The rise of the gift card industry

A prepaid value card issued by a retailer or bank and used as an alternative to cash for purchases at a specific store or related business is known as a gift card. They are generally redeemable for purchases at appropriate retail stores and are often subject to fees or expiration dates. Such gift cards are given by individuals to friends or family members in lieu of an item. They are also given by employers or organizations to their employees as rewards related to festivals or performances. Generic gift cards are available for cashback marketing strategies and are usually issued by banks such as American Express or even Visa. Other companies like airlines, cruise lines, hotels, theme parks and restaurants also offer gift cards to get repeat business.

History of Gift Cards
Gift card market insight
Factors affecting gift card industry growth
Benefits of gift cards
Problem areas for gift cards

History of Gift Cards

Gift certificates were the forerunners of the more modern gift cards. They were first invented by department stores in the 1930s. However, gift vouchers were only available to a limited number of customers, and only upon request. Gift certificates grew in popularity in the 1970s when McDonald’s first ran the campaign and gave out Christmas gift certificates. The trend caught on quickly, with many shops, restaurants and retailers joining the gift card bandwagon.

As beneficial as gift certificates were, they came with a few problems. Issuing and redeeming gift cards was time-consuming and there were many fraudulent activities that resulted in retailers losing large revenue. In the 1990s, gift cards came along, addressing the problems of gift cards.

Smithsonian magazine states that gift cards were first produced in 1994 by luxury department store Neiman Marcus. However, they didn’t market them to their consumers, and as such, Blockbuster is officially credited with being the first company to market plastic gift cards to the masses. They tested them in 1995 and launched them in the US the next year. These gift cards replaced Blockbuster’s gift certificates and were processed by Nabanco in Sunrise, Florida.

From then on, the gift card industry saw significant growth as the concept of gift cards expanded to various reputable brands. Many other retailers have adopted the gift card program to remove their gift card programs. Issuing debit cards instead of cash for returns not received became a popular practice among merchants. In 2001, Starbucks was the first company to launch rechargeable gift cards.

Gift card market insight

Gift card market revenue worldwide

The global gift card market size was recorded at USD 437.78 billion in 2020. It is estimated that it will grow at a CAGR of 15.4% between 2021 and 2028 to reach a market size of USD 1396.01 billion. According to Regional Market Analysis, during the same period Between 2021 and 2028, Asia-Pacific gift card market is projected to grow at a CAGR of 16.0% and reach $301.54 billion in revenue. Between 2022 and 2027, India’s gift card market is projected to grow at a CAGR of over 19.1%, reaching a market value of USD 93.96 billion by 2027.

Factors affecting gift card industry growth

Covid-19 pandemic

The pandemic led to worldwide lockdowns, which in turn led to travel restrictions and financial market disruptions. It is adversely affecting every affected industry seriously disrupting supply chains and production levels. The gift card market was no exception as the focus shifted from physical gift cards to digital gift cards as demand increased due to convenience of availability and ease of use.

Increase in the use of smartphones

The rapid development of smartphones has fueled the increasing innovation of gift cards. The penetration of smartphones has provided customers with flexible and convenient payment options, which in turn has boosted the gift card market. Modern technology and marketing strategies have created different ways for users to buy digital gift cards as the industry transitions from plastic cards to digital cards.

Benefits of gift cards

Whether digital or plastic cards, gift cards are a marketing strategy that benefits businesses in multiple ways.

Increase in brand awareness

Gift cards are an inexpensive promotional technique that keeps the brand front and center in the customer’s mind. Virtual gift cards can promote brand messages to online customers. When people buy and send gift cards to friends and family for special occasions, the brand gains more visibility and customers. Gift cards are an effective marketing tool.

Increased customer loyalty

The gift card program is a customer loyalty measure that not only encourages and builds customer loyalty, but also further promotes the brand to new potential customers.

increase sales

Gift cards are loaded with a fixed specific amount. However, in most cases, customers buy items that have a higher value than gift cards. It is a bargain for the customer as they are paying a fraction of the value and the experience is fulfilling.

comfort and reliability

The digital gift cards available today are reliable and convenient to use. They can be accepted online, in store or on the app, which protects them from loss, theft or fraud.

Provide useful data

Data is synonymous with money in every company. Gift cards help collect important customer data as brands learn about customer preferences through their use.

Problem areas for gift cards

The main concern of gift cards is their lack of security. The case was Distil Networks, which discovered GiftGhostBot attacking nearly 1000 websites to find gift cards, resulting in a breach of access to their funds. Additionally, while trying to launch gift cards quickly and inexpensively, many companies have inadvertently overlooked security risks that could allow any buyer to use money loaded on another buyer’s gift card. These security threats can prove to be a major impediment to the growth of the gift card market.


The development of the gift card industry was revolutionary. Their features and benefits are immense. If the problem areas are strongly addressed, this is an industry that will grow exponentially in the years to come.

frequently asked Questions

What is a gift card?

A gift card is a card that entitles the recipient to receive goods or services of a certain value from the issuer.

Who are the best online gift startups in India?

Some of the best online giftware startups are Qwikcilver Solutions, Indigifts, Wedtree, BigSmall, Giftsvilla and more.

What transactions are allowed with gift cards?

It can then be used to make any purchase for which payment is made electronically.

Can gift cards be used as cash?

You cannot use gift cards to withdraw cash.