Gift cards keep on giving

America's love affair with gift cards continues unabated. And whether purchasing these closed-loop prepaid debit cards for themselves or for others, the preferred vehicle is plastic, not digital cards, according to a new survey from Fiserv.

The survey, part of the 20th annual installment of Fiserv's prepaid consumer insights survey, also revealed that inflation worries are affecting gift card sales. Fiserv's survey queried over 1,000 adults, spanning all regions of the country, in November 2022.

Better than a third of consumers said they were purchasing fewer gift cards due to inflation, contributing to a slight reduction in overall sales in 2022 compared to 2021, Fiserv reported. Meanwhile, many retailers report average gift card loads are down, said Tom Niedbalski, vice president of gift card solutions at Fiserv.

But it's not all bad news. "Some brands delivered well, especially those that ran promotions," Niedbalski said during a telephone interview.

Such promotions – like buy a $50 gift card, get a $10 gift card bonus – are a great way to fend off a slow-down in gift card sales.

"Everyone should be running promotions. They pay for themselves," Niedbalski said. "You get a lot of uplift on the bonus cards. Also, a lot breakage."

Better than half of Americans surveyed (54 percent) said they had taken advantage of gift card promotions.

As for which businesses are Americans most likely to purchase gift cards, casual restaurants rank highest (purchased by 45 percent of those surveyed), followed by coffee shops (44 percent).

Plastic beats out digital, or does it?

Physical cards continue living large even as shopping gets more digital, Fiserv reported. In fact, among consumers surveyed, 62 percent said they prefer to gift an actual, plastic card rather than a digital gift card. Just 29 percent said they were purchasing more digital than plastic gift cards. "We see this as a positive," Niedbalski said. Digital cards "don't seem to be cannibalizing physical cards." In fact, Niedbalski suggested, digital cards are actually driving more gift card sales as they can reach a wider, younger audience.

One irony is that although Americans like giving physical gift cards, they have become more receptive to digital shopping, with 62 percent saying they are okay with giving gifts that don't require wrapping.

Paytronix, the digital customer engagement and payment processing company, isn't seeing the digital-plastic divide quite the same as Fiserv. Numbers it published in early January suggest digital gift cards were the notable exception in 2022 to an otherwise down year for gift card sales.

While total dollars spent was up, number of gift cards sold was down during the year-end holiday season, Paytronix reported. The total value of physical gift cards sold between Black Friday and Christmas Eve was down 22 percent compared to 2019 and 7.9 percent compared to 2021. The value of digital gift cards sold was up a whopping 77 percent over the same period in 2019 and 4.6 percent over 2021, Paytronix reported.

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