More Marketers to Promote Prepaid and Gift Cards

Although the total gift card market and prepaid card market dropped in 2009, analysts expect revenue growth in 2010. The tighter credit standards are the primary drivers behind card market improvement as consumers shift to a pay-​now or pay-​before mindset. A  Javelin Strategy & Research study suggests that marketers can increase sales by targeting specific businesses and demographics with prepaid and gift card products.

About 61% of the U.S. adult population used either gift or prepaid cards in 2009. The prepaid card market is most popular with the ‘underbanked/​unbanked’ population. This group comprises about 22% of U.S. adults.  And about 1/​5th of this group uses prepaid or payroll cards in any 90 day period.

When it comes to gift cards, about 36% of U.S. adults have used this payment form in any 90 day period. The demographics skew younger – over 40% of consumers under age 45 are gift card users.  About 40% of women use gift cards regularly.

The Javelin Research indicates that industry giants such as American Express reported an improving gift card market late in 2009 and many expect to see sales grow. Analysts also believe the new federal legislation will decrease consumer complaints about gift cards. Beginning in August 2010, gift card issuers must honor this form of payment for at least 5 years past the date of issue and cannot impose fees unless the card has been dormant for at least 1 year. The increasing acceptance of prepaid cards and gift cards means more service providers and financial institutions will be promoting this less risky form of purchasing in 2010 and beyond.

[2010 Prepaid and Gift Card Market. Javelin Strategy & Research. March 2010. Web. 12 Apr. 2010] 
Kathy Crosett
Kathy is the Vice President of Research for SalesFuel. She holds a Masters in Business Administration from the University of Vermont and oversees a staff of researchers, writers and content providers for SalesFuel. Previously, she was co-​owner of several small businesses in the health care services sector.