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by Alex Palmer | March 22, 2012
Prepaid cards saw a 10 percent surge compared to the same period the year before, according to First Data’s Year-End Prepaid Gift Card Market Analysis. The payment solutions company cited economic improvements and the growing use of credit, as well as pent-up demand, as some of the top reasons for the strong showing.

The report, which drew on data from First Data’s SpendTrend Solutions database, found a particularly high boost in quick-serve restaurant cards, which saw an 11.7-percent increase in the dollar value of cards sold. 

Casual dining also showed strength, with an 8.5-percent uptick. While all the categories showed an increase of some kind, the others were more modest, with specialty retail only growing 3.4 percent.

“Home furnishings and accessories stores, a subsegment of our Specialty Retail category, continue to struggle with their gift card sales due to the uncertainty in the housing markets,” says Silvio Tavares, senior vice president and division manager of First Data Global Information and Analytics Solutions. “Purchases are influenced by the vigor of the U.S. housing market, so First Data Advisors expects this segment to remain strongly influenced by cautious consumer spending in the face of ongoing market uncertainty.”

Areas that showed serious strength were grocery, discount, and gasoline retailers, which offered consumers hit hard by a tough economy value-oriented solutions, rolling out new or expanded fuel rewards programs. According to First Data, fuel rewards prepaid card sales grew 9.6 percent for the full year compared to the year before. 

Tavares points to the big increase in gas prices as a cause of this growth in fuel rewards, with costs rising to an all-time high of $3.51 per gallon on average for the year. But he emphasizes that a strict focus on value might become less useful for prepaid card resellers in the coming year or two. 

“One of the major trends in 2011 has been an increasing willingness of consumers to purchase higher valued gift cards as uncertainty in their financial situation eased,” says Tavares.  “QSRs are in a great position to leverage their proximity and familiarity with customers in order to increase the value of their gift card sales.  In 2012, First Data Advisors expects to see more innovation from QSRs in order to leverage these advantages.”