Two years after Square announced it was offering a virtual gift card service it decided to nix the program in favor of a physical one.
Considering new trends in consumer habits and technological innovations, the fact that Square chose to produce gift cards in their physical forms—when they could have chosen to do so digitally—came as somewhat of a surprise to me.
It’s true that a physical gift card may feel like a better present than a digital gift on account of it’s tangibility—namely, the fact that such cards can be wrapped up and gifted on special occasions like birthdays. However, such gifts are essentially only vouchers with which the recipient is free to buy themselves something else, a feat which could easily be accomplished through a digital gift card.
Digital gift cards are growing at an unprecedented rate, a fact I’d like to highlight with data from a recent Incomm research proving this consumer trend—one which is especially striking among millennials:
- 71% of the people surveyed intend to purchase at least one gift card from an online website or mobile website/app this holiday season, while 74% agree that they are likely to purchase at least one digital gift cards
- 85% of respondents between 18-35 agree that they’re likely to purchase at least one digital gift card this holiday season
- 53% of total respondents, and 79% of those between 18-35 are interested in storing and using gift cards on their phone
Despite the fact that physical gift cards still account for an undeniably large part of the gift card market, Square’s strategy—one aptly dubbed as “old school” by GeekWire—still struck me as somewhat outdated considering their previous history of being able to anticipate trends in the market.
It’s almost as if Spotify had decided to start producing their own branded CDs: sure they’ll still be popular, but are they really necessary considering Spotify’s role in the digital music market?
I am deeply convinced that digital gift cards bring far more value to both consumers and retailers than their physical counterparts, and here are a few reasons why:
1- You don’t lose them
The great things about electronic gift cards are that they can be accessed through e-mail and via smartphone apps. It is especially appealing to consumers worried about losing the cash, says Jeanine Skowronski, credit card analyst for Bankrate.com: “Electronic gift cards are definitely harder to lose,” she says. “It can exist in your e-mail, as opposed to a piece of plastic that may or may not make it into your wallet.” Actually, 40% of 18-29 year olds admit to losing a physical gift card before they could spend it completely!
2- You can customize them
Consumers can easily customize their gift cards. Users now have the liberty to set their own denominations rather than having to choose from a pre-determined amount, a factor which makes them the perfect choice for a quick last minute gift card. Users can also modify multiple elements of the gift card from the faceplate to other interactive options like a ceremonial bowtie to “unwrap” the card, an addition that has obvious appeal for children and younger age groups.
3- They’re instant
In an era of instant gratification where consumers want everything right here right now, it’s no wonder why millennials favor sending and receiving digital gift cards instantly online. There’s just no need to go to a store or waiting for the gift card to be shipped when you can now order and delight your friends instantly, in just a few clicks, no matter where they are in the world.
4- It’s cheaper for retailers
Switching from physical to digital gift cards benefits the retailers, too, and it’s easy to see why. Firstly, retailers don’t have to pay to produce the gift card—merchants only need to join an online program that allows for them to digitally order their own gift cards. Additionally, retailers no longer need to ship out their physical gift cards, an expenditure which undoubtedly represented another cumbersome extra fee. With Square, retailers are charged $1,50 per gift card!
5- It’s eco-friendly
It’s particularly important for us to preserve the natural resources that our planet has given us, and it’s part of our duty to future generations to use them only for good. Physical gift cards are incredibly wasteful in this regard on account of: 1. They are needlessly produced—there should be no need to cut down valuable trees in order to create a plastic card which functions only a voucher and 2. the act of shipping the gift cards is one which physically pollutes the world compared to its digital counterpart. Taking these circumstances into consideration, the benefits achieved from switching from physical to digital gift cards simply cannot be understated enough.
Square’s decision to utilize gift card services for retailers is a promising step forward in the gift card market, one which I hope will someday achieve its full potential—as a cheaper, more environmentally sound option—in digital form.