The ongoing cost of living crisis, fueled by high rates of inflation and subsequent high interest rates, has squeezed the finances of individuals and families across the globe. During these tough times, keeping track of outgoings is a top priority – and one of the first categories of expenses to get cut is often subscriptions due to automatic billing.
In its place, consumers are opting to manage their spending with a prepaid gift card. First released five decades ago, the top up card has continued to appeal to millions of consumers and brands alike, who are able to hold on to their customers by giving them the option to access services with a hard sending limit.
This is reflected in the positive outlook of the global prepaid card market, which is expected to reach $64 billion in 2023 despite the current economic downturn. Prepaid cards are set to continue this growth throughout the decade, reaching $84 billion in 2027 and growing at a compound annual growth rate (CAGR) of 8 per cent.
Consumers can maintain relationships with their favourite brands
Subscriptions were at the forefront of the global tech revolution, famously popularised by Netflix to move their DVD-by-mail business online. Since then, many brands across sectors have pushed for this consumer retention model – from T-Mobile and Amazon Prime to Spotify, Apple TV+ and Fabletics leisure.
However, the modern consumer has grown tired of the unrelenting monthly charges on their bank account, even in months when they have not used the service. These concerns heightened by the tough economic times are putting pressure on budgets around the world, leading consumers to search for a better way to interact with their favourite brands.
To address consumer’s concerns, innovative brands offer prepaid gift cards, enabling their customers to enjoy their favourite applications and streaming services worry free, with the knowledge that their spending on each gift card has a hard cap.
Branded prepaid cards also take other forms – general use prepaid credit cards allow customers to spend on a card in most stores without a link to their bank account. Additionally, prepaid cards extend new financial capabilities to the underserved; in the US alone, there are still millions of consumers outside the formal economy without access to a bank account. Others enjoy the sheer simplicity of prepaid cards.
Prepaid gift cards are an important tool for big brands seeking to engage a new audience, offering several benefits over traditional payment methods for retailers. The cards provide increased data security, greater customer flexibility and convenience, and a new avenue for brands to engage with customers and build brand loyalty.
A focus on data privacy
In an age of regular headlines concerning data breaches, consumers are desperate for more control over the use of their personal details, and oversight of parties with access to their data: 90 per cent of customers want complete or some control over how their data is used.
Prepaid gift cards are here to help. First, the promise to consumers is that their details are kept secure, as a connection to a bank account or credit card is not required. Additionally, if the prepaid card is compromised, the financial information of the consumer remains hidden. This is a compelling proposition for customers, presenting hard barriers to the theft of their data.
Consumer’s worries over how their data is used differs from continent to continent. For example, identity theft and stolen credit card information are the leading concerns in the USA, whilst data privacy is the main worry in China. Regardless of regional nuance, consumers and brands across the globe are paying more attention to data privacy and security.
Branded prepaid gift cards provide a solution to concerns about data privacy, undoubtedly playing a part in the market’s strong global growth. Prepaid gift cards, by definition, enable consumers to sign up to services anonymously and avoid handing over personal information. Consumers can now access their favourite brands with a simpler, faster and more secure payment method.
Flexibility and convenience for consumers
A key benefit of prepaid gift cards is that they offer customers greater flexibility and convenience. Prepaid gift cards provide a fast and seamless method for consumers to engage with brands and subscribe to their favourite platforms whilst maintaining control over their household spending budgets.
Cards that traditionally too some time to procure in traditional retail stores can now be quickly reloaded online, and continue to be supported by a growing range of merchants – both online and offline. This makes it easy for customers to continue to access a broad selection of products and services, even when they cannot afford to sign up for a regular subscription. As the cost of living crisis tightens budgets across the globe, prepaid gift cards help consumers to track and limit exactly how much they are spending.
Brands also enjoy benefits from prepaid gift cards. By preloading cards, brands eliminate any credit card processing fees and remove the risk of chargebacks, meaning they can save money by offering prepaid gift cards. The cost savings are significant for brands, improving their margins with no effect on the customer experience.
On strengthening consumer loyalty
Brands are also presented with a unique marketing opportunity when implementing branded prepaid gift cards, as they are now able to offer promotions and discounts directly to the customers using their cards, whilst also collecting more advanced data on customer spending patterns. This information can inform targeted advertising campaigns and enhance the customer experience, which will prove especially useful when brands expand into new markets.
Customer loyalty can also be improved by prepaid gift cards, reducing the number of data touch points required to make a purchase. Loyalty is fostered by providing customers with a convenient way to subscribe to a brand when compared with a competitor – customers are likely to return to the brand if they have a positive experience using and reloading the card.
In conclusion, branded gift cards offer a convenient and flexible method of maintaining subscriptions, improving consumer’s data privacy whilst enabling better spend management. Brands also benefit, eliminating the risk of chargebacks and any credit card fees, whilst gaining better customer data and building loyalty with the customer. The ongoing cost of living crisis and increasing focus on data management means that branded gift cards are an essential consideration for all brands striving to grow their customer base and reach out a helping hand to their customers.
Günther Vogelpoel is the CEO of Recharge.com. Offering branded payments from over 750 brands in one marketplace, Recharge.com is the go-to online store for digital prepaid credit for consumers who want to send or buy mobile top-ups, gift entertainment subscription cards to a loved one or themselves, or charge a prepaid credit card.
In partnership with TFN, social impact media firm Ecology Media is running a special editorial series called A Better View, which explores the global challenges and opportunities that exist in the world of innovation.
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