Page 26 - GS210902

CoverStory

There's perhaps no better recommendation for someone to
visit a store or restaurant they've never frequented than a
In fact, gift cards are the third card loaded with value that they can spend there, Rubin
said. Once a merchant has a gift card program in place,
most common payment type they are less apt to ditch it given the benefits received,
Niedbalski added.
used within digital wallets,
behind credit and debit cards. Gift cards, while wildly popular with large merchants,
can be a real boon to small businesses, too. A 2019 Fiserv
study found that 74 percent of consumers regularly pur-
chase gift cards from small businesses. Ninety percent of
consumers who receive a gift card from a small business
A Fiserv survey of consumer gifting plans for the year- they've never shopped at would shop at that business to
end holiday season found 58 percent of respondents pre- redeem their gift cards and make future shopping trips
fer to give physical gift cards, up from 42 percent in 2020. there.
Fifty-eight percent also said they prefer to receive physical
gift cards, up from 39 percent last year. Whether virtual or In addition, the cash flow benefits to merchants cannot
physical, gift cards are popular with recipients. The Na- be understated. Gift cards sold are in essence interest-free
tional Retail Federation reported that gift cards have top loans to merchants from their customers. Rubin recount-
rankings on 59 percent of consumers' holiday wish lists. ed that some SwipeIt customers have found themselves
with outstanding gift card balances totaling as much as $1
Consumers don't just buy gift cards for gifting, either. Re- million. That's money available to fund growth or help a
search from Blackhawk Network suggests 91 percent of merchant make payroll and other expenses when sales are
consumers have purchased gift cards, 69 percent bought stalled, as happened to many at the height of the COVID
them for themselves, and 87 percent purchased them as pandemic.
gifts. Gift cards have proven popular in just about every
merchant vertical, although Rubin said his experience in- A consumer poll conducted by Bankrate.com drives home
dicates restaurant gift cards are the most popular among this point, revealing a huge pool of money available to
consumers. merchants in the form of unused card balances. Better
than half of U.S. adults (51 percent) forget to use the mon-
One emerging use case is state-sanctioned gambling. ey gifted to them in the form of a physical or electronic
Blackhawk recently unveiled a card line it calls Game On, gift card, Bankrate reported. Combined, these Americans
which can be used at a variety of online gambling sites, in- are leaving about $15.3 billion on the table, or an average
cluding FanDuel Sportsbook and BetMGM. The cards are of $116 per person. That's down from an average $167 per
available at grocery stores and other outlets in four states: person in 2020, according to Ted Rossman, senior analyst
Colorado, Indiana, New Jersey and Pennsylvania. at Bankrate.

Merchant value proposition ISO/MLS value proposition
The most obvious value proposition for merchants is Gift cards are a really good deal for ISOs and MLSs, too.
loyalty. Gift cards also drive increased spend and act as Shepherd puts gift card programs "at the top of the list"
a marketing pitch to new and existing customers. "Mer- of value-added services that ISOs and their agents should
chants can leverage a closed-loop gift card program to get be offering. Niedbalski agreed. "Gift cards complete the
their brand in consumers' wallets, which then drives loy- payment tender type portfolio," he said. "It allows ISOs to
alty," Niedbalski said. "When someone has a gift card in check all the boxes for being a single-source provider."
their wallet, they are motivated to go to that merchant."
It's "free money" that allows them to splurge without nec- One of the biggest benefits to ISOs and MLSs is the way
essarily tapping into their own cash reserves or adding to gift card programs serve as an early warning system,
their credit card balances. alerting ISOs and MLSs to potential merchant defections.
That's because gift card files are integrated with the mer-
More often than not, recipients spend more than the value chant's payment processing hardware and software. "This
on a card. Fiserv's data revealed that consumers spend, on means the merchant must reach out to the gift card pro-
average, $59 more than the value on the card when shop- vider before making a change," Shepherd said.
ping with a gift card. Supermarkets receive the biggest lift,
with consumers spending 94 percent more than the value In most cases, swapping out integrations makes for mer-
on the gift cards they receive, according to Fiserv. chant headaches, made worse when selling gift cards on-
line due to the added step of needed changes to website
integrations. Rubin said delays in making the new integra-
tions can take upward of six months. "As delays continue,

26