Gift Cards Boost Sales and Reduce Fraud

February 28, 2023

SMB Payments | Blogs | ISOs, Merchants

For business owners, gift cards provide a way to increase sales and offer customers a way to give a gift without deciding for the recipient. But what type of gift card is right for your business? How can you offer gift cards to boost sales and reduce the fraud risks associated with different types of gift cards? In this article, we’ll explore these topics in more detail so you can make an informed decision for your business.

Closed Loop vs Open Loop Gift Card Providers

First, let’s begin with discussing the difference between a closed loop and an open loop gift card provider. Closed loop gift cards can be designed with advanced security features, aka PIN codes, to prevent fraud and unauthorized use. Open loop cards are subject to payment network security measures and may not be tailored to a business’s needs. Thus, closed loop cards are an effective way to reduce fraud compared to open loop gift cards.

Gift Card Market Trends and Forecast

Next, let’s look at trends and the projected forecast to understand the type of gift cards sought after and why. The U.S. gift card market is expected to gain significant growth from 2023 to 2030, according to Data Bridge Market Research. They analyze the market is growing with a CAGR of 12.6% and is expected to reach USD 699,015.16 million by 2030*.

The closed loop card segment accounted for a significant share of the industry. This trend is expected to continue through the forecast period. This is due to a number of advantages, i.e. how businesses profit from gift card purchases and free activation. Both encourage the usage of closed loop gift cards*.

Benefits

Boosts Sales: Studies show customers tend to spend more when using gift cards.
Reduced Fraud Risk: Closed loop gift cards can be designed with security features, i.e. PIN numbers, helping to prevent fraud/unauthorized use. Closed loop gift cards are typically more secure than open loop because they can only be used at specific merchants.
Attracts New Customers: Gift card recipients are likelier to visit a store they may not have considered before. This helps merchants expand their customer base and increase brand awareness.
Enhances Customer Loyalty: By offering gift cards, merchants encourage repeat purchases.
Easy to Implement: Factor4’s quick activation process has merchants up and running in less than an hour!
Generates Revenue from Unused Balances: When gift card balances go unused, the merchant keeps the remaining funds as profit. While this may not be a significant source of revenue, it can add up over time.
Improved Cash Flow: Cash flow is improved since funds received at time of purchase are not redeemed until later. This can help merchants manage their finances more effectively.
Increased Brand Awareness: Gift cards help increase brand awareness by introducing new customers to the merchant’s products and services. Also, Factor4 assists merchants with designing custom plastic cards, capturing the essence of merchant brands and thus pushing their brand recognition.

Conclusion

Overall it’s easy to see why offering gift cards is a smart business decision for merchants. Increasing sales, building customer loyalty, reducing fraud risk, improving cash flow, and increasing brand awareness are just a few. Priority’s partnership with Factor4 provides a safe and secure gift card offering all to you through our MX™ Merchant platform. Just check out these Factor4 customer testimonials to learn how Factor4 has increased sales for their business!