Gift cards are a widely underreported aspect of mobile commerce, and perhaps for good reason: the findings from a recent report from National Gift Card Corp. show that digital uptake of gift cards is hard won by retailers.

NGC’s report is a summary of gift card activity, both physical and digital, in 2016. Among other findings, the report found that big box retailers remain one of the primary purveyors of gift cards, with an overwhelming majority of sales involving physical gift cards, but many predict that digital gift cards will enjoy an uptick as big box retailers gradually shift their resources to ecommerce presences.

“Yes, but not as much as the market may expect, and it will be tied to who the end recipient of the gift card is,” said Eric Thiegs, president of National Gift Card. “The general consumer market who shops at the leading big box stores do so because they want the physical shopping experience of those brands.

“This audience will continue to translate to those individuals selecting a physical gift cards as the ideal reward method, especially for self-use.”

Physical vs. digital
NGC’s report claims that 85 percent of consumers prefer plastic gift cards, with the remaining 15 percent using digital gift cards.

The report also honed in on the use of gift cards within different sectors, with Travel having the most year-over-year growth at 39 percent, followed closely by Sports & Wellness and Department Stores at 35 percent and 25 percent growth, respectively.

Sectors with the biggest volume losses in gift card redemption include Entertainment at 10 percent decrease year-over year, Gas at 7 percent decrease YOY, and Home Improvement at 3 percent.

The report also use some space to discuss the differing rates of gift card usage between different demographics, focusing on how younger cohorts such as millennials and Gen Z will dictate demand for gift cards on different platforms.

“This audience are the digital natives, but they have not consolidated around a particular mobile wallet or payment platform that would force a Point of Sale technology unification across merchants,” Mr. Thiegs said. “That will be a tipping point for eGift.

“And when it happens, look out, as mobile and eGift usage will skyrocket,” he said. “Secondly, these demographics do not represent a significant portion of the earning market yet through their income.

“As their careers and income grow, we will see a shift in eGift reaching the usage levels of plastic. I see this taking a minimum of five years, but could last as high as 15 years as the Gen Y market becomes the income leaders as a demographic whole.”

Mobile commerce
Institutions both big and small are digitizing as millennials gain more earning power over time. Clothing retailer Kohl’s is opting to shrink its bricks-and-mortar presences in favor of shifting emphasis to digital channels (see story).

And regional bank Bank of the West is offering its customers a bevy of new ways to interact with brands and retailers thanks to integration of five of the most popular mobile wallets on the market (see story).

“Gift cards are becoming the branded currency for the merchants,” Mr. Thiegs said. “What Starbucks did with their gift card and eGift product — tying it to a loyalty program —established them as the leader in the concept of eGift as a currency.

“I think merchant eGift cards in categories with high frequency of consumer purchases (Gas, Grocery, QSR, etc) could use eGift cards to dramatically change spending loyalty behavior for consumers. This concept could apply to brands in categories with high loyalty engagement already in place t