Digital Transactions Authoritative, insightful and timely information for payments professionals
By Jim Daly
@DTPaymentNews
Dollars loaded onto closed-loop gift cards fell 9% in 2015, according to new research from Mercator Advisory Group Inc. But one major prepaid card issuer, Dunkin’ Brands Group Inc., franchisor of Dunkin’ Donuts and Baskin Robbins stores, reports that its DD Perks loyalty program now has more than 5 million members.
Maynard, Mass.-based Mercator reports that $85.7 billion was loaded onto in-store, closed-loop U.S. prepaid cards last year compared with $93.9 billion in 2014. Ben Jackson, director of Mercator’s Prepaid Advisory Service, attributes the 9% decline to several factors. A key one was softness in retail prices, which made actual goods more attractive vis-à-vis gift cards.
“There was a lot of discounting, especially in the holiday season,” Jackson tells Digital Transactions News. “That meant people were willing to take a chance on buying an item.” For example, if a consumer was weighing a purchase of either a $20 sweater or a $25 gift card, “they took the sweater,” he says.
Lower retail prices for some goods, especially gasoline, also made consumers less inclined to buy gift cards to get loyalty points, he says.
A third factor may have been fallout from the general-purpose networks’ EMV chip card liability shifts that took effect last October, Jackson says. Blackhawk Network Holdings Inc., a major seller of prepaid cards in grocery stores, has reported that its top and bottom lines have taken multimillion-dollar hits because, to avoid counterfeit card fraud, some of its supermarket clients that aren’t yet accepting chip cards are making it much tougher for consumers to buy open-loop gift cards with credit cards.
“There are some signs that EMV affected other gift cards, or other prepaid cards, in the retailers that were not [EMV]-compliant,” says Jackson. But he adds that quantifying those spillover effects is difficult. The liability shifts place financial responsibility for counterfeit fraud on the merchant if its point-of-sale terminals don’t read EMV chips, forcing transactions to rely on a card’s more fraud-vulnerable magnetic stripe.
The report also notes that loads on digital gift cards increased in 2015 as a share of all loads on retailer-issued closed-loop gift cards. The growth indicates an expanding overall market, not just digital forms taking share from traditional plastic, according to Jackson. “As the pie sort of grows, more of that is digital, it’s not strictly cannibalization,” he says.
A June Mercator survey found that 63% of U.S. adults bought prepaid cards, up from 61% found in a 2015 survey and 56% in 2014. Retailer-specific cards are the most popular type of prepaid cards, bought by 45% of U.S. adults.
Meanwhile, Canton, Mass.-based Dunkin’ Brands this week said that its Dunkin’ Donuts loyalty program has hit the 5-million-member mark. The program launched in January 2014 and gives five points for every $1 in purchases, with 200 points earning a free beverage.
“The number of DD Perks members has more than doubled in less than two years, which has surpassed all of our goals,” Sherrill Kaplan, vice president of digital marketing and innovation for Dunkin’ Donuts U.S., said in a statement.
DD Perks is integrated into the Dunkin’ Donuts mobile app, which uses barcode technology for contactless payments. The company would not reveal mobile-payment transaction numbers.
In June, Dunkin’ Brands introduced On-the-Go Ordering, an order-ahead and automatic-payment service akin to Starbucks Corp.’s Mobile Order and Pay service. A spokesperson says in an email to Digital Transactions News that while he can’t disclose the transaction count, “we’re pleased with our guests’ response to On-the-Go Ordering since it launched, and it is a clear demonstration of our commitment to enhancing convenience for our guests through technology-based initiatives.”
Dunkin’ Donuts, which has about 8,400 U.S. stores, also accepts the Apple Pay, Google Checkout, and Visa Checkout mobile wallets.
