The Gift Card Industry Is Growing: Can Blockchain Facilitate The Growth?

One of the less frequently considered market when it comes to an expanding economy is the gift card industry. However, sales and usage of gift cards have increased substantially over recent years. With younger generations more interested and engaged with an online, e-commerce driven retail economy, it should comes as no surprise that gift card use is flourishing.

As with all developing industries, there are growing pains. However, blockchain may be the solution for the pain points in the industry.

Gift Card Growing Pains

The gift card industry has seen a steady sales increase over the past decade, according to data from WalletHub. The report shows a 5 percent increase in sales during 2010, 9 percent increase in 2011, 8 percent in 2012, and a 10 percent increase in 2013. This 5-10 percent growth trend of  has continued annually up to 2018.

Additionally, Persistence Market Research projects the international market for gift cards to grow to $698 billion by the year 2024. That’s more than twice its current market valuation of $307 billion. While all that growth is certainly a good thing for vendors and consumers, it comes with issues as well.  

The gift card industry, though robust, isn’t as tech-savvy as it might need to be given the online retailers to which it caters. Concerns with maintaining proper usage and fraud prevention still run high. As recent as this past holiday shopping season, gift card fraud was still a top risk for consumers. Unfortunately, there are a variety of methods for stealing card information and funds that the industry still hasn’t been able to eliminate completely. Couple those issues with other factors like spending deadlines, double-usage, and outright fraud and the gift card economy clearly still has some intricate pain points to address. Enter: blockchain.

From Cryptocurrency to Corporate Currency

Yes, the market-wide “disruptor” also stands to play a major role in the gift card industry. Blockchain technology (and the cryptocurrencies typically associated with it) has generated buzz in the fintech world for a good reason: because it solves complex problems.

The most obvious example of blockchain improving the gift card industry is by integrating smart contracts via the Ethereum network to ensure fair and legitimate transactions.

Since many gift cards have expiration dates on them, not all holders will actually use them within the available time frame. This has created an entire industry around the secondary market; those selling gift cards they may never actually use. Interested consumers can shop gift cards through a third party platform, typically at a lower rate than the actual card value, and use those before making a purchase with the vendor in mind.

These gift cards can be thought of as another type of currency, often referred to as “corporate currency,” since the cards have a monetary value tied to one specific retailer or company. But, in this instance, governance of that currency can be difficult (or nonexistent) on many of these third party platforms. When it comes to transactions and handing over financial information like the payment for the card and the gift card credentials, things can sometimes go awry.

That’s exactly where blockchain comes in. Gyft and Zeex are two fintech companies have emerged tho hasten the industry’s adoption of blockchain. Gyft lets users manage gift cards, and to also gift them. They have also recently launched the option to buy gift cards with Bitcoin.

Zeex is a company looking to solve not only pain points in the gift card industry, but the bottlenecks for liquidity in the cryptocurrency industry as well. Zeex aims to accomplish this by allowing users to buy and exchange gift cards within the transaction protocols of many mainstream cryptocurrencies. They intend to develop the platform to ensure secure and independently verified transactions for both card sellers and crypto users.

By integrating distributed ledger technology and encrypting sensitive information, blockchain-based platforms and companies that incorporate them can accurately keep track of all transactions occurring in the ecosystem, ensuring that they’re executed fairly. This eliminates the problems of verification in online marketplaces like Craigslist and Facebook. Instead, consumers can sell gift cards to others and use the ecosystem to put up collateral for a sale to ensure buyers receive what has actually been listed. Not only does the platform cater to those in the growing gift card industry by allowing them to sell cards to other consumers, but it also aids one of the biggest problem areas for the cryptocurrency sector: liquidity.

With a legitimate, smart-contract-enabled system set in place, the gift card industry can continue to grow pain-free, and actually foster greater customer choice and security. Gyft, Zeex, and other companies that are integrating blockchain protocols into their transactions are bringing security to the ‘corporate currency’ market, bolstering the convenience of selling that currency off to another consumer who is looking for a card with that exact company.

Blockchain is the next logical step for develop a smart marketplace and will not only facilitate growth in the gift card industry, but alleviate liquidity concerns in the expanding cryptocurrency industry as well. It’s a win-win for both booming fintech industries.