The Gift Card Industry is Experiencing Growing Pains, But There Might A Solution on the Horizon

One of the industries that may not immediately come to mind when thinking about rapidly expanding sectors of the economy is the gift card industry. While it may seem like a very niche market not utilized as much as it once was, the truth is actually the opposite. The gift card industry has been experiencing continuous growth since the 1990s, and it doesn’t look like it’s likely to stop anytime soon.

According to market projections from WalletHub, the gift card market size is expected to grow to be a $160 billion industry, up from $91 billion just 10 years ago. The growth has been consistent and continuous throughout recent years, with hopeful projections likely to hold true. Other predictions include substantially higher growth in the future, like Persistence Market Research, which projects growth in the industry to reach nearly $698 billion by the end of 2024. Regardless of how bullish one is for the industry, it’s clear that growth is anticipated to continue for gift card usage and purchases.

There are a variety of factors contributing to the growth of the gift card industry, but perhaps the most pertinent is the shift in consumer spending and shopping habits. In a changing economy, it’s becoming increasingly clear how much younger generations have shifted their spending habits to an increased focus on e-commerce. Gift cards have adapted to the shift in spending habits for a new generation of consumers and offer digital variations of the traditional physical card that makes them a viable option.

As the industry continues to experience so much growth, there are multiple pain points that come with the growing sector. While gift cards and other prepaid cards are in high demand, easily accessible supply is not always present. Additionally, many gift cards have expiration dates that require consumers to use them by a specific date or lose the card altogether. With an expiration date limiting the usage of the card, gift cards don’t hold value in the same way cash or other currencies do. On top of both of those issues, the final issue is that retail gift cards remain substantially more susceptible to double-spending and other fraudulent acts when in use. For the time being, retail gift cards are “scarily easy” to hack, according to security and penetration experts.

New Economy, New Technology

As the gift card industry continues to grow and our economy continues to focus more on e-commerce, these problems will only become more pronounced. However, there are many out there looking to bring new technology to pair with a new economy. When it comes to problems in the industry around security, fraud, and double-spending, there’s one technology that’s been making waves in the fintech world that comes to mind: blockchain. The same technology behind Bitcoin, Ethereum, and other cryptocurrencies.

Companies are experimenting with blockchain technology that was first designed to solve the double-spending problem to integrate with the gift card industry. Platforms with an open, immutable ledger can also play a major role as solutions for fraudulent activity with gift cards. Zeex is a team looking to solve all those issues with a new blockchain-based system on the Ethereum network.

The Zeex project is working on using blockchain technology to aid the growth in the gift card industry over the coming years and offer viable solutions for the growing pains. The system is not only working on solving concerns about security and frau, but about liquidity as well. With limitations set on gift card holders, not all consumers can keep track of their cards, spend them within the time frame they’re supposed to, and use them to their full potential. Because of that, Zeex is using the blockchain-based platform to offer a marketplace for both buyers and sellers of gift cards. With high demand in the gift card industry, the marketplace will fill the gap between buyers and sellers and allow consumers to connect easily with those looking to sell their cards.

The benefit of the new system also includes solving one of the current pain points in the cryptocurrency space: liquidity. While the cryptocurrency boom has been significant over the past year, the movement is still largely in its infancy. Because of that, cryptocurrency holders often find it difficult to actually spend their cryptocurrency on goods and services as they are intended to be used (hence the ‘currency’ part of ‘cryptocurrency’). By taking traditional ‘problems’ of both the gift card and cryptocurrency industries and combining them together, there’s actually a viable solution. The two difficult areas in each industry can be integrated to solve both of the gaps.

Looking towards the future of the gift card industry, combining new technology with an increasingly-digital economy makes for a perfect fit. As gift card sales increase over the years, potential issues become more apparent and only those keeping up with the technological growth will stay at the top of the industry.