Calling all business owners: it's time to give stored-value cards a second look -- When your bottom-line benefits, you'll be glad you did

By Malcolm Fowler, Ernex

Fruitcake, tube socks, reindeer sweaters. Ring a bell? Think back to Christmas morning, right when it was time to open Aunt Edna's gift. As you examined the box, you knew full well it didn't contain the gift you had hoped for but instead, another oversized, itchy Rudolph sweater, which you, without a doubt proudly displayed at the back of your closet.

Thankfully, a clever marketer who thought Rudolph belongs in the North Pole and not on a sweater introduced the stored-value card, a convenient payment tool used by millions of consumers that has practically bullied the tacky sweater industry right out of business.

One of the key drivers of this exceptional growth is the popularity of gift cards as cards purchased in December are often redeemed in January. U.S. growth in the gift card sector is estimated to climb to more than $90 billion in sales by 2007 according to TowerGroup, a research and consulting firm.

More reasons to like gift cards:

  • Jason Praw of The J.C. Williams Group, in his Gift Cards are Here to Stay study, reports two out of five (40 percent) shoppers using a retailer's gift card buy items at full price, more than double the number of shoppers (16 percent) who pay full price using other payment methods.
  • Praw's report also states consumers will spend $150 to $200 a year on gift cards. The 45 to 54 and 55 to 64 age groups will spend $160 to $230 and $190 to $240, respectively. Higher income families will spend more still, with those making over $100,000 spending close to $220, on average.

A gift card is an extension of the overall stored-value category. Stored-value cards are usually magnetic stripe cards "loaded" with a set amount of money, used to make purchases, whereby each purchase amount is deducted from the balance on the card. Businesses have embraced stored-value cards as the preferred solution to drive brand awareness, build customer loyalty, increase revenue and reach out to the credit-challenged consumer.

Here are a few extensions of a stored-value program that you may not have considered:

-Refunds: A difficult-to-manage transaction for most businesses, refunds can now be issued in the form of a stored-value card. This helps generate return trips, ensuring the consumer spends the refund at the business, while virtually eliminating cash reimbursements that could be spent elsewhere.

-Customer Incentives: Increase customer loyalty and return visits by providing stored-value cards as a bonus for making certain types of purchases, e.g. spend more than $150 and receive a $25 gift card.

-Leverage Data: Stored-value cards can be used to capture customer demographic information if merchants require card registration. By analyzing the data to determine purchasing patterns, businesses can personalize their customer offerings, in particular at the point-of-sale -- in real-time -- when the customer uses their stored-value card.

-Automatic Reload: Letting your customers' reload their cards directly from your Web site or through pre-authorized re-loads can be a valuable tool for driving repeat business. For example, parents can remotely reload grocery chain stored-value cards for their college and university-enrolled children.

These examples are valuable benefits for consumers and retailers, but what about applications and advantages of stored-value in the workplace? Stored-value programs in a corporate environment can be deployed in a variety of applications with unique benefits and results, including payroll cards, spending account cards for employees on trips and healthcare benefit plan cards for qualified healthcare expenses at the drug store, dentist, or doctor's office.

Many companies have already embraced the value and convenience of stored-value cards. According to a report from the Federal Reserve Bank of New York, by 2008, the number of stored-value card users is expected to reach 49 million.

It's clear stored-value cards are here to stay, be it as gift cards for consumers, refund cards for merchants, or payroll cards for businesses. The variety of applications, convenience and ease of implementation of stored-value programs are convincing more and more forward-thinking companies to embrace stored-value as a logical evolution to grow their business.

Malcolm Fowler serves as Vice President & General Manager at Ernex, a division of Moneris Solutions Corporation. For more information please visit