The Power of Plastic - Gift Cards to Surpass $100 Billion in 2011 Sales

BOSTON, Dec. 20, 2011 /PRNewswire/ -- TowerGroup, a Corporate Executive Board Company and leading financial services research and advisory firm, today released its annual estimates for the U.S. gift card market.  Based on projections, gift card spending will top $100 billion this holiday shopping season surpassing 2010 sales by $9 billion and eclipsing the three previous years of soft, recession-era sales.  CEB's TowerGroup attributes much of this growth to increased consumer spending and greater ease of gift card use—especially cards that can be used at multiple merchants.  CEB's TowerGroup predicts that gift card sales will exceed $130 billion by 2014 with significant growth coming in the form of e-gifting, which is projected to grow tenfold. 

In addition to increased gift card purchasing, consumers are also more frequently spending the full value of the card.  Breakage—the amount that goes unused on gift cards—for 2011 is projected to be $2 billion, or two percent of total sales.  Consumers are realizing more value from gift cards due in large part to Title IV of the Credit Card Accountability, Responsibility, and Disclosure (CARD) Act of 2009, which severely restricts expiration and nuisance fees for gift cards.  Research shows that prior to the Card Act of 2009, expired cards were the highest channel for lost consumer value (52 percent) followed by fees (38 percent) and physically lost cards (9 percent).   

"The popularity of gift cards continues to grow as e-gifting, currently only a $1 billion business, is poised to reach $11 billion by 2014," said Brian Riley, senior research director at CEB's TowerGroup.  "Additionally, increased consumer protection regulations and cards that carry the American Express, Visa, Discover, or MasterCard emblem will increase consumer appeal and help the industry grow at its anticipated rate."

Additional gift card insights include:

• Gift card spending has increased year-over-year since 2005 by an average of six percent. Growth is expected to continue at this rate;
• The gift card market is anticipated to exceed $200 billion by 2021; and
• Regulations still fall short of completely protecting consumers to the levels prescribed by the Electronic Fund Transfers (Regulation E).

About TowerGroup, a Corporate Executive Board Company

CEB's TowerGroup, is the leading research and advisory services firm focused exclusively on the global financial services industry.  For more than a decade, we have been providing the world's top financial services, technology, and professional services companies with trusted advice and continuous, timely, and objective information. TowerGroup thoroughly understands the complexities of the financial services industry. With unrivalled industry experience and outstanding analytical prowess, our strong team of analysts and specialized advisors covers the business and technological issues impacting the entire financial services sector.  For more information, visit the website.

SOURCE TowerGroup