Gift Cards A Bonanza For Issuers
Tower Group
Nov 22 2006 : U.S gift card sales will exceed USD80 billion in 2006, representing a 20 percent increase on 2005 sales, according to research by TowerGroup.But issuers will rake in nearly USD8billion as a result of unredeemed or expired value and from lost gift cards, says the Needham, Massachusetts-based consultancy.
Consumers lose much more from the unused value on their gift cards than they do from the combined value of debit and credit card fraud, TowerGroup says. Credit and debit card fraud totals USD3.5 billion in the U.S. annually, it says. In the quarter ending May 2, 2005 U.S. retailer Home Depot recognized a profit of USD43million from accrued, unused gift card balances, TowerGroup points out.
The market for gift cards is currently dominated by retailers, which will issue USD29 billion worth of gift cards in 2006, TowerGroup says. However, it is bank-issued gift cards, worth an estimated USD23 billion in 2006, that will see the greatest growth, it predicts. These "universal" gift cards can be used at any location that accepts bank cards.
Restaurants will have issued USD18 billion worth of cards in 2006, while other business sectors such as gas stations and service providers will have issued USD12 billion worth of gift cards in 2006, estimates Tower Group.
Merchants LOVE it when people don't redeem the cards. That's free money to them. $8 BILLION in free money.
Use those cards folks. ;-)