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Gift Cards and Stored Value Cards James A. Sadik Affiliated Computer Services

Gift Cards and Stored Value Cards James A. Sadik Affiliated Computer Services. Topics of Discussion. ● Evolution of Gift Certificates and Gift Cards ● Market Size & Product Innovations ● Conditions Impacting Usage of Gift Cards ● “Non-Usage” Issues and Unclaimed Property Implications.

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Gift Cards and Stored Value Cards James A. Sadik Affiliated Computer Services

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  1. Gift Cards and Stored Value Cards James A. SadikAffiliated Computer Services

  2. Topics of Discussion • ● Evolution of Gift Certificates and Gift Cards • ● Market Size & Product Innovations • ● Conditions Impacting Usage of Gift Cards • ● “Non-Usage” Issues and Unclaimed Property Implications

  3. Product Evolution • Gift Certificates • Sold for decades • Typically sold by individual retailers • Valid only at a particular store • Most appropriate for individuals living near (and who would likely frequent) the issuing retailer • Many included expiration dates, some included small fees paid by giver, others had redemption fees for user

  4. Product Evolution (cont.) • Store Branded Gift Cards (Closed Loop) • Issued by retailers • Machine readable • Pre-loaded with a fixed dollar amount, or • Loaded with a specified amount at time of purchase • Inventory of cards electronically tracked • Outstanding balances electronically tracked • Revenue recognition process more manageable

  5. Stored Value Cards Rechargeable features Alternative to cash Open Loop Gift Cards Issued by banks of credit card companies Can be redeemed “virtually” anywhere More likely to include issuance, redemption, or dormancy fees where allowed by law Product Evolution (cont.)

  6. Market Size • ● $55 billion sold in 2004 (Boston Globe) • ● $25 billion sold during 2006 holiday season alone (National Retail Federation) • ● Estimates for recent years (TowerGroup): • $67 billion (2005) • $82 billion (2006) • $97 billion (2007) Estimated Non-Usage Rate: Up to 10%!

  7. Industry & Product Innovations • ● Cards for multiple retailers sold in other retailer’s locations (greater distribution) • ● Cards are personalized for particular occasion or interest • Birthday/holiday • Characteristics of the recipient (relative, personal interests) • ● Development of “secondary market” for the re-sale of unwanted/unused cards • ● “Pre-paid” cards issued as a substitute for consumer rebate checks

  8. Conditions Impacting Card Usage • ● “Mis-matching” of retailer with interest of recipient • ● Ease of usage (number of location, access, etc.) • ● Forgetting or losing card • ● Theft • ● Terms & conditions placed on cards

  9. Non-Usage Issues & Unclaimed Property • ● Where do unused balances end up? • $43 million (home goods retailer, 2005) • $16 million (electronics retailer, 2006) • $47 million (personal apparel retailer, 2008) • ● Historical redemption patterns • ● State laws governing expiration dates and fees • ● Recovery of unused balances • ● State unclaimed property reporting issues

  10. Questions?

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