitment of providers, issuers, retailers and other parties in the prepaid space to and to meet the needs of increasing potential regulations, such as the pending California measure (SB 728)  that aims to eliminate plastic gift cards entirely by the end of 2027.

Overview by Jordan Hirschfield, Director of the Prepaid Advisory Service at Javelin Strategy and Research.

The post Sustainability Trends Emerging in Prepaid Cards appeared first on PaymentsJournal.

About Fresh, the non-profit organization behind the Fresh Connect food prescription program, announced a new partnership with FIS that will add more than 10,000 grocery retail locations to its network. The new locations include large, national brands such as Albertsons, Kroger, and Walmart. Peyton Bigoa of Grocery Dive explains the program in additional detail:

“The expansion lets Fresh Connect consumers buy produce with a prepaid debit card at checkout. The cost of “eligible healthy foods” are automatically deducted from the customer’s total purchase price”

The program is funded through healthcare providers as a method of reducing overall healthcare expenses for individuals who may suffer from food insecurity issues. About Fresh touts its success in helping Medicaid-funded individuals get access to healthier food options, with a reported 74% of cardholders using their card and least once a month and spending upwards of 83% of their benefits.

The connection to the FIS Filtered Spend program enables Fresh Connect cardholders to have covered items deducted from their total spend, using the program funded prepaid card and then paying for the remainder of their groceries with personal funds.

This program capitalizes on trends in both healthcare and prepaid activity. Prepaid programs outside of typical healthcare items like Flexible Spending Accounts and Health Savings Accounts—specifically nutritional assistance programs—can benefit health-related outcomes through increased usage and may benefit from additional messaging. Javelin Strategy & Research data shows that government prepaid programs represent the second highest open-loop utilization among U.S. consumers in following consumer incentive and rebate programs. Additionally, recent research shows that low-income adults with access to the Supplemental Nutrition Assistance Program pay 25% less in annual healthcare costs than similar non-participants. Linking better access to important prepaid programs to secure nutritional assistance and access to critical food supplies increases the opportunities for individuals to reduce healthcare costs both to their insurers and out of pocket.

For About Fresh and its Fresh Connect program, the increased acceptance allows for expansion beyond Massachusetts which will enable broader proof of concept on the linking between access to better nutrition and reduced healthcare expenses. The program also could be a model for expansion of insurer provided wellness and rewards programs that reward individuals for healthy behaviors such as exercise, nutrition and preventative medical care.

Overview by Jordan Hirschfield, Director of the Prepaid Advisory Service at Javelin Strategy and Research.

The post About Fresh Partners with FIS to Expand Food RX Platform appeared first on PaymentsJournal.

Employee incentive programs are an effective way to motivate and reward employees for their hard work and dedication. These programs can come in many forms, from bonuses and promotions to recognition and time off. When implemented properly, employee incentive programs can lead to increased employee morale, job satisfaction, and productivity. Companies that offer these programs often see a decrease in employee turnover and an increase in overall success. It’s important for businesses to carefully design and communicate their incentive programs to ensure they are fair, achievable and align with the company’s goals and values.

Don’t miss another episode of Truth In Data! Click on the red bell in the lower-left of your screen to receive notifications as soon as the episode publishes.

Data for today’s episode is provided by Javelin Strategy & Research’s Report: U.S. Commercial Prepaid Card Market Forecast

Top Reasons for Receiving Employee Recognition

• 62% report it was for Achievement/Recognition
• 38% report it was for Compensation
• 31% report is was for Health and Wellness Goals
• 7% report it was for Other

About Report

Javelin Strategy & Research continues its annual series on market trends with a focus on the commercial prepaid market. Javelin generally expects a positive environment for commercial closed-loop cards with steady growth in non-governmental aspects and more robust growth in government closed-loop programs. In addition, budgetary and inflationary pressure should benefit Incentive programs, while those factors, plus a return to in-store shopping, will help store credits and returns.

Open-loop commercial products will see some stagnation in the short term before recovering. The leading cause of the short-term issues will be the end of the Economic Impact Payments (EIP), a vital element of the federal response to the COVID-19 pandemic. However, the long-term outlook will grow strongly in open-loop with the return to corporate use of open-loop products for expense, event, and incentive programs.

The post Top Reasons for Receiving Employee Incentives appeared first on PaymentsJournal.

In our modern, tech-savvy world, the use of digital wallets has become increasingly popular. These virtual wallets allow for secure transactions to be made with ease, without the need for cash or card. One type of digital wallet that has captured the attention of many is the prepaid option. With a prepaid digital wallet, users can fund their account in advance, allowing for convenient spending without the worry of going over budget or overspending.

Don’t miss another episode of Truth In Data! Click on the red bell in the lower-left of your screen to receive notifications as soon as the episode publishes.

Data for today’s episode is provided by Javelin Strategy & Research’s Report: Prepaid Mobile Expanding Its Use Case in a 5G World.

Apple Pay Payment Services Used in Past 12 Months

• 21% of consumers used Apple Pay for in-store purchases only
• 32% of of consumers used Apple Pay for both online and in-store purchases
• 45% of consumers used Apple Pay for online purchases only

About Report

In short order, the mobile phone market, and with it prepaid mobile plans, have gone from simple and inexpensive voice connectivity to an emerging player as the primary path to deliver internet capabilities worldwide. Currently, the prepaid market offers a steady but varying market presence worldwide, with developed countries using prepaid to augment postpaid subscriptions and developing nations utilizing prepaid as the primary source of accessibility.

The advent of high-speed 5G networks will enable a market shift from voice and data connectivity through mobile devices to a full array of internet services, free from the built-in infrastructure of wired services. This change is starting slowly, adding to incremental market growth in the short term, but will likely explode in the next decade, allowing for significant scale expansion of prepaid options to service a more comprehensive array of potential consumer use.

The post How are Apple Pay Users using the Service? appeared first on PaymentsJournal.

Cryptocurrency coin Baby Doge announced it would soon go live on payment cards backed by a prepaid card issued by Canadian firm FCF Pay, likely as an attempt to create additional market opportunity for the fledgling coin.

Yuri Mochan provides details on the Baby Doge plan in U Today:

“The official account of Baby Doge Coin (BabyDoge) has tweeted that less than 24 hours remain before the virtual crypto card of BabyDoge goes live, powered by Canadian crypto payments platform FCF Pay. Despite the big adoption news on the horizon, BabyDoge’s price is in the red, trading at $0.000000002642; that is, minus 2.45% over the period of the last 24 hours.”

Attaching crypto accounts to prepaid Visa and Mastercard programs provides simple and easy access to crypto owners who want to easily create liquid spending opportunities with their holdings. Established exchanges such as Binance have created repaid programs in certain markets such as Latin America to encourage normalization of crypto as a payment currency as opposed to an unsecured investment opportunity. In these cases, General Purpose Reloadable prepaid cards serve a critical role by providing access to standard payment rails and fiat currency conversion, while also giving users the flexibility to load value as needed.

The key to success for forward momentum in combining crypto and prepaid should involve clear identification of related partners such as the card issuer, as well as reasonable fees to the consumer. Adding nearly valueless meme coins only encourages the adoption of high fees in order to create financial value to the platform. The FCF Pay website highlights fees including $6 for a new card, $3 for a balance refill plus a 3.5% reload fee and a $2 monthly fee. In contrast, the Binance Card, using its issuance in Columbia as an example, reports no card issuance fee, no monthly fees, and a transaction fee of 0.9%. To benefit users there is also a cashback rewards program with their card. Binance also requires KYC identity verification, providing addition layers of security.

Moving crypto from speculative investment to usable currency requires discipline to innovate by taking advantage of established protocols in payments that serve to protect the consumer. The move by Baby Doge appears to be an attention grab for a low value meme coin and the minimal security protections and KYC standards with FCF Pay only exacerbate the poor connotation of crypto instead of highlighting the potential changes within the payments industry.

Overview by Jordan Hirschfield, Director of the Prepaid Advisory Service at Javelin Strategy and Research.

The post Memecoin Payment Cards Overshadow True Utility of Prepaid and Crypto appeared first on PaymentsJournal.

Following in the footsteps of Bed Bath & Beyond, discount home decor retailer Tuesday Morning announced it would be ceasing operations and closing all of its locations. While the exact date of store closures has yet to be determined, the impact on holders of Tuesday Morning gift cards will be immediate. Tuesday Morning’s website provides full details on the closure of its stores and immediate changes at their retail locations. Gift cards and merchandise return cards will be honored through May 13.

The recent news highlights the twofold issue of utilization of prepaid gift cards. While my recent Javelin Strategy & Research report on unused funds highlights that most consumers use gift cards within a month of receiving the card and generally in a single shopping trip, a significant percentage of consumers will have excess balances after 12 months, even if it is just a small percentage of the initial card value. In addition, the hidden gift cards—in the form of merchandise credits—can often add up and become a secondary thought in use of payments.

For consumers, laws around bankruptcies govern the order of who gets repayment. The Absolute Priority Rule determines the order of payments, with secured creditors getting priority for full payment. The remaining money then cascades down the hierarchy, moving through secured claims in order of issue and then to unsecured creditors before any equity holders can be paid out if funds remain. This is highlighted in an explanation from the O’Bryan Law Offices:

“Under the Absolute Priority Rule, the claims towards the bottom of the aforementioned hierarchy should not receive any money from the debtor until the claims towards the top received full recovery. Based on this process, the claims at the bottom often receive little to no money. This hierarchy is a ‘fair and equitable’ treatment plan for creditors according to the U.S. Bankruptcy Code.”

Moving forward, other potential bankruptcies and liquidations could be imminent, with recent news on David’s Bridal, Party City, and others. Consumers frequenting these retailers should be on alert to spend remaining gift and merchandise credit balances quickly to ensure maximization of their funds. Gift card vendors, incentive management organizations, and others must also carefully consider which retailers to spotlight and offer to ensure that their customers have a vibrant choice of options with limited ongoing risk to the intended final card recipient.

The vast majority of gift card use will continue to be unaffected by the current slate of potential liquidations and consumers can feel confident in utilization of any gift cards they hold. In general, the retailers currently struggling with bankruptcy or closures have much less utilization of gift cards compared to larger and more stable retailers. As an example, Tuesday Morning reported just $1 million in accrued remaining gift card liability in their fiscal year 2021 annual report. As a counter to that, Target reported in excess of $1.2 billion in upstanding liabilities in both fiscal 2021 and 2022, indicating a much larger use and remaining balance of gift cards.

Javelin Strategy & Research supports this usage with consumers preferring large scale mass merchandisers such as Target or Walmart, as well as large online retailers such as Amazon or eBay. In addition, the research indicates other popular gift card usage occurs with food and beverage retailers such as Starbucks, McDonalds or Chick-Fil-A—which have more recurring gift card use and also lower card values in relation to the lower price points.

Overview by Jordan Hirschfield, Director of the Prepaid Advisory Service at Javelin Strategy and Research.

The post Continued Retail Bankruptcies Highlight Need to Utilize Gift Cards appeared first on PaymentsJournal.

Prepaid products are a convenient and flexible option for those looking to manage their expenses. By preloading a set amount of funds, prepaid products are a great way to stay within budget and avoid overspending. Not limited to just phone cards, prepaid products include gift cards, transit passes, and even prepaid debit cards. These options make it easy to give gifts, commute to work, or make purchases online without having to use a traditional credit or debit card. Plus, there are often no credit checks needed to obtain prepaid products, making them accessible to those with limited or poor credit history.

Don’t miss another episode of Truth In Data! Click on the red bell in the lower-left of your screen to receive notifications as soon as the episode publishes.

Data for today’s episode is provided by Javelin Strategy & Research’s Report: Outside Regulatory Forces Impact Prepaid Market

Impact of current economy on your decision to purchase prepaid card products?

• 10% – much less likely to purchase prepaid card products
• 11% somewhat less likely to purchase prepaid card products
• 54% – neither more nor less likely to purchase prepaid card products
• 16% – somewhat more likely to purchase prepaid card products
• 9% – much more likely to purchase prepaid card products

About Report

In an uncertain economic environment, the payments industry will need to react to both micro and macro issues. Large-scale policy changes meant to fight inflation, deal with unemployment, and address other macro conditions will be the primary drivers of change in the prepaid market. Secondary drivers include broad and local efforts to curb money laundering and fraud as well as increases to saving products like Flexible Spending Accounts (FSA) and Health Savings Accounts (HSA).

Indirectly there are varying levels of regulation meant to create change in other payment verticals, primarily credit, that will have long-lasting changes in the prepaid market. Continued efforts to cap interchange fees could have secondary impact on loyalty programs, which drive large volumes of prepaid business as a secondary avenue for utilization of rewards. In addition, continued potential to regulate cryptocurrencies could benefit prepaid mechanisms that look to easily convert crypto to fiat currency at point of sale.

The post Do Current Economic Conditions Change the Purchase of Prepaid Cards? appeared first on PaymentsJournal.

There’s a lot of bad press when public companies report how much gift card liability they have, but it doesn’t automatically mean that a company is utilizing those funds for financial gain.

“Take Starbucks, for example. It’s reporting over a billion dollars in liability in their annual report,” said Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research. “That looks like a massive number, but they have $13 billion in sales. So the liability left over is around 8%.”

In his recent report, Unused Value in Prepaid Cards: Breaking the Misconceptions, Hirschfield delves into gift card liability and why it may be considered a misleading term. The report also examines how businesses can strengthen and maintain their prepaid programs and encourage the spending of unused balances.

Breaking Down Breakage

When a gift card is purchased it’s not recorded as revenue—it’s considered a liability because someone still has to redeem it.

That’s likely where the misconception around liability comes from, because when reporting on quarterly revenues, companies indicate how much gift card liability they have. And many people who see a lot of prepaid liability on a company’s balance sheet take that to indicate that the company is using the liability or breakage to boost revenues artificially.

Companies don’t actually generate revenues from the outstanding gift card balances. They can, however, invest it and earn interest on it. Companies term the money that never gets redeemed as “breakage,” which is distinct from liability and is generally applied for funds determined by formulas set by the company based on long term disuse.

For example, Starbucks had around $190 million dollars in breakage in 2022. That is a significant sum of money, but compared to the $13.5 billion that it’s selling every year in prepaid cards, it’s not necessarily impacting the company’s bottom line.

“Javelin estimates breakage averages out across the industry to about 1.5%,” Hirschfield said. “Starbucks, for example, has breakage just slightly above that figure at 1.6%.”

Every company has a formula to calculate breakage. “Usually companies consider gift cards that are five years as unredeemed breakage,” Hirschfield said.

Interestingly, not everyone reports their breakage.

Liability is an accounting term for the amount that they know will be redeemed in the future. “They can’t book it as revenue,” Hirschfield said. “But the likelihood is, it’s going to be redeemed fairly quickly.”

Learn more about what happens to balances on unused prepaid cards, the regulatory issues issuers and prepaid managers need to be aware of when they consider unused value, and how consumer behavior is affecting the use of gift cards and stored-value accounts.

The post Understanding Gift Card Liability appeared first on PaymentsJournal.

As the hype of return to office dies down, and the realities of increased vacancies—due to shifts towards hybrid and virtual work scenarios—become clear, commercial real estate firms are experiencing additional financial pressure, with defaults becoming more likely.

This reality will have a knock-on effect on how commuters travel to work and the methods in which transit agencies work to understand and adapt to adjusted travel patterns. Bloomberg’s John Gittelsohn adds detail on the commercial real estate situation:

“Some landlords are defaulting on debt as borrowing costs surge and the prospects of filling up office towers wanes given the rise in remote and hybrid work. Those trends have weighed on values, with prices on high-quality office properties falling about 25% in the past year, according to Green Street. About 4.8% of office properties with CMBS were managed by special servicers in March, up from 3.2% a year ago, according to Trepp.”

The Bloomberg article highlights Brookfield Corp. defaulting on a $161 million mortgage covering 12 separate properties in the transit rich Washington D.C. market. These realities are not lost on transit systems that are working to make postpaid options easier for occasional travelers. In Atlanta, The Metro Atlanta Rapid Transit Authority (MARTA) recently updated its mobile app system, with a greater push towards occasional riders. MARTA officials describe the push in an article in the Atlanta Voice:

“‘One of the most common customer requests is a way to conveniently pay for each ride as you go, rather than having to load a card or stand in line to buy a ticket at the ticket machines,” said MARTA Chief Customer Experience Officer Rhonda Allen. “This updated Breeze Mobile 2.0 app lets you pay-as-you-go. Just scan your phone on the bus or at the faregate and you’re on your way.’”

My recent Javelin Research & Strategy Impact Note, Return to Office Doesn’t Equal Return to Patterns in Prepaid Transit, describes this phenomenon in further detail. While MARTA’s new system does not exclude prepaid options, the clear marketing promotion is geared towards enticing occasional riders to have easier access to one-off postpaid rides. MARTA’s marketing push focused solely on the ability to purchase tickets in singular fashion, with little to no mention of adding stored value accounts or available discounts for multiple ride passes or fixed term daily to monthly passes. Dedicated riders will still have access to these options within the Breeze app, but the feedback received, as well as the trends of ridership, point towards growth coming from individual ticket purchasers.

Interestingly, the worlds of commercial real estate woes and easier access to the recreational use of mass transit are intersecting in Atlanta, as developers are looking to convert the former CNN Center complex in downtown Atlanta into residential units. This plan would give residents direct access to a MARTA station in the building, reversing the idea of use to commute to work and instead provide options to use the station on an as-needed basis for both residents and guests at the attached hotel in the complex.

Overview by Jordan Hirschfield, Director of the Prepaid Advisory Service at Javelin Strategy and Research.

The post Commercial Real Estate Woes Impacting Transit appeared first on PaymentsJournal.

Prepaid cards are rapidly gaining popularity as an alternative to traditional credit and debit cards. Unlike debit cards, which are tied to a bank account, they can be loaded with a specific amount of money and used anywhere that accepts card payments. They are also a safer option for those who do not have a credit history or want to avoid overspending. With these cards, there are no overdraft fees, credit checks, or interest charges. They are ideal for budgeting, travel, or online shopping. They have evolved to offer a range of benefits and features, including cashback rewards, fraud protection, and mobile apps for managing your spending.

Don’t miss another episode of Truth In Data! Click on the red bell in the lower-left of your screen to receive notifications as soon as the episode publishes.

Data for today’s episode is provided by Javelin Strategy & Research’s Report:19th Annual U.S. Open-Loop Prepaid Card Market Forecast

5 Top Prepaid Cards Purchased or Received

• 63% In-Store Retailer Gift Cards
• 40% Online Merchant-Specific Gift Cards
• 36% Card Network Prepaid/Gift Cards
• 15% Prepaid Phone Cards
• 14% Prepaid Gas Cards

About Report

Javelin Strategy & Research continues its annual series on market trends in the open-loop prepaid market. Javelin expects a robust environment for the prepaid ecosystem, with the largest segments; general purpose open-loop gift and financial services cards trending strong. Consistent with past years, economic conditions play a large role in the outlook of individual products. Budgetary and inflationary pressure should advance unemployment and benefit cards, and items stressing budgetary constraint, while travel, business cards, and other items representing discretionary spending will have a more negative outlook.

Javelin research indicates American buyers show positive outlook on the market as a whole, but the benefits will be less visible in open-loop categories. The research highlights healthy spending patterns in these cards as well as frequency of purchases, with ancillary benefits to retailers when consumers spend beyond their card balance, extending revenue opportunities because of the use of a prepaid card.

The post What Type of Prepaid Cards do Consumers Purchase/Receive? appeared first on PaymentsJournal.

Loyalty programs are a great way for businesses to reward their customers for their continued patronage using consumer incentives. Many companies offer customers the option to enroll in a loyalty program by signing up for an account, allowing customers to accrue points and rewards along the way. These benefits often come in the form of discounts, free items, and even gift cards. Depending on the company’s offerings, customers could receive discounts on future purchases or exclusive access to new products before they become available to everyone else.

Don’t miss another episode of Truth In Data! Click on the red bell in the lower-left of your screen to receive notifications as soon as the episode publishes.

Data for today’s episode is provided by Javelin Strategy & Research’s Report:19th Annual U.S. Closed-Loop Prepaid Card Market Forecast

4 Top Types of Consumer Incentives Received

• 38% received a consumer incentive for a store credit
• 38% received an incentive for a cash back offer from debit/credit card
• 37% received an incentive for an additional purchase
• 34% received an incentive for a rebate

About Report

In general, Javelin Strategy & Research expects a robust environment for the prepaid ecosystem. This includes top categories such as in-store gifting enjoying strong trends. Consistent with past years, economic conditions will have a give-and-take effect on several products. Budgetary and inflationary pressure should benefit the areas of transit, nutrition assistance, and consumer incentives, while petroleum and tolls may recede. Products such as campus cards and consumer incentives will continue to rebound after being negatively affected in the 2020-21 pandemic era.

Consumer sentiments remain positive overall, with American buyers showing strong overall belief in the closed-loop market. Javelin research highlights healthy spending patterns in prepaid cards as well as frequency of purchases, with ancillary benefits to retailers when consumer overspend beyond their card balance, giving an extension of revenue opportunities because of the use of a prepaid card.

The post 4 Top Types of Consumer Incentives Received appeared first on PaymentsJournal.

Consumers utilizing the Mississippi Affordable College Savings (MACS) program will soon have the ability to add and utilize a prepaid debit card to pay for qualified higher education expenses. Biancca Ball from WJTV in Jackson, MS adds additional details on Mississippi’s initiative:

“MACS account holders can now enroll and manage their MACS529 Card as an extension of their MACS account. Using a single login, and without having to work through any third-party intermediaries, account holders can view card balances and transaction history, as well as manage plan distributions.”

The ability for account holders to simplify purchase options for qualified incidental items adds a new and simple innovation to ensure use of accounts, as well as simple options to abide by 529 plan policies. The card runs on Mastercard’s debit network, giving nearly ubiquitous access for consumers to make purchases at retail locations and through e-commerce platforms.

Similar to cards utilized for Health Savings and Flexible Spending Accounts that restrict purchases and may require secondary approvals, Mississippi’s 529 plan card program only allows for purchases of specific, qualified expenses. In the case of 529 accounts, users can purchase items such as tuition, textbooks, supplies room and board in higher education settings. Conversely, education related expense for items such as insurance, travel or extracurriculars typically are not covered. Account holders are also tied to cost of attendance limits that are tied to individual school’s and can vary, making tracking acceptable limits difficult. A prepaid card can determine qualified expenses but will likely not be able to be capped based on individual school cost of attendance limits.

Regardless, the Mississippi plan creates a direct tie in to simply the reimbursement process. There are other examples of third-party cards, such as EduFi that can link to a variety of 529 plans and offer similar services. The MACS plan currently has slightly more than 16,000 accounts with total assets under management of $297M according to the National Association of State Treasurers. While the majority of the assets are still long term investments, more utilization of a reloadable prepaid card can only increase the current Javelin prediction of 6% CAGR in the cash access card vertical as outlined in the 2023 Prepaid Card Data Book. Additional 529 plan investment in prepaid programs could easily create a powerful new tool for consumers to more easily access savings while also expanding the functionality of prepaid programs to a new and growing vertical.

Overview by Jordan Hirschfield, Director of the Prepaid Advisory Service at Javelin Strategy and Research.

The post Mississippi Links 529 Plan to Prepaid Debit Cards appeared first on PaymentsJournal.

This year’s Transport Ticketing Global brought together stakeholders in the transport and smart mobility ecosystems from around the world for two days of insightful keynotes, panels and discussions on the key trends in ticketing, including Account Based Ticketing (ABT), open payments, and Mobility-as-a-Service (MaaS).

Many topics were discussed by major players in the space—from payment schemes to operators and authorities—and a few key themes stood out.

Transport Ticketing: Bouncing Back from the Pandemic

The transport ticketing ecosystem has been faced with a number of unprecedented challenges over the past few years. The COVID-19 pandemic, and resulting lockdowns, caused passenger numbers to reduce significantly. The subsequent rise in home working and cost of living crisis have meant that passenger numbers have still not recovered to pre-pandemic levels.

However, transit operators and authorities have been resilient in ensuring they continue to provide a vital public service. They have adapted to new passenger behaviors by implementing innovative ticketing solutions that offer increased fare flexibility to meet the needs of their network. This has led to a general optimism regarding the future of the transit ecosystem, with passengers now presented with ticketing solutions that make public transport simpler, more cost-effective, and convenient.

Furthermore, the pandemic presented operators with an opportunity to carry out some of the long overdue upgrades to their networks. Passengers’ familiarity with EMV contactless payments meant that open loop systems based on such architectures could be seamlessly implemented, with remarkable usage rates. The prevailing view at Transport Ticketing Global is that this has set up many operators and authorities—especially those in less developed areas—with the future facing ticketing architectures they need to implement advanced and future-proof solutions.

Cross-Border Ticketing and Fare Integration

Another major theme that came out of the conference was the discussion around fare integration and cross-border ticketing. Passengers are increasingly calling for their journey to be made as seamless as possible. To meet this need, new Mobility-as-a-Service (MaaS) initiatives promise to deliver door-to-door travel. However, customer expectations now extend beyond the boundaries of travel within a single city. MaaS initiatives must consider a way to integrate operators and authorities from multiple cities and even countries, into one large-scale network to provide a smooth passenger journey.

This cross-border integration presents several complex challenges. Every transport operator and authority have specific governance models and want to retain control over their relationship with the passenger. When creating a MaaS system at such a scale, the number of stakeholders all aiming to own that relationship grows to include multiple local governments, various solution providers and payments providers. In addition, fare structure and logic may be different in each location, increasing the complexity of meeting interoperability requirements and making pricing harder for travelers to understand.

Discussions at the conference did not lead to predictions of disruptive technologies that would simplify these large-scale network integrations in the short term. Therefore, the primary focus remains on the customer experience. We expect fare integration to be a focal point for networks looking to implement ABT and MaaS in the coming years, with an emphasis on enhancing payment choices.

The Ongoing Digitization Movement

While digitization of ticketing is nothing new, it’s important that the transport ticketing ecosystem continues to recognize that the way we handle money is changing. Fewer people are using cash for any sort of payment, and transport ticketing must adapt to this.

To meet this demand, many operators and authorities are swapping legacy smartcard-based systems, that require users to add credit at a machine, for mTicketing. This gives those utilizing solutions such as ABT a new and integrated way to store and manage passenger data and travel tendencies by leveraging the capabilities of the user’s smartphone. This also supports the wider trend of dematerialization, as less smartcards are being produced.

However, as this digitization trend continues, it is imperative that no passenger is left behind. Delegates at the conference were mindful that unbanked passengers or those without smartphones still represent a notable demographic within public transport users. Such individuals may not be able to access ticketing if it is purely based on EMV open loop. Therefore, any digitized system must still have provisions in place to make sure these individuals are not excluded.

Finding the Right Transport Ticketing Solution for Your Network

Transport Ticketing Global highlighted the exciting direction that transport ticketing is heading in. The main themes of upgraded architectures, MaaS and the trend towards digitization were accompanied by discussions around longer-term projects to enrich ticketing. Facial recognition tools to authenticate a passenger’s right to travel, and utilizing the geolocation features of a passenger’s smartphone were both proposed as innovative case studies. However, each of these still have a long way to go until they can reach widespread adoption due to considerations around consumer privacy.

The conference has highlighted that the ticketing ecosystem is undergoing rapid change. New technologies, infrastructures, and integration projects shall be delivered at a faster pace than in the past.

Ranald Freestone, Senior AFC Consultant at FIME, and Vincent Dulaquais, Smart Mobility Senior Business Development Manager at FIME, co-authored the article with Arnaud Depaigne, Smart Mobility Product Manager at FIME.

The post Talking Transport: Key Takeaways from Transport Ticketing Global 2023 appeared first on PaymentsJournal.

Fraud is rampant on funds distributed by the Supplemental Nutrition Assistance Program (SNAP) for the needy, and both state and federal governments are having a hard time mitigating it, according to The Economist.

According to estimates from Haywood Talcove of LexisNexis Risk Solutions, fraudsters could steal up to $20 billion from SNAP over the next six months, which amounts to a fraud rate of 15%. The actual amount of fraud is difficult to measure, as it is often underreported, and the government’s estimates of fraud rates vary widely. The USDA notes a much lower fraud estimate: 0.02%.

“Moving towards contactless payments creates a fully modern process to SNAP programs,” said Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research. “This combined with utilization of prepaid mobile phone programs establishes a fully universal mobile payment option, inclusive of prepaid debit cards, gift cards and benefit cards, for underserved and unbanked communities wrapped into a mobile wallet.”

There’s no doubt that fraud is increasingly rampant. Fraudsters typically gain access to the funds through phishing, card skimming, and finding customer information on the dark web. Fraud due to phishing and card skimming has become a significant problem in recent years, and the pandemic has only exacerbated the issue as the government distributed even more funds than usual.

Phishing, a tactic used by fraudsters to obtain personal information from individuals by posing as a trustworthy entity in electronic communication, is continuing to increase. This can include emails or messages that encourage people to reveal their account numbers, private identification numbers, and other important data. Once fraudsters have this information, they can use it to steal money from bank accounts or make fraudulent purchases.

Similarly, card skimming, is also evolving. It involves placing illegal gadgets over card readers and other devices to steal account information when someone swipes or inserts their card. This information can then be used to create counterfeit cards or make fraudulent purchases. Criminals can also sell this information on the dark web.

While it may be difficult to target phishing schemes, card skimming can be effectively made a non-issue by moving to contactless payments. A recent article in PaymentsJournal noted that the USDA is piloting contactless prepaid payment systems, which should help.

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In an effort to advance electronic payment systems and boost financial inclusion, Qatar Central Bank (QCB) has launched a national prepaid card named, “Himyan.” According to DohaNews, the prepaid card can be used for point-of-sale transactions, e-commerce, and ATMs within Qatar.  

What This Means for the Underbanked and Unbanked 

Named after an ancient Arabian money bag, the Himyan card will offer a secure and convenient way to both use and receive funds, especially for those who lack access to traditional banking services and products.  

National prepaid cards enable residents to withdraw cash, pay bills, and make purchases, much like a debit or credit card. However, in contrast to debit and credit cards, national prepaid cards are not tied to a credit line or bank account. National prepaid cards are typically issued by a financial institution supported by a nation’s government—or it can be issued by a government agency.  

The card can be loaded by transfers from other financial accounts, cash deposits from authorized locations, direct deposits from government benefits, and direct deposit from wages.  

As a registered trademark, Himyan is considered the first national prepaid card with a registered Qatari brand in Qatar.  

Speaking of the launch, Omar Abdulaziz al-Meer, chief (Corporate Sector) at QIIB said: “The initiative of Qatar Central Bank to launch Himyan Card deserves great praise and appreciation for providing a realistic and appropriate alternative to various payment solutions, as it is compatible with the various applicable banking systems and solutions within the State of Qatar. Himyan Card by QIIB is a unique addition to our product portfolio and another step forward in QIIB and QCB’s strive for a cashless society.” 

We have covered the usefulness of prepaid cards, especially for segments of the U.S. population that continues to be underbanked or unbanked.  

The post Qatar Launches National Prepaid Card, Himyan  appeared first on PaymentsJournal.

Binance is launching a prepaid cryptocurrency card in Columbia, following its debut in Argentina last August.

“The staggered launch pattern allows Binance to evaluate the marketplace, with key interest in Latin America and provide an important outlet to easily convert crypto into fiat currency,” said Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research. “This step is a needed next step to better integrate crypto into traditional commerce and prepaid debit cards create the right environment to actualize that opportunity.”

Binance is partnering with Colombian company Movii to produce the cards. Movii provides digital banking services and mobile payments solutions to individuals and businesses.

Movii’s mobile app allows users to create a digital wallet that can be loaded with funds via bank transfer, credit card, or cash deposit. Once the wallet is funded, users can make payments to merchants or other users by entering their mobile phone number or scanning a QR code.

When Binance customers use the prepaid cryptocurrency card, the crypto will be converted to local currency in real-time. Users pay with whichever cryptocurrency they choose from the 12 cryptocurrencies Binance supports. Cardholders will also be able to check their transaction history and access customer service through the card’s dashboard. Top of Form

Combining prepaid cards and cryptocurrencies can provide users with a convenient and accessible way to store and spend their digital assets, while also taking advantage of the benefits of traditional payment networks.

Binance’s partnership with Movii fits with the trend of cryptocurrency companies partnering with fintechs to expand the reach of their exchanges. For the general public, cryptocurrency exchanges have been rather niche, particularly because there has been little use for crypto in day to day purchasing. Partnering with other fintech companies allows cryptocurrency platforms to offer a wider range of financial products and services is helping to change that.

The post Binance Launches Prepaid Crypto Card, Partners with Movii appeared first on PaymentsJournal.

As cable companies push into the mobile industry with large growth, T-Mobile remains unconcerned with overall attrition to cable competitors and reported large overall growth and small, but significant, prepaid growth. The Motley Fool’s Adam Levy provides a rundown of T-Mobile’s earnings and subscriber growth:

“The carrier added 927,000 postpaid phone subscribers in the fourth quarter and eked out an additional 25,000 prepaid subscriber additions… (T-Mobile CFO Peter) Osvaldik suggested a lot of the growth at Comcast and Charter is coming from customers switching from prepaid plans to postpaid plans. He also called out Verizon as a major contributor to cable’s wireless subscribers. Indeed, Verizon lost 175,000 prepaid subscribers in the fourth quarter, and it struggled to add phone subscribers throughout 2022.”

T-Mobile’s results support Javelin’s predictions of slow and steady growth overall for prepaid services. Javelin predicts a CAGR of slightly more than 1% from 2023-2026 in prepaid minute and data revenue. Verizon, even with its losses this year, should continue to have a slight lead on subscribers over T-Mobile and AT&T.

T-Mobile believes that cable’s high use of promotional tools to lure customers creates an unsustainable model and appeals more to prepaid consumers. This makes sense as consumers who rely on prepaid phone plans are more likely to come from underserved and underbanked communities. These customers could be enticed by large scale promotions presenting free or discounted wireless service when linked to bundled cable and broadband services.

The continued development of Fixed Wireless Access, still in its infancy, lends credence to T-Mobile’s long-term stance. As I covered in my December 2022 report, “Prepaid Mobile Expanding Its Use Case in a 5G World,” the future marketplace may see a shift from wired to wireless. The advent of high-speed 5G networks creates an ecosystem that can support a market shift from simple voice and data connectivity through mobile devices to a full array of internet services, free from the built-in infrastructure of wired services. The marketplace is already starting to see some shift into these areas, although cable companies are spending heavily on commercials to push the message that FWA signals degrade easily with additional wireless traffic.

As the marketplace develops, prepaid FWA could help wireless providers reverse trends of low switching costs and I fact could use FWA to bolster prepaid opportunity, especially with government aid from the Affordable Connectivity Program. The program reduces hardware barriers to entry and extends offers of stipends of up to $30 a month for qualifying internet service. This program, is ideally suited to help consumers attracted to prepaid programs.

Overview by Jordan Hirschfield, Director of the Prepaid Advisory Service at Javelin Strategy and Research.

The post T-Mobile Postpaid Growth Outweighs Short-Term Prepaid Concerns appeared first on PaymentsJournal.

U.S. Bank announced earlier this week in a filing that the Consumer Financial Protection Bureau is stepping up its ongoing investigation into the bank’s prepaid unemployment card program. This is the latest in a series of CFPB investigations into several banking providers of prepaid cards for unemployment benefits. Polo Rocha writes further on the U.S. Bank inquiry in American Banker:

“The Minneapolis company, which disclosed the CFPB’s investigation late last year, said in a filing Monday that the agency is now “considering a potential enforcement action” and that U.S. Bancorp is cooperating fully with all pending examinations. The CFPB probe centers on unemployment benefits disbursed during the pandemic. A spokesperson for U.S. Bancorp, the parent company of U.S. Bank, declined to comment beyond the public filing.

Banks that work with state governments to administer unemployment insurance programs have faced a series of problems since the start of the COVID-19 pandemic. Though details of the U.S. Bancorp probe are not publicly available, other banks have faced fraud-related concerns due in part to expanded benefits during the pandemic.”

While full details of the CFPB unemployment card investigation into U.S. Bank are not clear, the precedent with other banks highlights the push by regulators to increase oversight on service related to unemployment programs. Bank of America incurred at $225 million fine split between the CFPB and the Office of the Comptroller of Currency in July. BOA was cited for freezing accounts for likely fraud, when in fact no fraud had occurred. Fraud detection, while a critical step to ensure government funds are spent correctly, remains a difficult process. While the prepaid card products provide important and necessary convenience for unemployment recipients, especially those in underbanked or underserved communities, the process to rectify issues as a customer service opportunity can be burdensome. This process is analogous to the increased scrutiny for P2P Fraud that banks are also dealing with which my colleague Suzanne Sando predicts in Javelin’s will increase in the coming year, forcing financial institutions to create improved processes.

Prepaid cards to provide unemployment benefits have been a positive revenue source for banks providing programs but the marketplace remains volatile. However the oversight necessary, likely combined with the drop in claims could create a gap in the marketplace. KeyCorp recently announced that it was ceasing to offer unemployment cards, despite the potential loss of revenue. While not directly attributed to the current U.S. Bank investigation, the State of Pennsylvania recently dropped the U.S. Bank product in favor of Money Network. These changes come in the face of a steady state market place, with small anticipated growth as discussed in my recent report, 2023 Prepaid Card Data Book: 11 Essential Metrics, which projects Government programs, inclusive of both open and closed-loop products, to rise at a 3 % growth rate through 2026.

Overview by Jordan Hirschfield, Director of the Prepaid Advisory Service at Javelin Strategy and Research.

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Managing business travel expenses is a hot topic in the industry, especially as travel continues its strong recovery from the pandemic. According to the latest GBTA Business Travel Outlook, 55% of travel buyers and procurement professionals reported they will take more business trips in 2023 than 2022 and 42% are expecting budgets for travel program operations to be higher.

Recently, American Express announced the development of a set of expense management solutions aimed at improving the expense management process for business travel. Microsoft will be running a pilot program with its own internal systems this year and the product is planned to rollout over time to American Express Corporate clients. In the press release, Gunther Bright, Executive Vice President, Global Commercial Services at American Express, gives an apt description for the expense reporting process, “Expense reports are a necessity, but we all hate doing them.”

Major providers are trying to enhance their offerings to make travel spend management easier. According to a new American Express Expense Management Trendex survey conducted between Dec. 16 and Dec. 20, 2022—among 1,000 business travelers and 300 business travel expense processors—nearly 94% of travel expense processors and 76% of business travelers report there needs to be more innovation around the expense report management processes. When describing their employer’s current expense management process, 52% of business travelers reported a negative reaction.

Business travelers and expense management professionals are used to using travel B2C technologies that are convenient and seamless. For example, it only takes a few clicks on their favorite ride-sharing app to order a vehicle, the app gives them payment flexibility, and they have control over their travel experience. Business professionals expect these types of experiences in their everyday workday.

Modern expense management platforms automate manual reporting processes saving time and money for accounting and finance teams. It’s no secret that business travelers and processors alike, do not enjoy the entire process of receipt management and filling out expense reports.

We particularly enjoyed this datapoint from the survey:

Overview by Ben Danner, Senior Research Analyst at Javelin Strategy & Research.

The post Continued Innovation in Business Travel Expense Management appeared first on PaymentsJournal.

Pennsylvania’s Treasury Department announced recent changes to recipients of their Unemployment Compensation benefits or Workers’ Insurance Fund that currently receive benefits through prepaid debit cards. Joe Zlomek, managing editor of The Sanatoga Post, provides full details on the changes to the state program:

“Money Network prepaid debit cards, issued by My Banking Direct, will replace U.S. Bank ReliaCards currently in use, the department said. For those who receive benefit payments on prepaid debit cards, the new ones are expected to be mailed beginning March 6.

The number of people affected by the change will vary depending on claims, but the state anticipates about 47,000 claimants receive Money Network prepaid debit cards by the end of March. Nearly all of those will be unemployment compensation recipients.”

What This Means

This change highlights two key aspects of the use of general purpose reloadable (GPR) prepaid cards for use in government programs like unemployment claims. The first is the increasingly popular option to include prepaid cards for government benefits. As I covered in my recent report, 2023 Prepaid Card Data Book: 11 Essential Metrics, government programs, inclusive of both open and closed-loop products, are rising at a 3 % growth rate through 2026 following the anticipated decline driven by the temporary spike in unemployment in 2020.

Government-driven mechanisms such as unemployment benefit cards also represent the third-largest segment of all open-loop cards following cash access cards and payroll cards. These cards represent a great advantage for recipients, who many times are unbanked or underbanked. The access to prepaid debit cards provides recipients easier access to both physical and e-commerce opportunities without the expense of cash checking facilities or the need to purchase additional prepaid cards, often with additional fees.

The other aspect that this change brings up is potential for lost value. As the article points out, balances will not be transferred from one program to the other:

“Any balances remaining on U.S. Bank ReliaCards will not transfer to the new Money Network prepaid debit cards, the Treasury noted. Those with remaining funds on U.S. Bank ReliaCards® should continue to use the card until it reaches a zero balance. Remaining funds can also be transferred to a personal savings or checking account.”

This aspect brings up important and sometimes overlooked aspects of the utilization of GPR prepaid cards. When cards are frequently reloaded, as is the case with unemployment benefits, it is unlikely that the balance of the card reaches no value before addition funds are loaded. In this case, recipients of the benefits must be sure to check the balance of their card and take steps to spend the funds on the former program. As I’ll write about in an upcoming report on unused prepaid funds, the escheatment process and process to seek unclaimed property, such as an unused and registered prepaid card, varies by state. In the case of Pennsylvania, unclaimed balances would sit dormant for three years before being assigned as unclaimed property. Those receiving benefits must be aware of how to utilize their funds and check frequently in the future if any unused funds are eligible to be returned to them from the state.

The post Pennsylvania Switches Unemployment Card Network appeared first on PaymentsJournal.

A trio of companies, Finnish FinTech’s Enfcuce and Epassi along with French banking startup Welcome.Place, have partnered with Visa to launch a prepaid card program to assist Ukrainian refugees. Gloria Methri of IBSintelligence highlights details on how the program provides the refugees with a leg up after arriving in France:

“As part of its “Welcome Package”, refugees and immigrants arriving in France will receive a prepaid Visa card that is pre-loaded with funds to facilitate spending on a range of items and services within their first weeks in the country. Enfuce and its partner Epassi will facilitate the card issuing and physical card distribution.

Supported by Enfuce’s cloud-based processing platform, Welcome.Place can also remotely set full spending controls on each card, including where and how it can be used, with full tracking and monitoring of how money is spent”

The program identifies a key benefit of the utilization of prepaid cards to assist unbanked people in gaining access to modern payment and commerce channels. While this program specifically highlights the need of assisting financial inclusion for refugees, the overall essence of the service can be replicated for any group that is typically unbanked, either through economic status, immigration status age or other factors.  

Charitable Grant Funds

In addition, the ability to utilize card networks and other technology can help systemic issues around the use of charitable or government grant funds. A program sponsor, such as Welcome.Place, can provide access to donated funds to individuals while also establishing guardrails to ensure that the funds that have been donated are used appropriately and efficiently. If combined with the ability to reload cards, users can then also more easily add their own earned funds to their cards to further access products and services.

Once a card is in circulation, the benefits for consumers, both banked and unbanked, can be critical with even more benefit for unbanked Americans.

Features of GPR Cards

Mercator Advisory Group research of American prepaid card consumers shows that 47% of people that utilize a general reloadable prepaid card will employ direct deposit to add additional funds to their cards. In addition, more than 60% value the ability to utilize a mobile app in order to deposit physical checks into their GPR card account. The combination of these features desired by consumers and the innovations of fintechs and card providers to service underrepresented communities through prepaid cards creates an easy path to follow to grow access and while adding interchange revenue opportunities for the program sponsors. Katherine Brown, VP and Head of Inclusive Impact & Sustainability of Visa articulates the mutual benefit of all parties in the IBSintelligence article.

“‘Accelerating access to the mainstream monetary system improves prospects for rebuilding a life in a new environment, and therefore Visa is proud to work with Enfuce to enable a Welcome.Place to those affected by forced displacement,’ said Brown.”

As economic and geopolitical conditions remain in flux in 2023 the linking of fintechs, banks and payment systems to utilize prepaid cards will be a key market to monitor for additional development.

Overview by Jordan Hirschfield, Director of the Prepaid Advisory Service at Mercator Advisory Group.

The post Visa Prepaid Cards for Refugees Highlight Service for the Unbanked appeared first on PaymentsJournal.

United Kingdom based Starling Bank announced a new program to encourage account holders to create budgeted spending accounts. The program will utilize digital prepaid debit cards as a tool to provide customers with specialized cards for specific purposes. Tom Phillips of NFCW provides more details: 

“Customers of Starling Bank in the UK can now set up dedicated ‘Saving Spaces’ for up to five different kinds of expenditure and then create a virtual card for each one that they can use to make payments online and in stores directly from the funds they’ve specially set aside.” 

The move by Starling Bank highlights a key opportunity for financial institutions (FIs) to provide additional tools to customers. These tools encourage budgeting by taking advantage of easy to implement technology. And empower customers to have new options within their traditional accounts. Starling’s program allows customers to take advantage of their digital wallets and near-field communication (NFC) enabled devices. Customers can spend pre-allocated funds on each card without fear of over drafting. And they do not need to utilize credit instead of funds on hand. This theme highlights a key component of my recent Mercator Advisory Group Viewpoint. The viewpoint covers the many ways prepaid providers can utilize their strengths. They can use these as a way to help consumers maintain their budgets in this era of inflation. 

Themed Spaces

In the Starling Bank program, customers can establish different themed spaces to fund and draw from those spaces to pay for the specific activity. The NFCW article explains further: 

“Starling customers can have up to five virtual cards at any one time and can choose a different colour for each one, free of charge,” the bank says. 

“Each virtual card is assigned to a dedicated Space in the Starling app that can be personalised to give customers more control over their budget. Payments can be made directly from a Space, such as a daily bus fare from a ‘travel’ Space or food from a ‘groceries’ Space, rather than coming out from the customer’s primary account.” 

Encourage Smart Spend

This idea works well. Data shows that specific household costs for food (rising at 11.4%) and energy (rising at 23.8%) are driving changes. The overall consumer price index 12 month changes are up 8.3% as of the end of the summer. This is according to the U.S. Bureau of Labor Statistics. In addition, credit interest rates are increasing and occurrences of credit defaultsare growing. FIs benefit by encouraging customers to spend smartly. Providing card access through prepaid and digital cards allows FIs to be seen as thought leaders. They are seens as working to the benefit of their customers, helping shake the old connotations that they are looking to nickel and dime customers through fees and charges.  

Combining prepaid digital card programs with increased educational information will also benefit FIs by creating better understanding of how customer should spend money. The customer benefits by being more financially educated while banks add opportunity to earn indirect interchange fees in place of the fees charged directly to customers. 

Overview by Jordan Hirschfield, Director of the Prepaid Advisory Service at Mercator Advisory Group.

The post Starling Bank Utilizing Digital Prepaid Debit to Encourage Budgeting  appeared first on PaymentsJournal.

We’re continuing our journey down the path of decoding what Digital-First card experiences really mean for Issuers.

In the first two parts of this four-part series, we discussed What Digital-First experiences are and Why they must be embedded into a customer’s digital life to drive value. This article will discuss Why and How Issuers should build bespoke card offerings for unique customer segments.

The Past – One card program for millions of customers

The success of the Ford Model T was a watershed moment in the history of modern consumerism, resulting from a standardized production line that minimized production delays and standardized quality. Henry Ford famously said, “Any customer can have a car painted any color he wants, so long as it is black.”

A 100 years later, 100s of millions of cards issued in the US today reflect the same philosophy Henry Ford propagated in the 1900s.

The only variables that typically differentiate these cards? Color of the Plastic, APR, and Rewards.

This worked till recently, as customers had no real options and had not seen better. As a result, if 100,000 customers enroll in a card program, they will always have the same experience.

The Future – A million card programs for a million customers

In the last decade, customer expectations have moved away from standardized to hyper-personalized experiences.

Interactions with big tech platforms, such as Amazon and Netflix have dramatically shifted what customers want, i.e., more personalization and curated experiences. For example, when Netflix users open their app, they are greeted with specific recommendations as Netflix has analyzed the shows or movies they watch to create a unique user experience. Similarly, Amazon displays products they believe would interest the consumer based on their purchases.

It should be no surprise that customers expect the same in all their interactions, including with card Issuers. According to McKinsey^[1] – 71% of consumers expect companies to deliver personalized interactions. And, importantly – 76% are frustrated when this doesn’t happen.

It is not that Issuers lack the desire to build better experiences, but the technology they use to run their programs continues to be a letdown. Two significant deficiencies exist. First, there are limitations on the number of variables an issuer can configure. Second, those variables can only be configured at the program level.

We argue that true personalization can be achieved only when the form factor, APR, fees, rewards, statements, transaction policies, notifications, card controls, and 10s of other variables are personalized in real-time for millions of such customers.

And it’s not just about providing choice. Beyond addressing what customers want, the ability to deliver contextual offerings based on a customer’s unique experiences can help Issuers offer their customers more reasons to use their cards, which can significantly expand cross-sell opportunities and help to grow revenue.

How can Issuers achieve Hyper-Personalization?

As Issuers look to hyper-personalize offerings, they must consider how next-gen technology can help them address existing gaps in their legacy tech stacks.

Truly understand customer expectations

One of the key roadblocks for Issuers today is not having a detailed perspective into what their customers want.

The data available through legacy technology is often derived via clunky standard reports with limited dimensions – under-representing and often missing out on key aspects of an individual customer persona.

With a next-gen platform, Issuers can address these gaps and access granular data across 100s of variables and attributes. This helps them understand customer expectations in different ways.

Issuers can access APIs, event streams, data marts, and reporting dashboards that provide them with granular, reliable, and real-time data about their customers and programs. Then, using these rich insights, Issuers can build targeted offers. And they can update program features to meet the expectations of their customers. This allows them to deliver a highly personalized experience.

Deliver personalized outcomes seamlessly

A truly Next-Gen platform can help Issuers parameterize and configure programs at an individual customer level or at an individual card level. This unlocks unparalleled customization where every single transaction (if so desired) – can be uniquely treated. Through this, Issuers have infinite flexibility to configure programs for the needs of a specific customer. For example,

1. Fees: Fees which are traditionally set at a program level, could now be personalized based on the needs of an individual customer or using any transaction attribute – allowing Issuers to offer several unique product constructs, such as
   1. The card program: $2 for every ATM transaction
   2. Each individual customer: Special ATM transaction fee of $1
   3. Each transaction: Zero ATM fees for withdrawals during the holiday season between November – January, if total spends are >$2,000.
2. Interest: Legacy platforms typically have static interest buckets created for broad MCC categories such as retail, cash, balance transfer, and promotions. In contrast, the infinite configurability of a next-gen system allows Issuers to build unique interest programs. For example, the customer could get a discounted APR for transactions at:
   1. A chosen retailer, e.g., Amazon
   2. On a particular day, e.g., their birthday
   3. For specific expenses, e.g., a child’s education expense
3. Rewards: Rewards can be configured to meet each customer’s unique persona and preferences than be offered as a one-size-fits-all. For example,
   1. Avid traveler: 5X reward on their next holiday,
   2. Frequent car user: 3x rewards on fuel spends

In addition to fees, interest, and rewards, modern processing technology can help Issuers configure statements, notifications, and card controls best suited to the preferences of a specific customer – an immense advantage that is not available with legacy systems. The result – bespoke card experiences for each card holder that would resemble the image below.

Deliver these experiences at scale

In a legacy platform, any update to a program configuration is a complex engineering project. It requires multiple rounds of iterations and often 100s of lines of code before something meaningful can be created. Typically, any program update would take months to fruition – leading to lost opportunities and dissatisfied clients.

With Next-Gen processing technology, Issuers can overcome all these challenges. Using no-code paradigms and intuitive web interfaces, Issuers can configure and reconfigure programs and products in real-time and at scale. They can do this with zero support from the engineering team. This allows them to accelerate time-to-market and results in rich, delightful, and contextual offerings.

Conclusion

To expand the scope of their personalization capabilities, Issuers need to ditch clunky green-screen-based legacy technology. They need to invest in next-gen platforms like Zeta.

Zeta Tachyon’s Hyper Personalization Policy Engine (HPPE) allows defining of dynamic product policies based on any attributes of a customer, account, card, or even a specific transaction. This enables Issuers to offer personalized experiences and offerings. Rich reporting capabilities provide access to customer insights across 100s of variables. This will help Issuers understand customer expectations and behavior like never before. And, web-based interfaces ensure that Issuers can manage programs and iterate in days vs. months and quarters in the case of legacy platforms.

In the final article of this series, we will discuss how Issuers can simultaneously embrace and respond with velocity and intention to myriad market changes.

^[1]https://www.mckinsey.com/capabilities/growth-marketing-and-sales/our-insights/the-value-of-getting-personalization-right-or-wrong-is-multiplying

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Prepaid cards are a versatile and convenient way to make purchases. Consumers can use them like gift cards, giving recipients the freedom to choose what they want to buy. They can reload them with funds, making them ideal for recurring expenses. And some prepaid cards can even be used for transit, providing an easy way to pay for fares.

Don’t miss another episode of Truth In Data! Click on the red bell in the lower-left of your screen to receive notifications as soon as the episode publishes.

Data for today’s episode is provided by Mercator Advisory Group’s Report: Canadian Prepaid Market: Rapid Growth and Developing Opportunities5

Prepaid Cards by Type Purchased by Consumers in Canada

• 46% of Canadians use retailer-specific prepaid cards
• 44% of Canadians use general purpose gift cards
• 29% of Cnadians use gift cards for online services
• 28% of Canadians use general purpose reloadable prepaid cards
• 25% of Canadians use transit prepaid cards

About Report

Mercator Advisory Group’s most recent report, Canadian Prepaid Market: Rapid Growth and Developing Opportunities, pulls from both primary and secondary data to develop an overview of the Canadian market. While relatively small, the market is growing rapidly and presents significant opportunities for prepaid issuers.

The report examines the driving forces behind the industry’s remarkable growth and identifies recent market developments. After identifying some of the most compelling opportunities for involvement with the prepaid industry in Canada, the report concludes with recommendations for the reader.

The post Top Ways Consumers in Canada are using Prepaid Cards appeared first on PaymentsJournal.

In traditional government disbursements and emergency payments, prepaid cards played a significant role in accelerating federal economic impact payments (EIP). This was particularly seen during the COVID-19 relief aid.

Prepaid cards are faster, more secure, and more cost-effective than paper checks. And they offer benefits to the recipient as well as the agency. They’re also especially useful for the unbanked and underbanked, which represent roughly 19% of U.S. households. According to the Report on the Economic Well-Being of U.S. Households, 40% of unbanked adults used an alternative financial service such as a check cashing service, a money order, or a payday loan in 2018. This is an important factor to consider when distributing funds.

In a recent podcast, Helen Brune, Senior Business Development Manager at Blackhawk Network, Tyler Gentry, Director of Payments for Good and Public Sector Partnership Development Director at Blackhawk Network, and Jordan Hirschfield, Director of Prepaid Advisory Service at Mercator Advisory Group, discussed how prepaid cards facilitate the disbursement of funds for agencies and give recipients the flexibility and security to receive these funds quickly.

The Key Benefits Driving Prepaid Card Adoption

The role of Payments for Good is to assist state and local government agencies and nonprofit organizations. It will assist them in updating their disbursement capabilities by replacing paper checks with prepaid cards. Prepaid cards are cost-efficient, faster, and safer than traditional paper checks.

“The pandemic really accelerated the adoption of cards by government agencies because they had an unprecedented number of COVID-related payments to send out,” said Brune. “They lacked the administrative staff and technology to do it in an efficient manner with checks.”

The advantage of using prepaid cards over checks is the ability to pay bills and purchase essentials. Consumers can also pay online or in person, giving them more flexibility.  Prepaid cards also offer cardholder protections in a way that checks don’t.

“One of the biggest takeaways we got from getting though the pandemic was the ability of businesses, government, and consumers to quickly adapt and accept cards as a secure and desired payment mechanism because they have wide acceptance,” said Hirschfield. “They are instantly available and there is back-end security.”

Agencies can cut administrative spending when using prepaid cards, as they typically cost 10% to 20% less than issuing checks. Prepaid cards are also faster than checks. If an organization chooses to distribute virtual cards, they can be delivered instantly, Cards can also be programmed to only be used in certain businesses and industries.

Prepaid cards are a more cost-efficient way to deliver funds and savings. This maximizes program funds and the financial benefit being awarded to recipients.  

How Prepaid Card Use Is Combating Fraud

Prepaid cards offer security benefits for both recipients and government agencies. Recipients don’t have to worry about receiving their prepaid cards via mail in order to support multiple or recurring payments. Funds are delivered digitally, ensuring that funds get delivered quickly and securely. Cardholders also benefit from protection against lost or stolen cards. With Cardholder Support, recipients can receive assistance when issues arise. The Federal Deposit Insurance Corporation (FDIC) also provides coverage.

Government agencies can analyze the program’s influence using spend information. It also offers transparency as well as accountability.

“Security continues to be an issue with consumers,” said Hirschfield, “Mercator has research that highlights that fraud and theft is a large concern across all payment mechanisms, especially within prepaid mechanisms. 55% of consumers were satisfied with a resolution with prepaid fraud or theft incident. People in a compromised position need to know they have the protections as well as a greater opportunity for a positive resolution.”

Payments For Good and Mobilization of Aid

Payments for Good assisted in the disbursement of $3 billion in state government and local nonprofit payments to individuals. One of its partnerships was in March of 2021 when it joined forces with CORE (Children of Restaurant Employees). CORE is a nonprofit organization that supports families in the restaurant industry who face financial hardship due to injury or death. They also provided prepaid cards during job loss in the middle of the pandemic. There was also Blackhawk’s partnership with the government of California in June of 2021 to provide prepaid cards as incentives to receive the COVID-19 shot before the state reopened.

“Our largest and most prominent clients were government agencies and departments of social and health services,” said Gentry. “Those funds have benefitted vulnerable populations, from foster youth and family welfare, assisted care facilities to immigrant workers excluded from federal emergency aid. During the pandemic, the state of California asked us to fill vaccine incentives to encourage health and human safety. It was in the form of $50 digitally delivered Mastercard to those residents who received the shot.”

Payments for Good takes on the operational challenges that many organizations face.

“What we do is take on all the administrative burden and all the servicing of disbursing the payments on behalf of the organization,” said Brune.

To learn more about Payments for Good, please visit Blackhawk’s website, contact us directly on LinkedIn, or reach out to us at helen.brune@bhnetwork.com or Tyler.gentry@bhnetwork.com

The post How Payments for Good Is Modernizing Government Disbursements Through Prepaid Cards appeared first on PaymentsJournal.

Visa and Qatar National Bank (QNB) are utilizing the FIFA World Cup as a proving ground. This gives several key payments technology services innovation opportunities. The three technologies tested include a digital prepaid card, biometric facial recognition and expansion of Visa’s Tap to Phone system. Tom Phillips highlights key details for NFCW:

“Football fans attending the FIFA World Cup in Qatar will be able to authenticate payments for purchases at three coffee outlets with their face, using biometric technology being piloted by Visa and Qatar National Bank. They can also apply for a digital prepaid card with animated card art that will be issued instantly to Visa cardholders.

Visa is piloting the two solutions as part of a wider rollout of payments technology at the international tournament that also includes enabling merchants and taxi drivers to accept contactless payments on a standard Android NFC smartphone with Visa’s Tap to Phone software point-of-sale solution.”

Each of these pilot programs brings to light necessary advances in payments. Mercator Advisory Group has identified these as critical to the development of the payments industry. Taking each development independently shows the short-term and long-term process for financial institutions and financial service companies working in tandem.

Digital Wallets: Travel and Events

The prepaid digital card option does not represent the newest technology. But it meets the needs of the growing segment of consumers who pay through digital wallets. And it also highlights the integration of short-term products such as prepaid cards utilized for travel. In the U.S., the average consumer who uses an open-loop digital prepaid card, spends more than $150 each per year, according to Mercator Advisory Group prepaid research. That is starting to approach the nearly $250 each that those using physical open-loop cards spent. The combination of digital and events like the World Cup indicates industry support aligning with my 2023 Outlook: Prepaid predictions. While travel will not return to pre-pandemic levels, it is starting to recover.

Emerging Technologies

The other two innovations piloted during the World Cup tie together the need for legacy providers in financial services to extend their experience and history, especially in more challenging times that could limit entrepreneurial innovations. As my colleague Christopher Miller writes in his 2023 Outlook: Emerging Technologies, each element will be a key for 2023 growth. While areas like facial recognition are on the early side of emerging, as the World Cup trial indicates with the small roll-out at three locations, the technology is enabled, and working now its time for industry players to work through regulatory and privacy concerns to help shape consumer use. The further development of the Visa Tap-to-Phone program shows the reach established players can provide small businesses by enabling inexpensive emerging technologies to give businesses and consumers more efficient payment options while minimizing risk for all parties involved.

Overview by Jordan Hirschfield, Director of the Prepaid Advisory Service at Mercator Advisory Group.

The post Visa and QNB Pilot Biometrics and Digital Prepaid Cards at World Cup appeared first on PaymentsJournal.

Regional supermarket chain Giant Foods has partnered with About Fresh to offer prepaid cards. This is in support of the Fresh Connect program at their stores in the District of Columbia. The program will allow consumers to use the prepaid card as a health benefit. Therefore, they can purchase nutritious food based on prescriptions from medical professionals. Catherine Douglas Moran reports on the program details in Grocery Dive:

“In conjunction with the Giant Food partnership, About Fresh also said in its Tuesday announcement that it’s now working with DC Greens, a Washington, D.C.-based nonprofit that is focused on advancing health equity through food.

About Fresh noted that DC Greens has been responsible for administering the city’s produce prescription program, which allows medical professionals to prescribe fresh fruits and vegetables to patients with diet-related chronic illnesses. The launch of Fresh Connect at Giant Food ties into the DC Greens’ oversight of that prescription program.”

The multi-stage partnership is between grocer, technology providers, healthcare providers, and non-profit programs. Furthermore, it highlights the additional resource that prepaid payments can tie together. This additional resource can ensure that people suffering from food insecurity can get direct access to purchase. This especially includes people with other health care needs

Government Acceptance

As these programs develop with continued buy in from each stage, the link to watch will be government acceptance. If the federal government begins to consider food prescriptions as qualifying health care expenses programs—similar to the Giant’s partnership with About Fresh—it would either expand or be merged with key Health Savings Account and Flexible Spending Account programs. These are programs that already have large use of prepaid cards and wide acceptance. Moran’s previous reporting highlights the industry’s commitment, led by Kroger, to working with government entities to tackle food insecurity and the trend of food as medicine:

“Kroger is helping to stand up a national Food is Medicine Research Initiative with the Rockefeller Foundation and American Heart Association (AHA), the White House announced Wednesday. The company is part of a $250 million commitment tied to the initiative, which is set to launch in spring 2023 with the aim of creating tools and evidence to scale ‘food is medicine’ programs.”

Prepaid Card Infrastructure

While prepaid cards are not the focus of the research, the processes are already in place for prepaid card suppliers, program managers, and retailers. The processes would allow them to capitalize on the existing infrastructure. It would support the end goal of helping Americans use healthy and fresh food options as a medical treatment. Furthermore, inflationary pressures are adding to food costs. Americans can tackle food insecurity problems outside of traditional government aid programs such as SNAP and WIC using these steps. Offering the ability to pay for fruits and vegetables as a health care expense encourages behaviors recommended by doctors. Pairing that with incented card programs allows for a systematically improved infrastructure to follow both medical and potential regulatory guidelines.

Overview by Jordan Hirschfield, Director of the Prepaid Advisory Service at Mercator Advisory Group.

The post Giant Food Partners with About Fresh for DC-Based Prepaid Food Insecurity Program appeared first on PaymentsJournal.

This article is part 2 on the topic of Holiday Spending Insights 2022. Click HERE for part 1.

The holiday shopping season is already upon us, and it is poised to be the biggest one yet. Consumers are planning to spend 8% more this year on holiday gifts than last year. This is despite factors such as rising inflation and a potential looming recession.

Holiday Trends to Watch

Consumers are also shifting their spending this holiday season, a trend merchants and retailers should be aware of. Many consumers are buying earlier than ever. This is due to concerns about supply chain disruptions as well as concerns about staying on budget.

Another trend to watch for is the massive adoption of alternative payments. Look for how younger consumers, in particular, will leverage them. Many consumers are planning a mix of in-store and digital shopping. A variety of different payment methods will be used.

Once again, gift cards are expected to be the most popular gift given. This is a distinction gift cards have held for 16 years in a row¹. Gen Z are big spenders on gift cards. They are planning to increase their holiday gift card spend by 57% (from $185 last year to $290). 

In this podcast, we learn more about the unique trends that will shape the 2022 holiday gift shopping season. PaymentsJournal sat with Jay Jaffin, Global Chief Marketing Officer at Blackhawk Network, Sarah Kositzke, Senior Global Insights Manager at Blackhawk Network, and Jordan Hirschfield, Director of Prepaid Advisory Service at Mercator. This is a two-part discussion about 2022 holiday insights. In part 1, they focused on why gift cards remain the most popular gift to give, the return of in-person gatherings and gifting, and the increasing popularity of alternative payment methods.

In part 2 below, we’ll cover the rise of the “hybrid consumer” and Gen Z holiday spending trends, using data and insights collected from Blackhawk Network’s 2022 Branded Pay Study.

Enter the Hybrid Consumer

The pandemic and related in-person restrictions helped create a growing breed of consumer who blends both in-person and digital shopping. Named “the hybrid consumer,” this type of shopper may purchase an item via a retailer’s app. Then they will pick it up curbside or in-store. Or they will browse and purchase items in a physical location before having them shipped to their home.

Hybrid shopping is a mix of digital and physical shopping,” explained Kostizke.

Kositzke said that while hybrid shopping spans all industries, home furnishings and groceries are among the most popular.

“We’re also seeing that the younger consumer is really embracing hybrid shopping,” she added.

Roughly 27% of all consumers consider themselves hybrid shoppers; however, that figure is higher among Gen Z, at 37%.

Kositzke added that 55% of consumers report that they shop both online and in-store. While 45% of consumers still prefer to shop in-store.

The Power of In-App Payments for Holiday Shopping

According to Mercator research, 63% of younger consumers and about half of older consumers are motivated to make an in-app purchase. This is also especially appealing for those who don’t want to deal with in-store holiday crowds. They just pick up an item curbside, or send the item directly to its intended recipient.

The beauty of in-app payments boils down to convenience. For example, the Starbucks app has seen incredible success. Consumers are able to pre-load a gift card within the app, enter a location and pay via their mobile device. During this process, they also garner loyalty points for every purchase they make. They are able to redeem them for a free beverage, food or merchandise item. What has made the app successful is that consumers don’t need to wait in long lines to get their purchase. They order ahead and pick-up their purchase at their convenience. This is an especially critical piece that retailers should keep in mind during the holiday season. “Personally, I don’t want to go anywhere near the inside of a store during the holidays,” Hirschfield added.

He also noted that in-app purchases are roughly equally made in-store as well as out of the store. For example, a consumer may want to browse items inside a store to judge the quality and then purchase digitally to be sent to someone else or to their home, especially if it is a large item such as a sofa or home appliance.

Gen Z Holiday Buying Habits

This holiday season will also see the rise of purchasing power among Gen Z.Gen Z—comprised of consumers born between 1996 and 2012—is currently the third-largest generational segment in the U.S., at 67 million people, and the most ethnically and culturally diverse. They are planning to spend much more this holiday season than in years past, and similar to their older cohorts, Gen Z appreciates the flexibility that hybrid shopping offers. Jaffin stated that they are also much more likely to be “conscious consumers.” That is, those who look for brands and products that are supportive of social causes.

“Studies show that brands that have a perceived positive sustainability impact have grown in brand value faster than those with a low perceived impact,” Jaffin added.

Gen Z especially “are looking for information about how their purchases will contribute to social and environmental responsibility.”

Jaffin noted that the desire for these consumers to put their money toward brands, products and gifts that make a difference in their community helped inspire Giving Good cards, Blackhawk Network’s line of charitable gift cards. A portion of the load-value on each card directly benefits charitable causes such as Habitat for Humanity, Wounded Warrior Project, and St. Jude Children’s Research Hospital. Nearly two-thirds (63%) of younger consumers (as well as 51% of older consumers) say they plan to give back to causes they care about this holiday season.

As noted above, Gen Z are the biggest user segment of gift cards in general, with this cohort planning to increase their gift card spend by 57% this holiday season. Interestingly, these younger consumers are buying gift cards both as gifts, and for themselves.  

Younger Consumers

For younger members of Gen Z who may not yet have a credit or debit card, gift cards are increasingly used as a form of payment. 18% of Gen Z said they use their cash to buy gift cards so they can make purchases online. 11% said they use gift cards for purchases because they do not yet have a credit or debit card. Gen Z are also more likely to spend above the gift card amount, which makes gift cards “the gift that keeps on giving” for merchants, Jaffin said. He added, “More than other generations, they love shopping for fun, they love retail therapy.”

Younger consumers are also the most likely to begin shopping in November, with 46% of Gen Z and 40% of millennials saying they will shop early.

Kositzke, in part 1 of the podcast, noted that people in general are shopping earlier due to concern of out-of-stock items and to stay on budget.

This is backed up by Blackhawk research, which shows that the top reason for early holiday shopping is budgeting, coming in at 42%, followed by out-of-stock concerns at 38%, and seeking deals at 37%.

Conclusion

Overall, consumers this year are expected to be much more strategic with their holiday shopping, hunting judiciously for the best deals and promotions and trying to buy as early as possible to avoid items being out of stock, said Kositzke.

“Everybody is starting early, and they are keeping their eyes on the prize, looking for the best deals,” she added.

Learn more about holiday 2022 shopping trends and predictions.

About Blackhawk Network:
Blackhawk Network delivers branded payment solutions through the prepaid products, technologies and network that connect brands and people. We collaborate with our partners to innovate, translating market trends in branded payments to increase reach, loyalty and revenue. We reliably execute security-minded solutions worldwide. Join us as we shape the future of global branded payments. Learn more at blackhawknetwork.com.

All BHN data noted in this article can be sourced to:
Source: Blackhawk Network 2022 Holiday Branded Pay Study n=2,001, US, 18+, purchased gifts in the past 12 months, and plan to shop during holiday 2022, Aug 2022

1. Source: NRF and Prosper Insights & Analytics 2022 Consumer Holiday Survey

The post How Gen Z Is Influencing the 2022 Holiday Shopping Season – and Why They Love Gift Cards appeared first on PaymentsJournal.

Government officials across the country are reminding citizens to utilize gift cards, as there are few regulatory devices available to recover unused balances. The issue highlights the quandary of unused balances and the primary option consumers have to protect themselves, mainly to spend through their gift card. The Sioux City Journal spoke with Iowa State Treasurer Mike Fitzgerald to highlight the lack of legal options Iowans have, reflective of the situation in much of the country:

“Prior to 2014, lost or forgotten gift card funds in the state of Iowa would, after a period of five years, be turned over to the state treasurer’s office as unclaimed property so that the owner could be located through the Great Iowa Treasure Hunt… But that summer, eight years ago, a new state law went into effect that allowed merchants to hold onto gift card funds indefinitely, assuming the issuer of the card does not charge fees and assuming the card has no expiration date.”

Gift Cards: Use It or Lose It

In the article Fitzgerald shares that the attempts to return money were difficult, making the prior legislation unwieldy and putting stress on retailers. With the current legislation, funds cannot expire, although service fees can be charged, meaning the retailer could potentially be on the hook for funds in the unlikely event that a lost gift card is found years later:

“The gift-card law was viewed by some state officials as, more than anything, a gift to merchants, who could retain the money paid to them for a gift card without having actually sold anything at all.

‘Most businesses just keep (the money) — because let’s face it, if you haven’t used a gift card in about a year, you’re probably not going to use it,’ Fitzgerald said. ‘The Chamber of Commerce, businesses, they know that, and so that’s why they offered that. That was kind of the way the Iowa law was cut.’”

Good for Retailers?

The reality for most retailers is that they want consumers to utilize gift card balances in a speedy fashion. As my colleague Brian Riley discussed in a PaymentsJournal podcast this summer with Aimee Wright and David Southwell of Blackhawk Network, up to 90% of gift card users are likely to overspend their balances, leading to additional purchases and with lower costs due to less interchange fees.  

While government officials may lament the ability of retailers to keep the funds, the reality is retailers actions are counter to the argument. Adding to that point is the continuing adoption of digital wallets to support gift card transactions. As Mercator research has identified, 23% of consumers already utilize retailer specific wallets to pay for goods and services. The increased stress of inflation is also causing these retailers invest more in technology to push more business towards wallets through card redemption, loyalty benefits and discounting. The reduced costs for the transactions and opportunity to gain brand loyalty bring to light the reasons and desire of the retail community to encourage use of gift card balances.

Overview by Jordan Hirschfield, Director of the Prepaid Advisory Service at Mercator Advisory Group.

The post Utilization of Gift Card Balances Aids Retailers in Reduced Regulatory Era appeared first on PaymentsJournal.

The world continues to move further away from COVID-19 pandemic-induced restrictions. It is moving back into a state of somewhat normalcy. The 2022 holiday season will take on interesting new trends in gifting and how those holiday gifts are paid for. In fact, 58% of consumers are planning to change their shopping behavior. They are seeking to use more discounts and promotions, according to research from Blackhawk.

The holiday seasons of 2020 and 2021 were largely marked by limited in-person gatherings and remote connections. 2022 will be a unique blend of pre- and post-pandemic trends. The massive adoption of alternative payments during the last two years is still in effect. But many consumers are desiring in-person, in-store experiences more than in the past two holiday seasons.

In this podcast. we learn more about the unique trends that will shape the 2022 holiday gift shopping season. PaymentsJournal sat with Jay Jaffin, Global Chief Marketing Officer for Blackhawk Network, Sarah Kositzke, Senior Global Insights Manager for Blackhawk Network, and Jordan Hirschfield, Director of Prepaid Advisory Service for Mercator for a two-part discussion about 2022 holiday insights. In Part 1, they focus on what to expect this holiday season, as well as the importance of gift cards.

Holiday Gifting and the Economy

Holiday get-togethers will be more prevalent this year. Blackhawk data shows there will be a 23% increase in in-person holiday gatherings in 2022. “This is not only the case for Gen Z and Millennials, but Gen X and Baby Boomers as well,” said Kositzke. “And more get-togethers lead to the potential for more gifting opportunities,” she added.

Many are planning to purchase holiday gifts earlier this year than in years past. This is due to fear of missing out on potentially out-of-stock items due to global supply chain shortages. It is also due to trying to stay on budget in the current inflationary times, Kositzke explained. Thirty-seven percent of consumers plan to spend on holiday gifting before November, while another 43% plan to begin in November.

“People have concerns on out-of-stock items, and they’re also trying to stick to their holiday budgets,” Kositzke said. “They are also really looking for deals. They want to take advantage of any kind of deal or savings discount.”

This is backed up by Blackhawk research. It shows that the top reason for early holiday shopping is budgeting, coming in at 42%, followed by out-of-stock concerns at 38% and seeking deals at 37%.

Despite the state of the economy and the many unknowns, consumers are planning to spend 8% more this year on holiday gifts, said Jaffin.

“This really speaks to the idea of the resilient consumer,” he added.

The Power of Gift Cards

For the 16th year in a row, gift cards are the preferred gift to give others, according to research from NRF and Prosper Insights & Analytics. On average, a consumer will purchase 36 gift cards — both physical and digital — this holiday season, Jaffin said.

“That number might sound big, but think about the things we do over the holidays,” Jaffin continued. “You might buy your kid’s teachers each a $20 gift card. There are all the people we interact with on a day-to-day basis that we want to show a small token of appreciation to.”

Overall, gift card spending represents about half of the total holiday gifting spend, according to Blackhawk data. Gen Z in particular are planning to increase their holiday gift card spend by 57% in 2022, from $185 to $290. Younger consumers (Gen Z and Millennials) are also significantly more likely to shop before November for gift cards (41% vs. 29% of Gen X and Baby Boomers).

Many will physically hand a gift to the recipient, or send it via digital means. But we are seeing a new trend of hybrid physical/digital gifting as in-person get-togethers come back.

Gift cards are especially popular this year amid an uncertain economy. This is because of the potential rewards purchasers can receive, Hirschfield noted. For example, he cited getting fuel points back on gift card purchases. This is very appealing with the current high gas prices.

“As a purchaser, if I’m buying five $10 gift cards for my kid’s teachers and I can save on gas at the same time, that’s very appealing,” he said.

Consumers also like the promotional incentives that can come with buying gift cards, such as receiving a bonus $10 gift card with the purchase of a $100 gift card, said Hirschfield, which is especially appealing in the current economic climate.

Furthermore, eGift cards allow consumers to send “last minute gifts” up and through the holidays. About 20% of consumers are expected to send digital gift cards directly to a recipient.

Kozitzke added that recipients like gift cards because they won’t need to return an unwanted item. Essentially gift cards give consumers flexibility, not only on what they can buy, but also how they buy it — online or in-store. They can also use the gift cards to make more practical, everyday purchases, or be able to treat themselves.

“Instead of a dreaded return day, you can have a day that’s more retail therapy,” she said.

Rise of Alternate Payments

The last two years have seen the rapid rise of not only digital payments, but digital wallets as well. In particular, the rise of retail-branded payments apps, such as digital wallets for a particular store or restaurant.

“There’s hundreds, if not thousands, of different digital wallets now,” said Jaffin.

These merchant apps “blur the line between physical and digital,” Jaffin added. As an example, he cited being in a mall and purchasing food on a restaurant’s app in a completely digital manner, but then going to that restaurant to physically pick up the food.

“So, it is super easy to pay for things on these different retailer apps, then go from store to store and pick up my stuff,” Jaffin said.

Mercator data from 2021 showed that more than 30% of younger consumers have used a retail-specific app to make a payment, Hirschfield said, adding that when the 2022 data come out, “I expect that number to increase even more.”

Consumers are also leveraging alternative forms of payments such as buy now, pay later (BNPL) to pay for holiday gifts. This is especially true for younger consumers; 27% say they will use BNPL to pay for holiday gifts (versus 10% of older consumers), while 17% of younger consumers will use cryptocurrency to do so (versus 4% of older consumers).

In general, “consumers are much more nimble now in how they not only fund their shopping expenses but also how they pay for their shopping as well,” Jaffin said.

Part 2 of this podcast episode is now streaming HERE.

Learn more about holiday 2022 shopping trends and predictions.

About Blackhawk Network:
Blackhawk Network delivers branded payment solutions through the prepaid products, technologies and network that connect brands and people. We collaborate with our partners to innovate, translating market trends in branded payments to increase reach, loyalty and revenue. We reliably execute security-minded solutions worldwide. Join us as we shape the future of global branded payments. Learn more at blackhawknetwork.com.

All BHN data noted in this article can be sourced to:
Source: Blackhawk Network 2022 Holiday Branded Pay Study n=2,001, US, 18+, purchased gifts in the past 12 months, and plan to shop during holiday 2022, Aug 2022

The post Gift Cards Will Be a Focal Point This 2022 Holiday Season  appeared first on PaymentsJournal.

The state of California announced a new option for participants in their CalABLE (California Achieving a Better Life Experience) tax-advantaged savings program for individuals with disabilities to link a supported prepaid debit card to their account, easing access to funds for participants. The Orange County Breese highlights the opportunity for participants to gain easier access to their funds with the prepaid card:  

“This new card is an improvement of the previous prepaid card offered by CalABLE. Account owners or their representatives can request cards, view their card balance, and make transactions all from the CalABLE website. Additionally, they can check their balance and review statements utilizing the U.S. Bank mobile app. There is no monthly fee for the card and no transaction fees.” 

The Power of Prepaid Card Purchases

The CalABLE program partnered with U.S. Bank to support the prepaid option as the issuer of the Visa cards. This will now allow participants to utilize the power of card purchases for qualified expenses. This is similar to the typical use of Health Savings Account funds. The movement to prepaid cards helps the program catch up to traditional spending habits of their constituents. CalABLE’s executive director highlights this in the article: 

“‘CalABLE allows account holders to use the funds in their accounts for the everyday expenses of living a life with a disability,’ said Dante Allen, Executive Director of CalABLE. ‘The new prepaid card makes it easy and convenient for account holders to pay for qualified expenses where they already live, work, and shop.’” 

This is an interesting example of how government can modernize their programs, which have been traditionally check-based or reimbursement based. Programs such as CalABLE, serve communities in need, either because of health or economic status. These programs must get through bureaucratic issues. Also, these programs must treat the recipients as deserving of modern payment options through credit and debit rails and eventually by enabling the linking of those cards to mobile wallets. 

Will Governments Adapt?

While a state such as California benefits from sheer size of population, and thus achieve more economies of scale in presenting options, it’s imperative for governments of all size to find ways to promote better payment options through card use to provide recipients with the most beneficial use of their funds. As many communities in the U.S. get through another election cycle and can move forward with policy and legislation it will be interesting to see how government entities take the learnings of the pandemic and potentially difficult economic conditions to adopt recipient focused opportunities that provide benefits as mentioned but also provide better ability of the issuing agencies to monitor and report on usage to assure taxpayers of proper use of government funds and benefits. 

Overview by Jordan Hirschfield, Director of the Prepaid Advisory Service at Mercator Advisory Group

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FIS introduced Walmart as its latest partner in the FIS Premium Payback program. This allows customers at Walmart stores to utilize pay with points options during checkout with a single prompt. The move provides access for financial institutions (FIs) using the FIS product to Walmart, the world’s largest retailer. The FIS announcement provides additional details on the program and partnership:

“The addition of Walmart to the Premium Payment network will give millions of consumers the opportunity to redeem their credit card rewards points for real-time discounts at more than 4,700 Walmart stores across the U.S. Walmart customers using eligible cards will be prompted at checkout with the option to turn their card rewards currency into discounts, which will be deducted from their purchase amount.”

Pay with Points: an Alternative Payment Method

The move identifies advancement to accept award redemption as a substitute for other prepaid vehicles, such as gift cards. It also gives a benefit to FIs looking to increase share of wallet with their reward earning credit cards. Points can be a valuable asset for consumers who are looking to use various methods to maximize their budget in the current inflationary market. This includes prepaid mechanisms. I wrote about this in my recent viewpoint. In the release, Mike Cook, Senior Vice President and Assistant Treasurer at Walmart underscores this point. He also points out the need for retailers to reduce barriers in accepting points as an alternative payment method:

“’Walmart’s mission is to help customers save money so that they can live better, and FIS Premium Payback allows customers to enjoy the benefits of their rewards in real-time at checkout,’ said Cook,  ‘Today’s busy consumer is looking for a frictionless shopping experience, and our partnership with FIS makes paying with points as simple as a single prompt at the point of sale.’”

Loyalty Programs

For retailers, utilization of credit card point redemption at point of sale also provides an opportunity to push retailer specific loyalty programs, that are not tied to payment method but instead to frequency and volume of purchases and visits. Mercator research, via the North America PaymentsInsights study in 2021, shows that consumers who are part of a loyalty program spend more at their chosen program outlets. As an example, 51% of members of grocery and supermarket programs indicate they spend more at their chosen store as compared to those that are not members of the loyalty program. When combined with reducing one of the larger merchant-controlled barriers of potentially cumbersome point of sale processes, the opportunity for retailers to double up on customer loyalty, with both individual’s credit card and store loyalty memberships is an important step to combat the fear of reduced spend in rough economic times.

Overview by Jordan Hirschfield, Director of the Prepaid Advisory Service at Mercator Advisory Group.

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Verizon and partner Walmart introduced a prepaid home internet service powered by subsidiary Tracfone’s Straight Talk brand. The service looks to create a lower cost market with reduced barriers to entry such as credit checks, however the limitations in service emphasize the difficulty providers have in providing enough value for the cost of a prepaid service versus a standard service. Mitchell Clark reports on the developments in The Verge:

“The $45 per month service uses Verizon’s 5G and 4G networks and a router, available at ‘nearly 2,000 Walmart stores across the country,’ according to a press release, to provide home internet without having to have a company come and hook up a modem. But while the company pitches it as an affordable option, there are definitely some considerations you’ll want to take into account if you’re looking to get cellular internet as cheaply as possible.”

As Clark points out, the price is only $5 to $15 less expensive per month versus Verizon’s flagship 5G Home service and is more expensive per month that the same service if bundled with several of Verizon’s mobile phone packages. In addition, the prepaid program requires an initial purchase of a $99 router that appears to have speed limitations as compared to the 5G Home service, a negative differentiator as compared to Metro by T-Mobile’s recent home internet service launch that offers similar speeds to T-Mobiles standard service.

Benefits of Prepaid Home Internet

Despite the negatives that emphasize the limitations of the service as compared to price the introduction of prepaid internet represents an overall positive to the industry. Clark points out the two greatest benefits of prepaid service that opens up easier access to connectivity for underserved constituencies:

“I do want to make it clear that I think it’s a good thing that it exists and that Verizon is making 5G home internet available to people who can’t pass a credit check or who need the ability to pay their bill in cash.”

Closing the Digital Divide

The simple availability of a prepaid service from both Verizon and T-Mobile creates new opportunity to close the digital divide. The long-term hope is that costs of both the monthly service and equipment drop as wireless internet services reach critical mass.

Additionally, the ability to pair prepaid services with government services such as the Affordable Connectivity Program, that can discount services by $30 monthly, opens up broader opportunity while also helping to defray the initial costs of the hardware through lower monthly fees. The overall wireless space will be fascinating to watch as coverage and speeds increase, allowing more consumers to transition from wired to wireless home internet. I expect prepaid options to lag behind the overall service but to offer more availability and value in the long-term outlook.

Overview by Jordan Hirschfield, Director of the Prepaid Advisory Service at Mercator Advisory Group.

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Technology is increasingly moving from physical to digital implementations. Opportunities to improve access in developing nations is becoming easier, faster, and more critical. There is a need to maintain pace with higher income countries. In-need countries are partnering with public and private infrastructure from more developed economies. This helps them to gain easy and inexpensive access. South Africa’s Independent Online (IOL) highlights the efforts being undertaken by Chinese authorities to expand digital access in developing countries:

“Memorandums of Understanding on building the Digital Silk Road were signed between China and 17 partner countries. China has also established a Silk Road E-commerce bilateral cooperation mechanism with 23 countries and built 34 cross-border land cables and multiple international submarine cables with neighbouring countries. In recent years, China’s information technology, as well as relevant hardware and software products, has been widely used in countries and regions along the Belt and Road. A number of cooperation projects in the field have been implemented, benefiting local communities.”

Embedding Technology into the Economy

The Chinese government sees an opportunity to embed its physical and digital technology into the economies of many developing nations. They are utilizing private technology enterprises, such as Huawei, Alibaba and Baidu. The Chinese government is doing this in partnership with government investments. They are building inroads, not just with governments, but with the general population. The IOL article highlights how this investment ties closely with the payments infrastructure:

“In Kenya, a “mobile wallet” application co-developed by China and Africa has become an indispensable transfer, paying, receiving and loaning tool for local people. Under the technical support of the Chinese side, the application is now under stable operation and comes with rich functions. According to statistics released in March this year, the application has gained over 30 million monthly active users.”

Prepaid Tools through Digital Access

As I’ve covered in my report “Digital Wallets: Moving Beyond Payments With Expanding Options” and will highlight more in my upcoming “2023 Outlook: Prepaid” viewpoint, the digital wallet is an increasingly necessary tool for consumers, merchants and financial institutions. This is especially true in the developing world within Latin America, Africa and Asia that have higher preponderance of underbanked and unbanked populations. These consumers require non-traditional resources that prepaid mechanisms can provide but need those mechanisms connected to the digital infrastructure to remain linked to the current economy.

In the prepaid market, this represents a large driver of industry growth. We’ve seen recent trends of these regions being more aggressive with their use and innovation around prepaid instruments as a primary source of payment technology. Not only are countries in the developing world utilizing prepaid to reach consumers, but they are linking with investments from leading countries to drive innovation in areas as diverse as private payment networks to cryptocurrencies. China’s investments allow their state-owned and state-supported enterprises to have first mover advantage in reaching these communities.

Overview by Jordan Hirschfield, Director of the Prepaid Advisory Service at Mercator Advisory Group.

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Dunkin’ announced large scale changes to its rewards program in terms of both accruals and redemption, potentially frustrating loyal consumers while also showing a reaction to inflationary pressures that are especially difficult in the quick serve and fast-food industries. Mike Winters from CNBC reports on the changes from the DD Perks program to the new Dunkin’ Rewards program:

“As part of the revamped program, the company says that consumers can earn points twice as fast as they did with the old DD Perks program: Now they earn 10 points rather than five for every $1 spent. However, the redemption value for free drinks has increased. Previously, customers could redeem $40 worth of purchases for any drink, including premium items. Now, that same amount will only get you a shot of espresso or a tea.”

Loyal Customers React

Those changes, which add in new benefits for food redemption as well as the existing drink options, created an uproar on social media for consumers who feel like the program discounts their frequent visits and reduces the benefit of remaining brand loyal for coffee drinkers. Winters spoke with Dunkin’ customer Lou Balzani who had expressed his initial disappointment on Twitter:

“These perks don’t address the actual needs of Dunkin’s most loyal customers,” he said.

“I’ve been a regular customer for 10 to 12 years and the food was never a big selling point for me,” he added. “When what you actually buy gets rolled back with no real replacement or additional benefit, that’s where you start to feel taken advantage of.”

Prepaid Rewards

Dunkin’ is making a bet that the changes will be a long-term benefit, despite the initial reactions and will offer increased options to utilize rewards as a prepaid tool within the Dunkin’ app. This is a key selling point for many retailers looking to combat inflationary pressures and grow business as I explained in my recent Mercator Advisory Group viewpoint “Prepaid Cards Provide Benefit for Budgeting During Economic Turbulence.”

In combating economic uncertainty, its critical for brands to reward reliable customers, especially as prepaid reward purchases can be likely to result in additional spending and splurge purchases that offset the initial cost of the reward. The Dunkin’ program gives a 20%-point boost to customers who visit 12 or more times a month also highlights my analysis showing that the ability to earn faster rewards creates a message that the most loyal customers are most valued and can influence daily behavior.

Dunkin’ is also working to offset challenges of inflation both damaging profitability and reducing customer traffic, which had a significant decline in May and June as highlighted in July in QSR Magazine. Overall, the changes in the program, still underscore Dunkin’s commitment to utilizing rewards as a prepaid mechanism but could be a precursor of other brands reducing some value in points in order to broaden its programs and hedge against potential further macroeconomic struggles.

Overview by Jordan Hirschfield, Director of the Prepaid Advisory Service at Mercator Advisory Group.

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Prepaid programs continue to show strength in the current economy and runway for continued growth. Mercator Advisory Group research and complementary studies highlight growth in specific prepaid sectors that range from 3% CAGR to as high as 10% over the next 3 to 5 years. However, the industry needs to catch up to commonly accepted technology to encourage and enable the projected growth path.

Digital Technology Enhances Prepaid Cards

Libby Calderone, President and Chief Operating Officer at credit union service organization Envisant, highlights the challenges and successes of the advancement in Credit Union Magazine:

“Digital technology has done much to enhance the speed and security of prepaid cards. Virtual cards are making issuance even faster and more cost-effective. Tokenization adds another level of security and ease of use. Randomly generated tokens are stored by stores and e-commerce sites while cardholders’ private details remain in one secure database. This technology also allows shoppers to easily switch between online and in-person shopping through mobile wallets.”

The technology shift does not provide groundbreaking advancement for prepaid programs, but instead allows prepaid to be at parity with credit and debit cards as a significant resource in consumers wallets. Mercator research shows that prepaid cards represent 10% of U.S. household payment methods, however 35% of consumers utilize universal wallets to make payments, and 23% use a retailer-specific wallet. With these trends expected to rise, it’s imperative for prepaid programs to be a player in both the consumer facing wallet technology and the underlying aspects like tokenization.

Harness Technology to Delight Cardholders

While retailers have a clearer path to utilize their own wallets and closed loop stored value accounts, Calderone highlights that Credit Unions, and by extension other financial institutions, need to work to link their open loop products to universal wallets as a tool to stay relevant:

“Prepaid cards and technology can be a powerful way for credit unions to connect with current members and reach out to new markets. The most effective use of prepaid cards will harness the advantages that technology offers to delight cardholders and compete in an increasingly digital world.”

Prepaid as a Lead into Other Banking Services

The wallet space is critical in Calderone’s comment specifically in terms of customer acquisition. Our research indicates that more than 70% of millennials and 55% of Gen Z individuals will use a mobile device to research and buy products online. Combined with this generation’s greater proclivity to either freelance full-time or use freelance work as a moonlighting opportunity, there is significant runway to utilize prepaid cards, attached to the technologies as a primary method of payment, simplifying payment processes and driving usage.

FI’s that grasp this as an acquisition tool can help to bring those technologically savvy consumers into the fold by building meaningful customer interactions that start with prepaid but then extend into other banking services. The centerpiece in all this activity is the technology, especially the front-end apps and wallets that allow for a robust and long-term relationship.

Overview by Jordan Hirschfield, Director of the Prepaid Advisory Service at Mercator Advisory Group.

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General theft and deception schemes continue to be the leading form of prepaid card fraud, matching concerns addressed by consumers in Mercator Advisory Group studies. A recent theft of $1,000 worth of prepaid cards from a retail outlet in Michigan shows how criminals can easily swap physical cards. Jim Kasuba of The News Herald in Southgate, MI highlights an incident involving prepaid cards:

“Two thieves used classic techniques of deception, including creating a distraction and switching a valuable product for a worthless one, to steal two $500 prepaid Visa cards… The store attempted to cancel the two cards, but the cards had already been used to make a purchase elsewhere, for the full amount.”

Incidents like the one detailed in the article underscore both the strong ability of prepaid providers to combat fraud, as well as the critical need for personal awareness with any payment method. Prepaid providers operate with an extensive set of tools, policies, and procedures that allow them to control access to individual cards, protect large scale clients from cyber-criminal activities, and provide consumers with potential recourse into fraudulent use of prepaid card products.

What is incumbent upon both prepaid card issuers and retailers is to alert and educate both retail staff and consumers on the steps that can be taken to reduce these incidents, which have less recourse but represent more than 50% of all prepaid fraud activity according to Mercator Advisory Group’s most recent research.

Use of cash to purchase prepaid cards, especially general reloadable prepaid cards, represents a key value proposition of the cards, allowing for safe and reliable access to a multitude of retail options, backed by the card rails. With that comes the risk at transaction, that using cash for large prepaid card purchases in a deceptive manner leaves less recourse for the retailer. Small businesses in particular need to remain alter at potential large cash purchases, as Mercator’s Small Business Payments Insight’s Consumer Purchasing Options study shows that more than 60% of small business report seeing less utilization of cash for purchases. As scams like the Michigan incident show, the last step in preventing fraud within the prepaid space lies with the retailer during transaction, a step that the issuers can mitigate with education on crime prevention practices.

Overview by Jordan Hirschfield, Director of the Prepaid Advisory Service at Mercator Advisory Group.

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The Central Bank of Brazil issued new guidelines on interchange rates for prepaid card and debit card transactions, with new caps of 0.7% for prepaid cards and a firm rate of 0.5% for debit cards. This adds pressure to the country’s burgeoning fintech industry, but brings relief to traditional banks working to compete with the less regulated startups. Full details of the new regulations, which are slightly less stringent than initially proposed, are reported by Reuters:

“The central bank had put the issue out for public consultation last year, but its proposal suggested a maximum rate of 0.5% for both debit and prepaid cards, which would be even more damaging to fintechs. Banks’ debit card interchange fees, which currently have to comply with a joint weighted average calculation of 0.5% and maximum value per transaction of 0.8%, will now be capped only by 0.5% per transaction.”

The main benefit in Brazil is that the regulations create more equity for debit issuing banks in competition with fintechs using prepaid instruments. This is likely a reason why consumer benefit was not a highlight of the announcement. By bringing prepaid cards in-line with debit interchange rates, Brazil creates a more simplified environment that banks feel creates a level playing field in how they work with merchants and compete against startups that previously had more latitude on creating revenue by using prepaid instruments.

In the prepaid space, an argument can be made that the restrictions on interchange can maintain or increase service fees paid by consumers for prepaid cards as a way for the fintechs to compensate for lost interchange revenue. Brazil’s policy, which takes effect on April 2023, doesn’t hide that the move was made for the benefit of the retailer with no direct implication that the consumer would benefit as well:

“According to the central bank, the changes will ‘increase the efficiency of the payments ecosystem, encourage the use of cheaper payment instruments, enabling the reduction of costs for stores to accept these cards.’”

The rates and rationale for Brazil are similar to rates and rationale established in the United States by the 2010 Durbin Amendment that was upheld in 2014 by the Supreme Court, although in the U.S. there was added political rationale to aid consumers though lower prices. Since that time there has been widespread debate if the overall purpose, to keep retail costs lower by capping interchange, has been successful. Detractors argue that the lower rates are rarely reflected in savings passed on to the consumer and the lack of flexibility in rate setting, with no free market system, actually hurts consumers, retailers, and banks alike within the process.

Overview by Jordan Hirschfield, Director of the Prepaid Advisory Service at Mercator Advisory Group.

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Blackhawk Network, a California-based company in the prepaid, gift card, and payments industry, joined forces with NAPCO Research, the “research arm” of NAPCO Media, a B2B digital media company, for the fifth year. Their aim? To assess the in-store, online, and mobile gift card program experiences across more than 225 merchants. This time, their annual research has extended beyond the U.S. and includes the UK and Australia for the first time.

The findings of the “2022 NAPCO Research Merchant Gift Card Omnicommerce Evaluation” report were discussed by Amy Dunckelmann, VP of Research Operations at Mercator Advisory Group, Andrew Solomon, Vice President of Sales at Blackhawk Network, and Hilary Spidaliere, Director of Product Marketing at Blackhawk Network.

The pandemic accelerated digital transformation within businesses and Dunckelmann believes that this study could not be timelier:

“One of the reasons I really liked this study, especially that you’ve got research that goes back for five years, the trend in the report really shows much more of an emphasis on digital, especially with what’s happened in the pandemic, and more businesses looking for digital options. I think it’s really smart to help vendors understand their digital experience and what they can do to improve it. So, I think, although this is the fifth year, it’s certainly very timely in terms of results.”

Solomon spoke favorably about this study as well, adding:

“It really creates a framework not only for a customer that has an existing program to expand on their program and take it to the next level. But someone who’s entering the business, it shows you the roadmap of what some of the most successful companies are doing. And they can implement those ideas without having to do trial and error. So it just creates a great, great roadmap for our customers and our potential customers.”

The Methodology

To conduct the study, the NAPCO Research team visited each merchant store, visited the websites, accessed the mobile apps, and purchased the gift cards. All these experiences were assessed using more than 150 criteria, which have been developed and amassed during the last five years of conducting this annual study.

Some of the criteria explored include:

• How easy is it to locate the gift card?
• What faceplate card art designs are available?
• What denominations can you purchase?
• Is adding a custom message possible?
• Does the order go through once purchased?
• Does it feel like a gift when received?
• Is it easy to redeem?

Key Findings and Biggest Takeaways

Based on the research findings, the multinational average Total Omnicommerce Score is 66% across the 225+ merchants assessed. This indicates there is considerable opportunity to enhance gift card programs across the various industries, verticals, and regions.

Retailers are also keen on investing in providing a variety of payment methods based on what customers prefer to use. Also, a rise in purchasing gift cards for personal use has also increased the need for more expedited purchases to benefit self-use purchasers.

Despite the rise of mobile use, the overall mobile experience still is underdeveloped.

As more customers become “mobile first,” it would be critical to invest in the mobile space to refine both the purchaser and recipient experience.

In all the regions featured, it is important that merchants provide a seamless, in-store experience for customers. This can include having gift cards in stock, a knowledgeable staff, and new payment options available for customers.

When it comes to the online experience, the key is to make the card program easy to locate. Having the most well-developed gift card program will not translate into sales if gift cards cannot be found by customers.

Spidaliere expounded further on this:

“… one of the key takeaways across all three regions was making sure that your program is easy to find. You could have the best gift card program in the world, but if a customer can’t find it, you won’t be able to sell any gift cards. So, this is making sure it’s easy to find the gift card program on your homepage as well as making sure you’re promoting it out through email [and] social media, [and] making sure your customers as well as new prospective customers know about your program and how to purchase a card.”

Customization is also a key driver. Customers want to make the gift card experience more personal. They want to have access to design options as well as custom message spaces, and they also want to select the denominations and the timing.

In-Store, E-Commerce, and Mobile Gift Card Program Performance by Region

When it comes to in-store gift card program performance, the U.S. comes out on top. The findings show that in-store, U.S. merchants excel at having both well-stocked and tidy fixtures and check stands.

The UK and Australia excel in mobile and e-commerce. With Australia scoring the highest Omnicommerce score, at 69%, its strength lies in both digital and mobile capacity. This includes its site search, payment options, and personalization options. Australia also provides the most robust desktop gift card purchasing experience.

The UK continues to outshine in its mobile experience. This is especially true in its mobile gift card programs. It is recommended that the UK should really lean into this space as more consumers than ever are opting to shop via their mobile phones.

Opportunities for Growth

As the holiday season approaches, retailers would do well to take advantage of all the key findings in this report. Some recommended action items to improve the gift card program experience include the following:

• Ensure gift cards can be easily found
  This includes all selling channels (in-store, digital, app). Facilitate gift card purchases by positioning them more visibly for customers to find them.

• Be flexible with your gift card program
  Offer both physical and digital cards. Provide cross-channel purchasing (e.g., buying digital cards in-store, buying physical cards online). Sell multibrand cards as well as your own brand’s gift cards, and offer various payment and delivery options. Be flexible with denominations, where customers could choose the card’s value. Feature advanced personalization, such as personalized messages, a variety of faceplate designs, and the capability to upload photos.

• Deliver a fast, seamless, and secure purchase experience
  This includes providing a variety of payment method options. Provide the purchaser with a notification of when their gift card has been shipped or received.

• Enhance the gift card recipient experience
  Make it effortless for the recipient to add their gift card to a digital wallet and to redeem it. Have a way for them to check their balance, add more funds to their card, and securely access their gift card.

To learn more about the latest industry trends, best practices, and where your gift card program stands, get your copy of the fifth annual 2022 NAPCO Research Merchant Gift Card Evaluation – U.S. Edition. You can DOWNLOAD IT HERE.

The post Assessing Merchant Gift Card Programs and Actionable Best Practices appeared first on PaymentsJournal.

When it comes to gift giving, retailers and merchants love gift cards. They’re convenient, flexible and an easy way to give a present. They’re also a great way to boost sales. However, there’s one big downside to gift cards: they often go unredeemed.

Unused Gift Cards

A recent study commissioned by CreditCards.com and conducted by YouGov.com highlights a perceived increase in the number of unused gift cards and the value associated with them. Erica Sandberg summarizes the results of the survey at CreditCards.com:

“According to the survey, the average amount of unspent gift cards, vouchers and store credits is $175 per person, up from $116 last year. In aggregate, that’s a total of roughly $21 billion in unspent cash for the entire U.S. adult population.

If you’re a young adult, be particularly careful to check your pockets and messages for overlooked gift cards. Fifty-two percent of millennials and 51 percent of Gen Zers are likely to have unused ones hanging around. That doesn’t mean older people are unlikely to have these gift cards gathering dust, however. Forty-three percent of Gen Xers and 42 percent of boomers also have them.”

Sales of Deferred Revenue Products

The survey addresses unused gift cards, resulting in unrecognized revenue liabilities for the retailer community. As a consumer survey it is likely only going to uncover the liability, much of which will be spent accordingly in a reasonable amount of time versus the unrecognized revenue. Mercator research showed an overall increase in purchases during 2021, corresponding to a similar time frame as the YouGov study. To highlight this, using data from Home Depot annual reports we can identify a large increase in sales of deferred revenue products from 2019-2021, which would include gift cards as well as other deferred services such as installation services paid for but not completed as an example. In the same time frame unrecognized gift card balances reported by Home Depot increased, but at a slower rate than deferred revenue products, giving Home Depot consistently decreasing unrecognized gift card balances as a percent of their deferred revenue as highlighted in the table below:

The data provided by Home Depot validates a secondary point in the aforementioned study that indicates most people will use some or all of their gift card balances within 12 months:

“The survey also discovered that 45 percent of people who have unused gift cards say they will use all of them within the next 12 months. Others will wait it out, with 30 percent saying they will use most of their cards and 16 percent planning to use a few. The remaining 9 percent say they will keep all of their gift cards.”

Combining these two data points shows that the growing balances are more of a result of volume increases and that the cyclical nature of the gift card purchase to redemption path will continue to show balances that are in-line or below historical trends. When purchases go up, so will unrecognized balances, but the percent of liabilities will, at worst, remain constant and potentially decrease as in the case of Home Depot.

Overview by Jordan Hirschfield, Director of the Prepaid Advisory Service at Mercator Advisory Group.

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An online search for the phrase “remote company culture” delivers a wide range of opinions on how organizations should engage employees as they weigh returning to the office against remaining virtual. Regardless of where the work happens, organizations need sure-fire ways to encourage employees to stay with the company for longer periods. Yet recent research suggests a positive workplace culture is no longer enough to support employee retention. The missing ingredient: employee recognition.

A 2022 InComm InCentives survey of more than 1,200 full-time workers in the U.S. found that employees feel less appreciated and connected to their teams working remotely. Thankfully, there is an opportunity for remote employers to stand out from other workplaces, as the survey’s results reveal how a monetary-based incentive program may reduce costly turnover by delivering consistent recognition.

Positive Workplace Cultures Alone Are Not Enough

Employers juggled morale and productivity after the sudden shift to remote work in 2020, and many successfully translated their workplace culture to virtual settings – 80% of surveyed employees say they currently have a positive company culture. Despite that encouraging trend, almost half of employees are considering or actively looking for a new job. The factors driving the decision to seek a new job vary on an individual basis, but there are indications that a lack of recognition is having a greater impact on employees.

Only 13% of employees feel recognized by their executive team. This underappreciation extends down the ladder, with 59% of surveyed employees feeling less appreciated and connected to their remote teams. Left unchecked, a general lack of recognition and appreciation can lead to departures, as 39% of employees cited a lack of appreciation as a reason to look for a new job.

Many employers rightfully focus on compensation, benefits and work-life balance in attracting new team members, but recognition is growing in importance as 21% of surveyed employees find recognition from co-workers and managers equal to or more important than salary considerations.

Organizations must act now to reverse these trends by showing their employees that they see and appreciate their hard work on a regular basis. Implementing an incentive program is an effective way to start, but employers must first understand what kinds of rewards resonate with employees so that their efforts do not go to waste.

Employees Seek Monetary-Based Rewards

Employee appreciation begins when organizations recognize team members for their performance. Recognition can take many forms, from words of praise to privileges like extra vacation days. However, employees are quite clear on the rewards they most favor. Gift cards and monetary bonuses ranked as the top two types of recognition employees prefer to receive from their companies.

This preference for gift cards and monetary bonuses makes sense when considering the true value of such rewards. They provide flexibility, enabling employees to spend rewards on items or experiences that are meaningful to them. Additionally, gift cards can be delivered physically or digitally, which means organizations can easily disburse them across in-office and virtual workplaces. In short, monetary-based rewards are an effective way to ensure that a performance incentive will be appreciated by as many employees as possible.

Despite the inherent value of monetary-based rewards, many organizations fail to take advantage of their popularity. About two out of five employees (42%) say their workplace does not offer a monetary or gift card recognition program. This gap presents a considerable opportunity for employers to stand out from the competition and show team members that they truly appreciate their contributions. The reasons why companies do not offer monetary-based incentives can range from cost concerns to doubts over the time and resources necessary to run such a program. Managing a monetary-based incentive program may seem complex, but with the right partner, organizations can streamline implementation.

Customized, Monetary-Based Employee Incentives

Employees clearly favor gift cards and monetary bonuses, and there are several ways that organizations can offer them as incentives. Rather than limiting themselves to certain kinds of gift cards that may only appeal to a narrow segment of the workforce, organizations should consider partnering with payments technology experts that have access to a broad network of gift card brands. Such a partner can assist a company in creating a customized incentives program that is tailored to its operational needs. Some such partners even have the ability to allow people to add a personal message in a physical or digital card with the incentive, allowing even more customization and an added personal touch.

With the right mix of monetary-based rewards, employers can more effectively recognize employee performance and tangibly show team members that they are valued assets to the company. The more employees feel appreciated through consistent and meaningful recognition, the more likely they will stay with an organization to strengthen its workplace culture and increase workforce retention.

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Upstart cryptocurrency exchange Ripio announced an initial roll out of their prepaid debit card product, with Brazil as its introductory market. The card will allow Ripio account holders to pay at traditional points of sale using their crypto holdings. Rupal Sharma reports further in The Crypto Times:

“The company plans to launch 250,000 cards that were developed in collaboration with Visa by the end of the year. The offering would be accessible to the one million users it has in South America. The company already declared that the digital version of the card is already available.”

The Ripio prepaid card follows Binance’s recent announcement, previously covered in PaymentsJournal. Binance is providing similar services in Latin America, starting in Argentina, for payments utilizing crypto holdings through prepaid mechanisms to ensure merchants are paid in fiat currency. The competitive market within Latin America exemplifies the growth potential and opportunity to transition crypto from a speculative investment mechanism into a fully actionable currency supporting daily transactions. The moves also highlight the need for exchanges to offer easy to use prepaid card options as a standard offer to attract and retain customers. Providers are wisely launching in specific markets before expanding into other, complementary areas. Ripio, which also operates under the BitcoinTrade brand through a previous acquisition, plans for similar distribution throughout Latin America following the initial launch in Brazil:

“Ripio will launch the card in Argentina later this year but hasn’t ruled out launching the debit card in countries such as Colombia, Mexico, Spain, and Uruguay.”

Ripio is also following recent trends to support reward programs, a burgeoning space in the crypto supported prepaid card market. Details of the Ripio reward program are limited to date beyond support of rewards paid in Bitcoin.  Ripio is considering supporting rewards in additional cryptocurrencies that would likely try and match some or all of the 28 currencies that Ripio actively lists. Another good indicator of potential offerings that Ripio may try and cover would be to highlight the retailer supported rewards program that Bitpay and Cardlytics recently launched that incents customers to shop at particular merchants to earn rewards. This type of program highlights the need for crypto exchanges to encourage mainstream merchants to support the use of crypto through card-network supported prepaid cards in order to grow the market beyond the visionaries and early adopters.

Overview by Jordan Hirschfield, Director of the Prepaid Advisory Service at Mercator Advisory Group.

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In an effort to encourage increased use of their crypto linked prepaid card, Bitpay announced a partnership last week with Cardlytics to support a prepaid cash back rewards program. This move is another example of working to bridge the gap between the acceptance of fiat currency at point of sale and the ability and encouragement to use crypto easily to make purchases. Jamie Redman reports further at Bitcoin.com.

“Cardlytics is partnered with thousands of unique merchants such as Adidas, Costco, Office Depot, Shake Shack, Sam’s Club, Finish Line, and H&M. Farrell Hudzik, the EVP of financial institutions at Cardlytics, explains that getting rewards for using the Bitpay card at specific merchants is easy. “Working with Bitpay, we offer their crypto cardholders a customized shopping experience where they can earn cash back making the Bitpay card easy to use anytime they shop,” Hudzik said in a statement”

The list of well-known brands participation in the program highlights the desire for topflight retailers to provide options and incentives in partnership with the platforms to serve the needs of pioneering consumers that have already adopted crypto and to pave the way for the next generation of more hesitant consumers to consider options for using crypto currency in a safe and effective manner. The use of prepaid cards also helps to give an easy, and less risky on ramp to consumers who may want to dip their toes in the water of crypto and understand the investment and practical payment options available to them.

The opening of the prepaid cash back rewards program also brings Bitpay into closer alignment with competitor Crypto.com who also offers a reward program in partnership with Cardlytics, one that offers reward payments in the Cronos cryptocurrency. Bitpay also added support for Apecoin and Euro Coin, bringing the total number of crypto currencies supported in their platform to 15. The continual addition of newly supported currencies and the ability to support consumer friendly incentives such as the rewards program show continuing momentum to normalize the use of crypto to an expanding general use population. Bitpay CEO Stephen Pair explained further in the article:

“’Cryptocurrencies are becoming increasingly popular and widely used as many like the option to live life on crypto,’ Bitpay’s CEO remarked. ‘Adding a reward program through Cardlytics offers crypto enthusiasts another incentive to get and use the Bitpay Card. It’s easy, just load the Bitpay Card with crypto, spend with dollars, get cash back and see rewards in the Bitpay app.’”

This comment adds to the April announcement of support for payments through their app using the Lightning Network for payments, allowing for digital payments to complement the card payments supported through the Bitpay branded Mastercard prepaid card.

Overview by Jordan Hirschfield, Director of the Prepaid Advisory Service at Mercator Advisory Group

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CPI Card Group announced quarterly earnings yesterday, indicating a leveling off of prepaid debit cards after experiencing rapid growth in the same period last year as the economy began its post Covid-19 recovery. CPI provides full details  outlining their overall strong growth in their release:

“Second quarter net sales increased 22% to $113.3 million, another record sales quarter for the Company. Growth was led by the Debit and Credit segment, which benefited from strong customer demand for contactless cards and instant issuance solutions.

‘Strong customer demand for our portfolio of high-quality payment offerings drove outstanding sales growth in the second quarter’ said Scott Scheirman, President and Chief Executive Officer of CPI. ‘We continue to win with our innovative products and services and end-to-end solutions, and we are pleased to be able to increase our full-year financial outlook.’”

Continued Growth Projections for Prepaid Debit Cards

While the prepaid debit card segment shows a slight decrease from last year, CPI projects full year results to be at or near the record level sales of 2021. This matches the expectations set in Mercator’s 2022 Outlook: Prepaid which expected a more modest overall growth of 3.3% for the open loop market following the unusually high growth of 2020-21. The Mercator 2022 Outlook also expected a continued move to contactless and digital solutions which corresponds to CPI’s quarterly results and strengths in their earnings release:

“Year-to-date 2022 Business Highlights

• Generated incremental net sales from customer demand for higher-priced contactless cards, as the U.S. payment card market continues its gradual transition to contactless solutions.
• Continued to be a leading provider of eco-focused payment card solutions in the U.S. Through the end of the second quarter of 2022, the Company has sold nearly 80 million eco-focused cards since launch in late 2019.
• Experienced ongoing high demand for Card@Once® Software-as-a-Service-based instant issuance solutions. The Company has nearly 14,000 Card@Once® installations across approximately 1,900 financial institutions in the U.S.”

Overview by Jordan Hirschfield, Director, Prepaid Advisory Service at Mercator Advisory Group

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Leading cryptocurrency exchange Binance announced their initial Latin American launch of their crypto prepaid card offer, in partnership with Mastercard. The card’s purpose will serve to make conversion of crypto currencies to fiat currency more simple. Ritu Lavania reports further in The Crypto Times:

“The card will unleash a seamless transactional experience in which their cryptos will be converted to fiat in real-time during the purchase and also get up to 8% crypto cashback on a few limited purchases.”

The Binance card will work for crypto purchases and payments. Binance customer swill be able to use the card to purchase additional holdings of various cryptocurrencies and on the flip side, will allow users to easily make purchases at Mastercard accepted locations. Users can choose which cryptocurrencies to use from their holdings while merchants receive traditional fiat currency as payment:

“Walter Pimenta, Executive VP, Mastercard Latin America and the Caribbean, said ‘Our work with digital currencies builds on our strong foundation to enable choice and peace of mind when people shop and pay.’”

Using the prepaid networks allows consumers to choose how much of their crypto portfolio to they choose to fund on their card and provides an simple conversion point from their crypto wallet to their physical wallet. Users can manage their cards through a dashboard on either the Binance website or app, pricing instant access to information and ability to fund their card. Users can also easily access paper currency directly with free ATM withdrawals. These moves highlight an effort to normalize use of crypto currencies by using the card networks in fashions similar to international transactions where each party uses or receives the currency of their choice. These moves, and the use of prepaid as the vehicle to move crypto, are critical for crypto to move from speculatory investing into an everyday choice to complement cash, credit and debit.

Overview by Jordan Hirschfield, Director, Prepaid Advisory Service at Mercator Advisory Group

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Consumers are ready to travel over the next twelve months, according to a new study commissioned by Amadeus. Using a panel of 4,500 consumers from France, Germany, UK, US, and Singapore, the study examined discretionary spend preferences over the next 12 months with international travel (43%) ranking the highest priority, outpacing online subscriptions (38%) and domestic travel (35%). The study found that those traveling from the U.S. expect to spend $3,268 on international travel over the next 12 months. Of interest to us, however, is how consumers are expecting to pay for their travel. Is BNPL an option?

The study found that a whopping 84% of consumers indicated they were more likely to use an installment option such as “Buy Now, Pay Later” (BNPL) to pay for their trip. Popular travel sites such as Carnival and Expedia offer Buy Now, Pay Later solutions at the checkout page, enabling consumers to split their payments over a fixed period of time. Klarna is working with suppliers such as Expedia.com and Booking.com while Affirm is currently partnering with providers such as Delta Vacation, Priceline, and StubHub. Uplift, a BNPL vendor specializing in travel, is partnering with 140+ travel partners. BNPL options typically allow consumers to extend the life of the loan longer than on a credit card, but at the cost of reduced rewards, if any. We were not surprised to see the uptick in BNPL usage for travel, especially given how hot the BNPL industry is currently, but with a possible recession brewing, BNPL providers will be taking on heightened levels of risk in an already risky business. For more of our thoughts about BNPL, please see the following resources from our analyst team:
BNPL: Was It All a Dream? Wake Up and Smell the Coffee

Overview by Ben Danner, Research Analyst at Mercator Advisory Group

The post Travel Now, Pay Later?: Consumer Travel Is Back And They Are Eyeing BNPL appeared first on PaymentsJournal.

Imagine having a conversation with your parents about your allowance. In the past, this would likely involve a lot of back-and-forth about how much money you should get and what you should be expected to do in order to earn it. However, there’s now a new tool that can take the guesswork out of allowance: an allowance app. Allowance apps allow you to track your income and expenses, set goals, and even set up automatic payments.

BusyKid, a chore tracking and allowance app for families, announced the introduction of a prepaid card to allow for children to have easier access to money earned through the app. The company provides further details on the service along with parental controls in their release in the Digital Journal:

“Every child has a profile in the app with a personalized card that can used to shop online or in any store where the Visa card is accepted. For the parent who still wants control, BusyKid has the answer with a series of approvals and notifications which ensure money isn’t allowed to leave the app account without a parent saying ok. This way the BusyKid app helps encourage kids to be more independent in their buying decisions, but still gives the ultimate control to the parents, just in case.”

The addition of the prepaid option levels up BusyKid with other providers in the youth money management space including Greenlight and Go Henry, which offer similar chore tracking features with prepaid cards along with many banks and credit unions that offer children’s checking and savings accounts with traditional debit cards. BusyKid looks to differentiate their service with money management education and dedicated charitable donation functions directly tied into the app.

“’Kids need to learn the basics of personal finance at school so they know the terms and concepts, but the problem is that most schools never teach it, and certainly don’t have a anything to provide hands-on experience,’ said Gregg Murset, CEO of BusyKid. ‘This leaves it up to parents to make sure good financial habits are practiced at home and that starts with their first job – household chores that they earn money for completing which gives them the opportunity to learn through practice the value of an earned dollar versus one that is just handed to them.’”

BusyKid, like its competitors makes their prepaid card available on Apple Pay and Google Wallet, allowing digitally native children to utilize their earned money through physical or virtual prepaid cards, which is a critical area to maintain relevance with both parents and children.

Overview by Jordan Hirschfield, Director, Prepaid Advisory Service at Mercator Advisory Group

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Prepaid cards are becoming increasingly popular around the world, and India is no exception. Regulations for these cards are still being developed, but there are some general guidelines that apply. For example, most prepaid cards can be used to make purchase transactions, but they may not be used for ATM withdrawals or cash back transactions. In addition, there may be limits on the amount of money that can be loaded onto a card.

Directives and ambiguity from regulators in India are halting common practices of Indian fintech’s to loading credit lines onto prepaid cards. Tarush Bhalla & Saloni Shukla cover the story in The Economic Times:

“Card-based fintech players Uni and PayU-owned LazyPay (through its LazyCard product) have completely stopped giving new prepaid cards amid a lack of regulatory clarity, they added. Both these companies, however, continue to support existing cardholders and are working to forge new partnerships with lenders to ensure business continuity.”

The halting of services has resulted in a dramatic reduction in card issuance for vendors and participating trade groups are urging regulators to reconsider actions:

“The Payments Council of India (PCI), an industry grouping under the broader umbrella of the Internet and Mobile Association of India (IAMAI), recently urged the government to step in to resolve the fallout from RBI’s latest directive. PCI pegged the total active prepaid cards industry – where a credit line is disbursed – at over 10 million, with over Rs 3,500 crore worth of transactions processed through these cards in May alone.”

The regulations are disrupting business models of the current players in the space who may need to pivot to traditional cash loans if the regulations continue and the ability to find prepaid cards does not resume.

In recent years, the prepaid card market has seen benefit from the technological advances being made. Mercator Advisory Group has released a viewpoint that examines the most widely used technologies in prepaid physical cards as well as some of the most important developing technologies in the space. After identifying the leading drivers of progress within the prepaid market, we offer readers recommendations for remaining competitive.

Overview by Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group.

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When it comes to financial planning, families have a lot of different options to choose from. One option that has become increasingly popular in recent years is prepaid payments. With this type of payment, families can put money aside each month to cover future expenses. This can be helpful in a number of ways. First, it can make budgeting easier because you know exactly how much money you have available to spend each month. Second, it can help you avoid financial surprises down the road.

Japanese fintech startup SmartBank completed a $20M Series A financing round to continue innovation using prepaid services and family financial planning and bring total funding to over $30M. Kate Park provides details in TechCrunch:

“SmartBank wants to enable anyone to manage finance, “from everyday spending to planning for the future” by offering its digital finance management service B/43, which is a Visa prepaid card and personal finance management app. The company is similar to challenger banks like Brazil’s Nubank and U.K. company Monzo, but its key differentiator (in terms of functionalities) is that it does not just focus on individuals but also offers joint accounts for couples. In addition, it will soon release services for parents and kids to manage finance together, the startup says.”

SmartBank focuses on dual-income families in Japan, a growing segment that currently cannot be served by traditional banks that do not permit joint accounts:

“In Japan, banks do not offer joint accounts for couples. As the number of dual-income households is increasing in the country, it is more inconvenient for them to keep the overall flow of money and savings compared to single-income families, (CEO Shota) Horii said. The startup has conducted over 250 user interviews and estimated that as many as 15 million double-income households face challenges managing household finance, Horii continued.”

Users of the B/43 platform prepay their monthly budget into the app and make payments from there, circumventing the traditional banking process. The innovative use of prepaid also allows SmartBank to operate under a fund transfer license rather than a traditional banking license, allowing multiple family members to be connected to a single account. SmartBank then collects interchange fees and also has loan product they call Charge Now Pay Later that collects a commission at the end of each month the product is utilized.

Overview by Jordan Hirschfield, Director, Prepaid Advisory Service at Mercator Advisory Group

Read more on prepaid services: Reserve Bank of India Aims to Grow Prepaid Services

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Making and receiving payments has never been easier, thanks to the wide variety of enterprise payment solutions available today. Whether you need to disburse rewards to employees or customers, or accept payments from clients, there’s a solution to fit your needs. And with so many options to choose from, you can find a solution that fits your budget as well. Prepaid cards are a popular choice for disbursing rewards, as they can be used anywhere major credit cards are accepted. And since the funds are already loaded onto the card, there’s no need to worry about bounced checks or overdraft fees. For businesses that need to accept payments from clients, there are a number of online payment processors to choose from. These services allow you to securely accept credit and debit card payments, as well as direct bank transfers.

Prepaid Technologies announced the acquisition of employee incentive provider WorkStride, broadening the reach of services offered to employers:

“The combination of Prepaid Technologies and WorkStride will provide businesses with an end-to-end menu of enterprise payment solutions from pay, expense management and corporate disbursements to employee and channel incentives and rewards, all designed to enhance employee satisfaction and retention in an increasingly competitive job market. Stephen Faust, CEO of Prepaid Technologies added, ‘Their channel incentives, rewards and engagement offerings are ideal and complementary solutions to our existing Dash product suite. This strategic combination enhances our position for rapid growth and provides customers and the market at large with a powerful, one-stop-shop suite of payments and engagement solutions.’”

The acquisition signals the increasing opportunity to provide employees with real-time payment solutions, specifically in the disbursements and reward segments. These areas can be seen as critical components of employee engagement in the current competitive employment market:

“’For some time, WorkStride’s customers have been asking for a more seamless way to make payments as part of our engagement platform. By joining forces with Prepaid Technologies, we will be able to address this growing need, as well as open our platform to new solutions for new industries,’ said Tom Silk, CEO of WorkStride. ‘The combination of our two customer-centric organizations, powered by great technology and passionate people, will provide tremendous opportunities for our customers, partners and employees.’”

Prepaid Technologies will seek to utilize the acquisition to increase sales volume through complementary offerings and create new revenue streams.

Overview by Jordan Hirschfield, Director, Prepaid Advisory Service at Mercator Advisory Group

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