Gift cards are widely used as a tool to support local businesses and drive consumer spending in the United States

Gift cards are widely used as a tool to support local businesses and drive consumer spending in the United States

Gift cards are widely used as a tool to support local businesses and drive consumer spending in the United States

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First, the global pandemic outbreak and now the macroeconomic environment is having a severe impact on consumer spending globally. With rising inflation, and the subsequent surge in the cost of living, consumers are saving more and spending less on splurging. The fear of a potential recession in 2023, is making further dents into consumer spending behavior. As a result of this, small businesses are finding it difficult to run their operations and remain afloat.

To provide local businesses with much-needed support and drive consumer spending, many local authorities around the world are turning to gift card programs. In the United States, City Councils are using gift cards as a tool to support their local businesses.

  • In December 2022, La Habra, a city in California, announced that it will send out gift cards worth US$200 to a thousand eligible residents. The gift card program is aimed at providing financial support to local businesses, that lost revenue during the global pandemic outbreak. The gift card program was approved unanimously in October 2022, wherein the City Council decided to disburse US$200,000 to eligible residents as a subsidy.

La Habra is currently accepting applications for residents to check eligibility. On the other hand, all the participating businesses are enrolled automatically in the gift card program. According to the City Council, residents receiving the gift cards can use the payment tool at participating businesses, and are valid for six-month period. With no limitations placed on the gift cards, residents can buy anything they want using the payment tool.

The funds for the gift card program launched by La Habra will be made available through the American Rescue Plan Act of 2021. Notably, a part of the funding available through the act was available to assist local governments to address the economic challenges associated with the pandemic. From the American Rescue Plan Act, La Habra received approximately US$16 million, which the city can utilize until 2026. Consequently, PayNXT360 expects La Habra to launch more such gift card programs that aim to drive sales for local businesses, while also supporting the growth of the local economy.

  • In December 2022, Upland, another city in California, announced a similar gift card program to support local businesses. Using the funds received from the American Rescue Plan Act, the City Council approved the gift card program totaling US$250,000. However, unlike La Habra, which is providing gift cards to only eligible residents as a subsidy, Upland is offering gift cards to shoppers as a bonus when they purchase an e-gift card from the Discover Upland website.

Furthermore, the gift card program launched by Upland will focus on personal services, unlike the one offered by La Habra. Barbers and hair salons are some of the local businesses where residents can use gift cards as a payment tool in Upland. While the La Habra gift card program is implemented by Giverrang, Upland chose HdL and Yiftee to run and implement the program.

  • In November 2022, Portland, a city in Oregon, also announced a gift card program to support local businesses. Termed Here for Portland, the program is led by a non-profit. Under the program, three thousand gift cards each worth US$50 were distributed to residents through a mobile application. These gift cards, like the other two offered in La Habra and Upland, can be used at participating local businesses.

Globally, the trend of gift cards as a tool to support local businesses is growing. In the United Kingdom, many local authorities launched gift card programs in 2022, and the trend is projected to further continue in 2023, as businesses continue to reel under the pressure of economic challenges and declining consumer spending.

In China, local authorities have been using gift cards to drive the recovery of the property market, which has been severely affected by the crackdown announced by Beijing in 2020. Jiangxi Province, for instance, is offering homebuyers a voucher worth approximately US$5,500 when they purchase a home having a floor space of more than 90 square meters. Other cities, such as Zhengzhou, Changchun, Zhoushan, and Shandong, have also announced similar programs to drive the recovery of the property market in China.

With these innovative use cases of gift cards, PayNXT360 expects further growth in the popularity of the payment method over the next three to four years. This will keep assisting the growth of the overall market from the short to medium-term perspective globally. 

To know more and gain a deeper understanding of the gift card market in the United States, click here.

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