Gift card providers are poised to record strong growth amid rising inflation and the soaring cost of living in 2023

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Over the last three to four years, gift cards have grown into widespread popularity among both consumers as well as businesses. The growing adoption has led to a high-growth environment for gift card providers worldwide. In 2023, the growth momentum is expected to further continue, as providers are set to see a surge in demand due to rising inflation and the soaring cost of living.

Prices for everything from groceries to fuel are increasing, and many are struggling to make ends meet. To offset the rising cost of living, consumers in increasing numbers have opted for discounted gift card programs launched by retailers in 2022. Inflation is expected to continue to rise in 2023, and this is likely to lead to a surge in demand for gift cards over the next few quarters.

In the B2B space, the adoption of gift cards is expected to surge in 2023, as employers are also seeking ways to support their staff without hiking wages. By offering gift cards as part of their benefits package, employers are helping their employees to offset the cost of living and provide a tangible benefit that can be used immediately. All of these factors are driving the gross merchandise value and volume for gift card providers globally.

• Givex, one of the leading players in the segment, announced that the firm had recorded a 30% revenue growth in FY 2022. The total revenue for the firm reached US$72.9 million compared to US$55.2 million a year before. The firm attributed the growth to the strong fourth quarter ending March 2023, during which the firm reported revenue growth of 40%.
• Europe-based Sodexo is also anticipating a strong growth period for its benefits and rewards services unit, which provides vouchers and benefits cards to businesses for employees. In April 2023, the firm announced that it planning to spin off and list its voucher business in 2024. According to Sodexo, the benefits and rewards services unit of the firm performing well, owing to higher inflation and cost of living.

From the short to medium-term perspective, Sodexo expects the business vertical to record strong growth. For 2023, the firm is targeting organic revenue growth of nearly 20% for its benefits and rewards services unit. Sodexo is also anticipating an underlying operating profit margin of approximately 32% in 2023.

Edenred, another firm operating in the employee benefits space, announced that it is also expecting a high-growth period for its business over the next three years. The announcement, in October 2022, comes amid the growing adoption of meal tickets and fuel cards offered by Edenred. Notably, more and more businesses are using these products to help their employees cope with inflation.

In India, Pine Labs is also poised to record strong growth over the next five years. The gift card business vertical has emerged as the second-highest income generator for Pine Labs in 2022. As of November 2022, the firm had issued more than 185 million gift cards and loyalty cards in India, according to a report from the Reserve Bank of India. To accelerate its growth, the firm is expanding its geographical presence to capitalize on the growing gift card industry. Furthermore, Pine Labs is also entering into acquisition deals to expand its presence in more business verticals and diversify revenue growth.

Many businesses, operating in the gift card space, are expected to adopt a similar strategy over the next few quarters to accelerate their revenue growth. Sodexo, for instance, is repositioning itself as an employee engagement platform in India. The shift in business positioning comes amid the growing demand for services beyond meal vouchers. According to Sodexo, more than 25% of the 11,000 corporate partners are opting for services beyond meals. In the global market, 30% of the organizations are seeking products beyond meal cards and rewards.

In India, Sodexo is also planning to target schools and small merchants to expand its client base for the benefits and rewards services unit. As part of its strategy to move beyond the B2B sector, Sodexo will enable customers to use Sodexo cards on smartphone devices to buy school meals and products from local stores.

While the move into other business verticals will lead to higher expenses from the short-term perspective, the robust demand for gift cards and incentive vouchers is expected to keep aiding the revenue growth of these firms. Given that inflation and the cost-of-living crisis will continue to impact consumers and employees from the short-term perspective, gift card providers are well-positioned to benefit from this trend in 2023.

To know more and gain a deeper understanding of the global gift card market, click here.