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Gift Cards Emerge As Digital Payments On-Ramp For Cash-Based Customers

It’s hard to argue the digital shift in any business, but particularly at retail. PYMNTS research shows that 97.3 million U.S. consumers have now switched to performing at least one routine activity online — working from home on their laptops, browsing retail marketplace apps, ordering their food via aggregator apps or buying groceries for curbside pickup, for example.

But while the digital shift is quantified and consumers aren’t going back, brick-and-mortar retail still has a life.

“By nature, humans are social creatures,” Blackhawk Network Vice President of Global Product Strategy Helena Mao told PYMNTS in a recent conversation. “Yes, we love the convenience of what digital services offer, but there will be times when we prefer to shop in person.”

Consumers won’t want to go backward. When they’ve experienced  a better, more beneficial and convenient way to transact during the pandemic period, consumers aren’t going to start settling for less. Which means the challenge lies in the retail industry’s need to stop thinking about a digital versus physical strategy. The goal for every merchant, Mao said, as retail’s recovery is getting underway over the course of 2021, will be to shift their focus to the total set of products and services available and deliver them across channels to meet the customer where they are.

“If merchants can take away the lessons learned from 2020 and really focus on an overarching strategy for how they interact with their customers, I think not only will their digital business thrive, I also think that physical will once again get back to where we were before,” Mao said.

Creating More Accessibility Points 

Cash, Mao said, has had its obituary written too early during the pandemic period. It’s true that fewer and fewer people are transacting with cash every day, and that the pandemic did speed up the decline in global cash use. It’s also true, she said, that there is roughly $10 trillion in physical currency in circulation being used in transactions worldwide every day, and consumers tied to its use. And those consumers, she said, need an on-ramp to digital payments that companies are sometimes slow to consider. When they talk to customers about having ways to digitize cash payments, they often hear back from merchants that they don’t need it — 100 percent of their consumers are using digital methods like credit and debit cards.

“That’s kind of like In-N-Out Burger saying customers don’t like chicken sandwiches because they never sell any, when they aren’t on the menu,” Mao said. “So how could you, right? If the price of entry is having a debit card or credit card, then of course you will have no cash customers.”

What physical stores offer, she said, is a potential on-ramp for those customers who are cash-based to digitize their cash. And it’s a value add, Mao said, that can make merchants a preferred shopping location, because they become a hub for value added services as opposed to merely a shopping destination.

Building a Bridge to the Future

Gifts cards, Mao said, have already stepped into the digital on-ramp role as the pandemic has worn on and consumers who perhaps didn’t have access to a credit or debit card need a quick and easy way to jump into online commerce. Consumers buying gift cards for themselves this year, she said, was one of the many things that pushed digital gift card sales growth in excess of 20 percent in 2020.

But the bigger change over the course of the year is that the legacy players of the past and the digital players of the future need to work together to build a bridge that more firmly connects them. Physical retailers, she said, have used the same payment methods for the last 50 or so years — cash, checks and cards. They introduced thighs like Apple and Google Pay, she said, but these digital wallets primarily hold payment credentials consumers already have.

“They’re not really new per se,” Mao said. “But as more digital wallets surface very few of them can effectively be used in stores. Take Venmo as an example. Consumers can send and receive money and they can move that balance into a bank account.  But when they actually want to spend the balance directly from Venmo, it’s very limited in terms of where and how you can use it.”

But that is starting to change, she said. A perfect example is PayPay’s massive push behind QR code payment which is opening up the world of in-store payments for PayPal and Venmo users. Retailers, she said, are starting to see the value in making those connections and in giving consumers a wide range of digitally enabled payments within their shopping journey.

And while COVID-19 will pass away, and we will start building a new normal, consumers’ desire to create their own shopping journeys will remain. Which means the merchants with the right tool box will win out at the end of the day.



About: Buy Now, Pay Later: Millennials And The Shifting Dynamics Of Online Credit, a PYMNTS and PayPal collaboration, examines the demand for new flexible credit options as well as how consumers, especially those in the millennial demographic, are paying online. The study is based on two surveys, totaling nearly 15,000 U.S. consumers.

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