Monitoring the Evolution of the Closed-Loop Gift Card Market
Not to date ourselves here, but it seems like only yesterday when the Blockbuster Video and Kmart gift card programs got the ball rolling on a national scale. Ironically, the debate in those years raged on as to whether consumers would embrace such an impersonal mode of gifting. Many of the original business cases for launching a gift card program were based on eliminating the fraud and operational burden associated with administering gift certificates and merchandise returns. Float was also a nice side benefit. The big “ah ha” of merchandising gift cards on J-hooks was a pleasant surprise and a catalyst for gift card malls, numerous use cases, and ultimately the “stored value” concept that powers programs such as Starbucks (to the tune of $4.3 billion in load volume in U.S. and Canada in FY2014).
On the journey over the past few decades, there have been many milestones and a fair amount of fits and starts. The dot.com frenzy in the late 90s set off a flurry of cyber-currencies some of which were tangential to the stored value concept. The historians in the group may recall the likes of Flooz and Beenz. Now, digital is now more broadly defined and e-commerce opened the door for specialists such as CashStar, Transaction Wireless and others to bring customized solutions to web and mobile channels.
Ideas that were initially viewed as niche opportunities, including secondary gift card resale marketplaces such as Cardcash.com (which acquired Plastic Jungle) and Cardpool.com have become meaningful players with the evolution of technology. One of the newer players, Raise.com, touts the ability to enable gift card buyers to purchase an e-gift card at a discount, in real-time, and transact immediately online, or potentially one day at the point-of-sale. At the extreme this inserts the gift card commerce marketplace directly into the purchase stream. As e-gifts grow in popularity and mobile-gift redemption becomes easier, this segment could grow significantly.
Figure 1: Recent M&A and Funding Activity in Gift Card Market
Figure 1 is not meant to be exhaustive, but is a recap of certain recent events given the string of acquisitions, capital raises, and other activity in the gift card space.
For more information, please contact John Grund, Partner, firstname.lastname@example.org; or Aaron Mercurio, Senior Consultant, email@example.com. Both specialize in Credit Card Issuing.
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