GUEST POST: Opportunities Abound in Open-Loop Gift Card Market
By Matt Lanford, Senior Vice President and General Manager for Financial Services at InComm
Open-loop gift cards are an increasingly popular payment tool for consumers. However, brands and retailers that want to capitalize on this demand need to do more than simply stock gift cards on store shelves. To help the industry gain a better understanding of the open-loop gift card market – and more importantly, what consumers expect from the shopping experience – our team at InComm conducted the 2018 Open-Loop Gift Card Study.
The study surveyed more than 2,500 consumers from a wide range of age and financial demographics to determine how they purchase and use open-loop gift cards. With the findings delivered by this study, brands and retailers can create actionable steps toward creating more effective and engaging gift card programs.
Frequency of Open-Loop Gift Card Purchases
A key finding of the study is that open-loop gift cards are planned and recurring purchases for a large segment of the population. Of the consumers surveyed in the study, 73 percent plan their open-loop gift card purchases in advance. These are not the spontaneous or last-minute decisions.
When asked how often they purchased open-loop gift cards, 61 percent of consumers said that they purchase at least one open-loop gift card every three months. There is a clear majority of consumers who are not only purchasing open-loop gift cards, but also doing so on a recurring basis.
Retailers that establish quality gift card programs have the opportunity to tap into this demand and create relationships with long-term, repeat customers.
Convenience is Essential to the Shopping Experience
The study asked participants to rank the factors that influence their purchasing decisions, and the common theme across all responses was that consumers want an experience that does not disrupt their typical shopping routines. The top two factors indicated as important to the purchasing decision were “convenience of the retailer’s location” (33 percent of respondents) and having a “wide range of gift cards available” (28 percent of respondents).
Consumers prefer retailers with gift card aisles that serve as a one-stop shop with a wide selection of open-loop gift cards; more importantly, these cards need to be conveniently placed so shoppers can easily find the one they want. Retailers can planogram to help determine the best place for cards within a store and on the shelf to facilitate an easy selection process for customers.
A Versatile Payment Option for Everyday Purchases
The study also centered on questions around how open-loop gift card purchasers use the cards they buy. Unsurprisingly, a majority of purchasers give the cards to others, but 17 percent of respondents indicated they buy open-loop gift cards for their own use. Of these consumers who buy open-loop gift cards for themselves, 45 percent said they use the cards for everyday purchases, including gas, groceries, dining and entertainment.
These consumers were also asked why they purchase open-loop gift cards for their own use. Nearly one in five respondents (18 percent) indicated money management as the main reason, which suggests they are using open-loop gift cards to assist with budgeting. Convenience, consumers being able to use their open-loop gift card easily, was also a major factor with 47 percent of respondents indicating it as the main reason. In addition, 14 percent of respondents said security was the main reason they use open-loop gift cards, while 12 percent said they use them as an alternative to traditional banking. This wide range of reasons paints open-loop gift cards as a versatile payment method for consumers.
Encouraging Consumer Purchases
The report also explored promotions that drive consumers to purchase open-loop gift cards. More than half of respondents (54 percent) said they prefer promotions that give them a free gift card to that retailer.
Gift card promotions have the potential to bring significant added value to retailers because of the volume of consumers who often spend more than the funds available on their gift card. The study revealed that 28 percent of consumers spend more than the value of their open-loop gift card, and of these consumers, 43 percent spent between $20 and $50 more. Stores that complement their gift card program with attractive promotions and an engaging in-store experience will be well-positioned to earn the business of these consumers.
A Closer Look at Open-Loop Gift Cards
There is significant opportunity to engage consumers as they plan their future gift card purchase, and the findings of this study are just the tip of the iceberg. The complete 2018 Open-Loop Gift Card Study is available online here. The gift card market is continually evolving, and with the holiday season right around the corner, now is an ideal time for the industry to take a closer look at how consumers are purchasing and using open-loop gift cards.
Matt Lanford is Senior Vice President and General Manager for Financial Services at InComm, a leading prepaid product and payments technology company. He leads InComm’s consumer-facing VanillaTM brand, which provides prepaid products such as Vanilla Gift and OneVanilla.
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