Prepaid card spending is on the rise, according to an annual Consumer Insights Study. 69% of consumers surveyed say they purchased the same number of gift cards, or more, in 2023 than in 2022. In addition, 40% of buyers are putting at least $50 on gift cards, up 33% from 2022, while 79% of respondents said they spend more than a gift card’s worth.
One trend to emerge is that digital gift cards are becoming popular with gift givers. Reasons consumers prefer to give digital gift cards include immediate delivery (63%), they are easier to send than physical cards (53%), and they are easier to purchase than physical cards (50%).
Despite consumers’ growing preference for digital gift cards, physical gift cards remain extremely popular. Reasons include gift givers wanting to give an actual card or gift (85%), wanting to give a gift that can be unwrapped (52%), and physical gift cards are easier to buy (25%).
Forty-seven percent of respondents say they prefer to purchase gift cards from merchants that offer multiple gift card options. Other locations where consumer purchase gift cards include the store where the card will be redeemed (34%), online gift card marketplaces (16%), and other locations (3%)
“When it comes to shopping, consumers want convenience. Seeking partnerships that increase your distribution through online and in-store multi-card sellers will allow you to meet consumers where they shop,” the report says.
Birthdays are the leading reason consumers purchase gift cards (76%), followed by the winter holidays (70%), to say congratulations (54%), wedding (40%), and housewarming (39%).
The survey also revealed that peer-to-peer (P2P) gifting is growing in popularity, as that capability is becoming more common through P2P apps. Some 55% of respondents sent gift cards using a P2P app. Of this group, 67% did so because the experience is “easy and convenient”, while 36% said the option featured more merchants than expected.
“For merchants, P2P signals a new way to reach consumers by making their gift cards available to send through P2P apps. This concept is not entirely foreign—58% of consumers indicated they are aware that gift cards can be sent through these apps,” the report says.
While retailers like Target and Walmart, and brands such as Lululemon, Sephora, and food-delivery services such as Grubhub and Instacart, offer the option to send gift cards through P2P apps, overall merchant options in the P2P channel are limited. Nearly one in three (32%) feel P2P channels lack their desired merchants,” says the report. By leaning into this new payment channel and consumer calls for more options, merchants can keep pace with current gifting trends.
Besides gifting, consumers are looking to gift cards to help them better manage their money. Of the 62% of consumers who purchased a gift card for themselves in the previous year, 25% indicated they did so for budgeting/money management purposes.
Reasons consumers use gift cards for budgeting include gift cards provide better money management than cash (39%), gift cards and cash are interchangeable (37%), and gift cards are considered a new form of cash (32%).
Getting started with gift cards is easy. You just need to choose a robust solution that handles the logistics—like sourcing the physical cards and making them communicate with your POS—and leaves you free to focus on your business.