Physical gift cards are ceding ground to digital alternatives globally

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Ever since the pandemic outbreak, gift cards have gained widespread popularity among consumers globally. In addition to being a popular choice for gift givers, the payment tool is also getting used widely for self-usage. Another emerging trend that is worth taking note of is the fact that traditional physical gift cards are ceding ground to digital alternatives worldwide. The shift is driven by a number of different factors, including convenience, environmental, and security concerns, among many others.

• In China, digital red packets gained widespread adoption during the 2023 Chinese New Year. Several banking institutions, including DBS Bank, revealed that more and more consumers are opting for electronic transfers due to greater convenience. United Overseas Bank, on the other hand, revealed that digital red packets on the eve and first day of Chinese New Year increased over 10% year on year. In addition to this, United Overseas Bank also revealed that consumers are seeing digital red packets as more eco-friendly compared to traditional red packets.

While convenience and environmental concerns are driving the adoption of digital gift cards in China, security and theft concerns are expected to lead to the adoption of electronic gift cards in the United States in 2023.

In the North American market, thieves intercepting gift cards through mailboxes are on the rise. Some of the local postal service offices have also warned consumers about the risks of mailing gift cards.

• The Department of Justice, in November 2022, announced that a former USPS mail carrier pleaded guilty to gift card theft. The trend of thieves intercepting gift cards through mailboxes is projected to grow further in 2023, as the Postal Inception Service is steadily reducing the number of postal officers on patrol around large cities. Consequently, PayNXT360 expects that more and more consumers will turn to digital gifting options like gift cards, which are more secure compared to physical ones.

In addition to these factors, government disbursement programs aimed at driving consumption are also expected to aid the adoption of digital gift cards from the short to medium-term perspective in the global market.

In Hong Kong, the government announced that the first installment of the consumption vouchers will be disbursed starting April 16, 2023. An estimated 6.4 million people are eligible to receive e-coupons in 2023. Alongside permanent residents, new arrivals aged 18 or above are also eligible under the consumption voucher scheme. These people will receive HK$5,000 in two installments.

To disburse the funds, the government has selected six payment platforms, including Octopus, Bank of China’s BoC Pay, HSBC’s PayMe, AlipayHK, Tap & Go, and WeChat Pay HK. On the other hand, these e-vouchers can be redeemed at retail stores, supermarkets, restaurants, public transport, and even online platforms that accept payment from any of the six service providers.

Globally, many government institutions have announced a number of disbursement programs to aid economic recovery, while supporting local businesses. The trend is projected to further continue in 2023, and therefore, the adoption of digital gift cards will continue to grow from the short to medium-term perspective.

The digital gift card segment will also benefit from the growing strategic collaborations in the global market. Qwikcilver, for instance, entered into a strategic alliance with Woolworth’s Wpay to support the latter’s journey toward digital transformation. With consumers preferring digital solutions over physical ones, the collaboration will enable Wpay to better serve the needs of its customers in the growing digital gift card space. For Qwikcilver, the collaboration with Wpay will assist the firm in extending its gift card processing solutions and services in the Australian and New Zealand markets.

From the short to medium-term perspective, PayNXT360 expects more such strategic collaborations in the digital gift card segment, which will subsequently drive the competitive landscape as well as the industry growth worldwide. Furthermore, as digital gift cards continue to become a more popular choice among gift-givers, PayNXT360 expects more and more firms to adapt their strategies and launch completely digital gift card programs over the next three to four years. All of these factors indicate that physical gift cards will continue to cede ground to digital alternatives from the short to medium-term perspective.

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