Blackhawk Study on E-Gift Cards Shows Why Competition Is Heating up

Electronic gift cards are becoming more popular with consumers, and potentially creating more sales at retailers, finds a new survey from Blackhawk Network Holdings Inc.

That will likely mean competition for consumers will heat up as merchants and processors look to cash in. Mercator Advisory Group, which follows the gift card market, estimates virtual cards accounted for 3% to 4% of all gift card loads last year, but predicts this percentage will rise rapidly as more mobile wallets are introduced and retailers look to capitalize on consumer interest.

In the Blackhawk survey of more than 2,000 U.S. consumers, 53% said they purchased an e-gift within the last year, and 94% bought more or the same amount of e-gifts in the last 12 months compared to a year ago.

Blackhawk defines e-gifts as virtual gift cards delivered to recipients via email, social media, or text message.

As with physical gift cards, e-gift recipients—82% of them—tend to spend more than the value of their gifts, Blackhawk says. “Additionally,76% say that hearing about a promotion encourages them to spend their e-gift and 75% tend to treat themselves when spending e-gifts,” Blackhawk says.

As for where consumers redeem their e-gifts, 69% do so online, and 46% redeem in stores. Most consumers—82%–buy their e-gifts online on a desktop, followed by mobile phone, 26%, and tablet, 25%.

The survey also found that 56% of consumers who never have received an e-gift would be interested in getting one, and only 44% of shoppers who never bought one said they were not familiar with e-gifts.

Rising interest in the product means competition for digital gift card customers is intensifying. In the most recent example of this, First Data Corp. bought Transaction Wireless Inc., a digital gift card distribution company, providing the payment processor with the ability to help merchants sell digital gift cards directly to consumers.