Analysts predict healthy holiday spend

Positive economic indicators and general consumer optimism have created a festive mood among retailers and payment professionals in anticipation of the upcoming holiday season. Retailers have launched early, omnichannel Black Friday promotions. Bellwether reports from the National Retail Federation and First Data Corp. indicate consumer spending in 2015 may be nearing prerecession levels.

Gift cards gain traction

The First Data 2015 Prepaid Consumer Insights Report, due out in mid-November, noted an uptick in consumer spending on physical and electronic closed-loop gift cards over the past 12 months. The company reported that 64 percent of consumers would prefer to receive a gift card than any other type of gift or incentive.

"First Data has seen an uplift in prepaid gift cards across all merchant segments, from the largest retailers to corner store small midsize businesses," said Euphemia L. B. Erikson, Director of Client Solutions, Network and Security Solutions at First Data. "Clients are more knowledgeable about gift cards and can choose card, app or POS-based gift card solutions to increase foot traffic and create greater connections with their brands."

Erikson noted five reasons for gift cards' increasing popularity among retailers and consumers. The cards:

  1. Generate revenue: Consumers redeeming gift cards spend, on average, $23 more than the original value of the gift card they receive, driving more incremental store revenue.
  2. Differentiate the company: An array of gift card designs can help a business stand out from its competitors and deepen ties between customers and brand.
  3. Drive additional foot traffic: Consumers with gift cards return to a business an average of three times per gift card. Each store visit provides another opportunity to promote complementary products and sale items.
  4. Acquire new customers: More than 80 percent of consumers have given or received a gift card in the last 12 months. Many shoppers have not even visited a particular retailer but know that it would be a good place for a specific gift card recipient to shop. For this reason, gift cards can be a way to recommend and promote a merchant and brand.
  5. Reduce fraud: Most gift card programs and marketplace apps incorporate real-time authorization for gift card transactions and incorporate secure transactions at the POS or in-app. These security measures help eliminate the fraud associated with paper certificates.