Innovative business models are driving gift card industry growth in 2023

Print

Email

Employee retention is one of the major pain points for corporates around the world. Many of the human resources teams run employee recognition programs to recruit and retain the top talent for their organizations. This has created a lot of demand for innovative startups in the employee benefits space over the last few years, which is also evident in the fact that a number of startups have emerged in the segment over the last ten years. One such startup is Bonusly which was founded in 2013.

The platform developed by Bonusly aims to gather and evaluate data regarding organizational dynamics and connections, providing valuable insights to human resources teams and managers. On a monthly basis, employees are allocated an allowance to award small bonuses to their colleagues as a way to acknowledge their contributions. These bonuses are displayed in a feed, allowing everyone to witness and appreciate the impactful work occurring within their team.

• The bonuses, which are received by employees, can be converted into gift cards from popular brands like Amazon and Hulu. Furthermore, employees can also convert them into cash or make charitable donation.

Amid the current macroeconomic environment, wherein employees are struggling with higher interest rates and the soaring cost of living, the demand for gift cards has increased substantially. More and more employees are seeking to receive gift cards from their employers to offset the inflationary pressures. Although retail gift cards are more popular, leisure and travel-focused gift cards are also in high demand. Going forward, the demand for such innovative solutions is expected to further increase, as inflation continues to dampen the disposable income of many worldwide.

Consequently, PayNXT360 expects platforms like Bonusly to gain widespread traction among employers over the next few quarters. In addition to employers, such platforms are also gaining popularity among venture capital and private equity firms. Notably, the startups that are facilitating employee recognition and offering merit-based rewards have raised multi-million-dollar funding rounds over the last few quarters.

This also includes Bonusly which raised US$18.9 million in a funding round in February 2023. The Series B round was led by Ankona Capital and included participation from Access Ventures Partners, Next Frontier Capital, and FirstMark Capital. With the Series B round, the total amount raised by Bonusly has reached US$32.4 million, as of February 2023.

• Despite the economic challenges faced by startups in today’s environment, Bonusly has managed to triple its valuation in between Series A and Series B rounds. This shows that investors are foreseeing strong value in Bonusly and are, therefore, betting on its growth potential over the next five years. Going forward, the firm is planning to use the capital for developing new tools to improve its product offerings as well as expanding its rewards catalog. This will make the platform more attractive for employers, while driving higher engagement and retention rates.

At the end of January 2023, Bonusly had 3,175 customers and 396,813 users. With improved engagement rates and better employee satisfaction, more and more employers are expected to deploy the Bonusly platform within their organizations. This will subsequently aid the growth of the gift card industry over the next three to four years.

Finch, the United States-based employee benefits firm, also raised US$40 million in its Series B funding round. General Catalyst and Menlo Ventures co-led by the Series B round, which also included participation from Altman Capital, QED Ventures, and PruVen Capital. The firm is planning to use the capital for extending the benefits systems, among other things.

Alongside Bonusly and Finch, Fringe is another employee benefits platform that raised multi-million-dollar deals from venture capital and private equity firms. The firm, in November 2022, revealed that it had raised US$17 million in a funding round that was led by Origin Ventures and Felton Group.

Going forward, PayNXT360 expects more venture capital and private equity money to flow into the employee benefits space. Furthermore, more startups like Bonusly are projected to enter the market with their innovative business models, which employ the use of gift cards to enable employers to retain and attract talent. This will subsequently support the growth of the global gift card market from the short to medium-term perspective.

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