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Prepaid Market Assessment: Gift & Incentive
Global Prepaid Exchange, April 2012, Pages: 25
Prepaid should not be viewed merely as a payment instrument equivalent to cash, checks, or debit and credit cards. It can be useful to view prepaid as a tool – as an enabler or a problem solver. For consumers buying gift cards, the first and foremost quality is the versatility the card represents, as described in the Insights section below. When the recipient makes the choice of an item or service when exchanging the card, the chances increase for a successful purchase and well-liked gift. Gift cards also reduce the time associated with searching for the right gift for the giver, whether the giver is a consumer or an organization.
For businesses, the same benefits for consumers buying gift cards apply for incentive products given to their employees, customers or partners. In addition, certain employee benefits delivered on a prepaid product can entail tax benefits, depending on a given country’s legislation. For example, in France meal vouchers outweigh gift card sales; 40 years of product history, long lunch hours, tax benefits to both the employer and employee, and a large network of merchants the products can be redeemed with have made meal vouchers extremely widespread.
Issuers of gift cards have access to a powerful tool for customer acquisition and marketing, as detailed in the section Retailer Case: Prepaid Category Management. In addition to driving more traffic and incremental spend to the retailers, these products improve cash flow, reduce cash handling costs, and provide float and breakage income on top of any fees charged to card buyers and recipients. For restricted network and open loop products, partner commissions provide an additional revenue stream. Furthermore, third party distribution represents not only an opportunity for greater footprint of one’s own brand, but also for tapping into the revenue streams of other retailers by becoming a destination for a card distribution network.
In this study, gift and incentive cards represent a current prepaid market opportunity of EUR 60.3 billion annual load value across 28 European countries, whereof EUR 27.3 billion (45.2%) is consumer gifting and EUR 33.0 billion (54.8%) corporate incentives and benefits. France, with its highly developed corporate segment, represents the single largest country market for gift and incentive in Europe, accounting for 23.3% of the European opportunity. The UK (11.9%), Germany (11.7%), Russia (11.1%) and Italy (8.7%) follow, each constituting a market opportunity of more than EUR 5 billion per annum. The culturally and geographically adjacent four Nordic countries (Scandinavia + Finland) covered in the study constitute a combined opportunity of EUR 2.5 billion.
Consumer gifting is often the first prepaid application to reach widespread adoption in a given country market; then other prepaid products tend to emerge. This is not a ubiquitous pattern, but one observed in multiple European countries and around the world. Retailers and other companies offering gift cards are dependent on educating their customers on the existence and the benefits of their card programs; sadly many retailers fail to do so effectively due to poor merchandising and packaging, and the absence of a gift card strategy integrated with the overall marketing program.
When gift cards become popular among consumers, there is often a positive correlation in B2B awareness. The main driver of adoption for corporate buyers, however, is economic incentive. Any tax benefits that favor employers and employees achievable on a prepaid instrument, makes these instruments increasingly attractive, as they will represent more value for money than equivalent wage increases or other expenditures. The growth in virtual prepaid products also drives growth in the corporate segment, as the personal aspect of a physical gift consumers are concerned with apply to less extent among businesses.
- Executive Summary
- The Prepaid Value Configuration
- Business Models
- Retailer Case: Prepaid Category management
- Benefits Delivered
- Prepaid Market Size Forecasts
- Competitive Landscape
- Drivers and Inhibitors to Prepaid Growth
- Gift and Incentive Sample Programs
- Appendix A: Prepaid Glossary
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