Prepaid and gift card industry to witness rapid growth; consolidation expected to intensify over the next five years

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Consumer demand is shifting towards online retail and as this happens, the payment processing industry too has witnessed significant revenue jump over the last few years. It is expected that mobile will drive the growth of payment processing industry over the next three years. The market maturity for ecommerce will witness the acquisition of companies offering new and innovative products and technology to the niche consumers. The prepaid and gift card market has been moving on an upward trend and is expected to expand even more as consumers are shifting away from the high fee associated with bank cards. However, there are differences in terms of consumer behavior across markets, which makes understanding of dynamics critical to gain market share.

In developed markets, payment processing industry has witnessed notable M&A and partnerships over the last one year, especially in the US. Blackhawk Network, the US based company that issues gift cards has announced the acquisition of GiftCards.com and OmniCard.com in January 2016 with the objective of expanding its market share in the gift card and ecommerce space. In March the same year, Blackhawk Network acquired extrameasures, a prepaid consumer promotions and incentives company to expand the reach of its incentive and engagement business. In June 2016, US based gift card startup Slide agreed to merge with its rival, Raise. In developing economies, M&A activities are still few years away as these markets have still not reached the maturity level to trigger consolidation.

From a fundamental point of view, another market scope for the expansion of this industry segment is the benefit that gift cards offer to the retailers¬–retailers use gift cards as tactic to bring back customers and encourage shoppers to spend. In emerging economies, majority of the consumers tend to spend the amount loaded in the gift cards. However, in developed economies, it has been observed that once customers with gift cards are in-store, they tend to spend more than the worth of gift card, thus enabling retailers to increase their profits. E-gift cards are becoming a more promising mode of payment for consumers as there eliminate the requirement of carrying physical cards across markets.

To know more and gain deeper understanding of global opportunities in gift cards, click here.