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Promotional gift cards drive closed-loop market

September 14, 2011

According to an assessment of closed-loop prepaid cards by independent research firm Mercator Advisory Group, promotional gift card use is driving closed-loop growth.

According to an assessment of closed-loop prepaid cards by independent research firm Mercator Advisory Group, promotional gift card use is driving closed-loop growth.

The Eighth Annual Closed-Loop Prepaid Market Assessment revealed that the closed-loop prepaid market – consisting of cards that can only be used at certain merchant locations – grew from $230.3 billion in 2009 to $261.2 billion in 2010.

Ben Jackson, senior analyst for Mercator’s prepaid advisory service, notes that greater than expected gift card use spurred the prepaid sector.

“Growth in the closed-loop prepaid market has been driven by the in-store gift card segment, which continues to grow and develop as retailers move from thinking about prepaid cards as a plastic version of paper gift certificates to a multi-functional promotions and sales tool, ” said Jackson.

Mercator had predicted 4 percent growth for in-store gift cards from 2009 to 2010. However, load volume actually increased by 10 percent – from $76.9 billion to $84.6 billion.

Digital Transactions reports that prepaid loads for government nutrition-assistance programs have acted as a significant source of revenue for the closed-loop sector. The Supplemental Nutrition Assistance Program and the Women, Infants and Children program increased loads by a combined 21 percent in 2010.  

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