Gift cards: The payment lifeline of the crisis

Stay-at-home orders amid the Coronavirus pandemic made it clear that this crisis has hit some frontline workers and other members of society harder than others. Similarly, the impact on small and local businesses has been disproportionate, prompting these businesses, and the payments providers that serve them, to develop ways to generate new sales and cash flow while riding out social-distancing rules. To help these businesses, payments providers and fintech companies enable merchants to sell gift cards for use during or after the pandemic.

Many people are purchasing the goods and services they want during the pandemic using contactless payments or online shopping to deter transmission of the Coronavirus. In fact, 80 per cent of respondents in a recent Blackhawk Network survey indicated that they are concerned about the cleanliness of cash during the pandemic.[i]

Cameron Horb, Senior Director at Blackhawk Network, explained that, “Gift card sales are holding fairly steady during the pandemic as consumers continue to celebrate life’s major events. Many consumers are electing to purchase open loop prepaid cards this year as online shopping has obviously seen a big bump and these cards provide consumers the ubiquity to spend where they see fit.”

Physical and digital gift cards provide a flexible, speedy one-two punch solution for distributing financial relief to individuals while supporting small businesses. For merchants, the proceeds strengthen their cash flow to help cover costs until brick-and-mortar stores reopen. Even payments providers and lenders stand to benefit, with sales helping maintain relationships with clients or even bring new merchants into the fold.

Toronto start-ups started selling gift cards[ii] to support small local businesses at the start of the lockdown and one Toronto councilor even created a local initiative called Gift Card Days[iii] to encourage gift card purchases and support for local businesses.Instead of setting funds aside to use over a longer period of time, buying gift cards help support local businesses through a “buy now and use later” approach especially for upcoming occasions and celebrations—including birthdays, graduations, and weddings—providing some desperately needed cash for small businesses that need it.

Physical and digital gift cards are increasingly being leveraged for charity and kindness. “COVID-19 has fundamentally changed the way consumers shop and give, with consumers reporting that gift cards are more appealing as gifts for upcoming celebrations, while appreciating that they also have a positive impact on a business’ bottom line,” said Horb.

recent study shows 31 per cent of people are interested in contributing to a gift card for a person or family in need, 31 per cent are interested in sending gift cards to healthcare workers and 26 per cent are interested in purchasing a gift card from a business they care about that is closed or struggling during the crisis.[iv]

Business employees are also under pressure right now, and gift cards are a great way to thank, encourage and support them—especially those on the front lines. According to research, most people would be encouraged to work harder after receiving gift card rewards and feel that gift card rewards show that their employer values them—beating out online chats, virtual luncheons and video conference meetings.[v]

What’s next for gift cards? 

 As a popular payment tool, gift card ecommerce has become one of the most intriguing areas of modern retail. So, over the past few years, the payments and retail industries have come together to create flexible ways for people to buy gift cards from a multitude of small business and brands via virtual gift card malls. Other innovative companies introduced new ways to bring together disparate payments more invisibly such as connecting loyalty accounts in-app and cash out earnings via gift card to the retailer of their choice.

The gift card industry continues to be ripe for innovation and we look forward to seeing who blazes the path in 2020 and beyond.

[i]Blackhawk Network, “Paying for Things and Giving Gifts During a Crisis,” March 30, 2020, pg. 3

[ii]Dished Toronto, “Toronto startup selling gift cards to support local businesses,” March 24, 2020

[iii]CKOM, “Councilor supporting local businesses with Weyburn Gift Card Days,” May 10, 2020

[iv]Blackhawk Network, “Consumers look to gift cards amidst the crisis,” April 9, 2020

[v]Blackhawk Network, “Engaging Remote Workers: Research Reveals Remote Workers Overwhelmingly Want Rewards and Incentives from Employers,” April 6, 2020

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