Digital gift cards, also known as e-gift cards, have transformed the gifting landscape by providing a versatile and convenient method for payments or purchases at specific stores or businesses. These cards can be categorized into two primary types: open-loop and closed-loop cards. Open-loop cards offer recipients flexibility, allowing usage at various locations, including restaurants, retail stores, and even for single transactions. Their compatibility with multiple credit card systems enables widespread use. These cards serve both business-to-business (B2B) and business-to-consumer (B2C) purposes, finding applications across consumer goods, health and wellness, restaurants and bars, travel and tourism, and media and entertainment sectors.
Market Growth and Trends
The digital gift card market has seen significant growth over recent years. According to a new report by The Business Research Company, the market size is set to expand from $418.74 billion in 2023 to $495.05 billion in 2024, reflecting a compound annual growth rate (CAGR) of 18.2%. This remarkable growth can be attributed to several factors, including the rise of mobile and contactless payments, the growing culture of gifting, the integration of social media into payment methods, and boosts from seasonal promotions and holidays.
Future Projections
Looking ahead, the digital gift card market is poised for continued rapid growth, expected to reach $932.11 billion by 2028 at a CAGR of 17.1%. This anticipated expansion is driven by enhanced personalization features in gifting platforms, increased emphasis on environmental sustainability in gifting practices, the introduction of innovative redemption options, cross-platform compatibility, and the expansion of gifting services in emerging markets.
Factors Driving Market Expansion
A significant factor propelling the expansion of the digital gift card market is the rising awareness and adoption of digital payments. Digital payments, known for their convenience and contactless nature, have become a prominent choice for transactions. For instance, digital payment transactions in India surged from 3,134 crores ($3.96 million) in FY 2018-19 to 5,554 crores ($7.02 million) in FY 2020-21. Similarly, 82% of Americans utilized digital payments in 2021, underlining the growing popularity of digital gift cards.
The evolution of diverse payment methods is another catalyst for market growth. Noncash payments in the United States surged to $128.51 trillion in 2021, with card payments contributing approximately $9.43 trillion. This shift in payment preferences highlights the burgeoning landscape of digital payment options, fostering the growth of digital gift card utilization.
Innovation in the Digital Gift Card Market
Product innovation plays a critical role in the digital gift card market. Major companies are introducing new technologies to enhance customer experience and engagement. For example, in November 2021, Cross Tower launched a digital gift card feature based on cryptocurrencies for its Indian users. This feature allows users to send and gift cryptocurrencies, adding a unique element to traditional gifting.
Additionally, the introduction of network-level gift cards is gaining popularity. These cards operate on specific networks rather than being tied to a single retailer, promoting increased transactions and engagement. For instance, the ONDC Network Gift Card powered by RuPay Network, launched in September 2023, aims to enhance digital commerce during festive seasons by allowing purchases across various ONDC-enabled buyer applications.
Conclusion
The digital gift card market is experiencing robust growth driven by technological advancements, evolving consumer preferences, and increased adoption of digital payments. With continuous innovation and strategic market expansions, digital gift cards are set to become an integral part of the global payment ecosystem. The comprehensive market report by The Business Research Company provides valuable insights and data to help businesses and stakeholders navigate and thrive in this dynamic market landscape.
