Will Bank-Branded Gift Card Sales Rise?

The recession will prompt consumers to make more “practical” holiday purchases.

“Practical” purchases mean the gift of branded gift cards, reports the Network Branded Prepaid Card Association’s recent survey. Or so gift-card sellers hope.

Of the 1,000 adults surveyed, 52% reported they plan to give more practical gifts this year. Of those who had given or received a branded gift card in the past, 17% percent plan to give more branded gift cards this year, while 43% plan to give the same number.

Talbott Roche, NBPCA media and consumer working group co-chair, says branded gift cards have been trending up since their inception. The popularity of the product is growing as the impersonal stigma is crushed. “[Having] positive experiences as a recipient allows them [consumers] to get over preconceived notions,” says Roche. “More people are buying them and are buying them for more occasions.”

Roche believes there will be an even greater sales uptick this holiday season, with branded ones like Mastercard or Visa as the most popular picks.

Omni Prepaid, LLC, a prepaid solution provider that owns GiftCards.com, anticipates greater gift card sales this holiday season, too.

Jeff Lininger, executive vice president, says their sales are trending upward. “Consumers want to use branded, network gift cards,” he says.

But this all might be wishful thinking on the part of the gift-card industry, at least when it comes to retail ones. Analysts are expecting retail gift-card sales to drop, not climb.

Overall, gift card sales will decline 9% for the 2008 holiday season, projects TowerGroup. The research and consulting firm credits this to lack of consumer confidence in retailer-sponsored gift card products. However, the company does see a shift toward financial institution-branded products and expects sales to increase 5.6%.

No surprise here. Why buy a gift card if the business is about to go bust? Think Circuit City. Even with banks crashing, consumers have more faith in them than stores.

However, this doesn’t stop retailers from trying to encourage retail-sponsored gift card sales. Last October, the Retail Gift Card Association formed with an aim to create consumer-centric policies and procedures for its members that will help consumers buy and use gift cards confidently. My verdict? I doubt this is enough. Consumers are scared and rightfully so.