First Data 2011 Midyear Prepaid Gift Card Analysis

First Data 2011 Midyear Prepaid Gift Card Analysis

  • 40000

2011 Mid-Year Gift Card Performance Update. Against a backdrop of continuing macroeconomic uncertainty, prepaid gift card performance in the first half of 2011 was resilient, growing at a higher rate than the general U.S. consumer spending on all other card-based payment methods. This analysis provides an in-depth look at gift card performance in the first half of 2011, along with insights into what’s helping drive growth and where the industry is going. For the first time, First Data Advisors examined the stratification of gift card activation. Daily Newsletter subscribers are eligible for discounts of up to 20% off.

The 2011 Prepaid Midyear Gift Card Performance Update looks at the growth of gift card activations through the first six months of 2011 for the major gift card categories of Total All Closed Loop, Specialty Retail, QSR and Casual Dining. This update provides key insights into gift card trends observed in the first part of 2011, and is based on our proprietary SpendTrend® databases.

Selected Key Insights:

1-Macroeconomic Headwinds Are Impacting Consumer Use of Prepaid Gift CardsThrough the first half of 2011, general U.S. consumer spending volume on card-based products increased 7.9% on a year-over-year (YoY) basis. Gift card activation dollar volumes increased at a higher rate --- 8.8% for the same period. Higher prices for such things as fuel has driven the cost of goods purchased upward. As a result, U.S. consumer spending reflected these higher costs, especially in Q2-2011. These price increases, in turn, have compelled more customers to utilize credit products at the point of sale (POS). Somewhat surprisingly, consumers have demonstrated a willingness to increase the average amount of gift card values in most merchant categories, albeit slightly.

2- Overwhelming Preference For $10 to $25 Gift Card Denominations Across All Merchant Categories May Overshadow Nuances Within Each Major Merchant Vertical. Across all merchant categories, there is an overwhelming preference for gift cards in the $10 to $25 dollar denomination range. However, there are subtle nuances in each market vertical’s use of marketing strategy and prepaid card technology that impact these results. The Specialty Retail category was the only major merchant segment which showed a higher percentage of total gift card activations outside of the $10 to $25 denomination value range. The source of these higher dollar activations has been attributed to higher dollar merchandise returns and gift cards awarded as employee and customer incentives.

About the Authors :

Ed Kountz is a Director with First Data Advisors. Prior to joining the company, Ed spent nearly a decade and a half as a payments analyst and consultant, most recently with Forrester Research. Earlier, Ed tracked the evolution of the payments and online banking industries for TowerGroup. In both roles, Ed consulted on a variety of payments and banking-related topics with a broad cross-section of leading industry firms.

Kathleen Uehling is a Senior Advisor with the First Data Advisors team, specializing in developing customized benchmarking solutions for First Data clients. Kathleen previously served on First Data’s Competitive Intelligence team for nearly 10 years, with a focus on emerging market initiatives for prepaid, loyalty, fraud and risk, and analytics payment product.

We Also Recommend