Consumers love cards. Credit cards are more popular than ever, with the average U.S. household owning 2.5 credit cards, according to U.S. Census data. And as in other retail industries, prepaid cards have exploded in popularity in the convenience store industry because of ease of use, options and portability.
“As the No. 1 most-requested gift by U.S. consumers, gift cards are really a customer expectation,” said Darek Mose, consumer card manager at Chevron, which this summer launched a new digital eGift Card that ties into its loyalty program.
So while open-loop cards, which generally feature a credit-card company logo and can be used anywhere, remain popular, it’s closed-loop cards, which feature a brand name (like Amazon, Apple or the convenience-store brand) and can be used in one location, that are exploding in popularity, leading companies like Chevron to explore their own versions.
“Closed-loop in-store gift cards are the largest prepaid segment, the one familiar to most people,” said Sue Brown, director of prepaid advisory service at Mercator Advisory Group. “Retailers and their customers have developed a greater appreciation for the branded currency of closed-loop cards, especially as technology has enabled them to be tied more closely to rewards programs. Another factor contributing to their growth is the immediacy with which cards can be delivered via digital means, whether SMS, email or digital wallet.”
Mercator research showed that the overall closed-loop segment grew 3% in 2018 to $95.7 billion and forecasts annual growth of 5% through 2022.
And the popularity won’t wane any time soon. Prepaid card market values increased 16.8% from 2014 to 2018 to become a $561 billion industry, according to ResearchandMarkets.com’s “United States Prepaid Cards Business and Investment Opportunities” report. The report predicted prepaid will grow an additional 12.4% through 2023. The growth is being driven by retailers embracing both third-party and branded cards.
“The cards continue to be popular and are ideal for the channel,” said Derek Gaskins, senior vice president of merchandising and procurement at Des Moines, Iowa-based Yesway, which operates 150 stores in nine states.
Prepaid cards only require a small footprint and offer consumers flexibility in managing spending, weekly budgets and gift giving, he added.
“(Prepaid cards) expand the ability to sell products beyond your four walls through third-party retailer gift cards like Amazon, Macy’s, Foot Locker, drive customer trips and provide true convenience for gift occasions, holidays and more,” Gaskins said.
Today, prepaid cards at c-stores encompass much more than the one rack of phone cards and third-party cards of yesteryear. While the general use of open-loop cards remains strong for bill pay, healthcare spending accounts and other personal uses, it’s the ability to brand the closed-loop cards, tie them into loyalty programs and make them digital that is attracting both customers and companies.
Chevron’s eGift card takes advantage of both the desire for prepaid cards and the desire to have digital versions of those cards.
“It allows our consumers to pay for fuel and car washes at the dispenser with our Chevron and Texaco apps at stations that are able to process mobile payments,” Mose said, adding that “eGift Cards deliver faster, friction-free transactions for customers as mobile commerce sales continue to grow. Balances are easily visible in the Chevron and Texaco apps, resolving a longstanding challenge with plastic gift cards.”
That challenge can lead to lost balances or security concerns. But by tying the balances into an app, customers know that balances are trackable, secure and available, ensuring that their popular gift or payment method is a viable one.