The holiday season has increasingly revolved around gift cards, as more consumers prefer spending power over physical gifts. Although gift cards are an enduring offering, the prepaid industry has evolved to include an array of products that are as much about self-use as they are about handing out gifts.
As Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research, detailed in the 2026 Prepaid Payments Trends report, the reimagining of prepaid could even go further than stored-value accounts and digital payment cards. New technologies like digital assets have the potential to turn the prepaid model on its head and shift the course of the industry.
Blending Toward Equilibrium
As digitalization has accelerated, speculation has held that the workhorse of the prepaid industry, physical gift cards, could be phased out. However, a strong demand for these products persists, even if consumers have new preferences for how to leverage them.
“You need physical gift cards because they are a point-of-sale item,” Hirschfield said. “In general, consumers still like physical cards—you go to a store, and you could tap your phone, but people still like to pull their card out. But especially on the consumer side, both with open-loop cards and closed-loop cards, the ability to digitize a physical card is a critical step that a lot of companies and programs have taken.”
The capability to digitize a physical card is important because it can bridge a single-use gift card and a recurring-use account. This makes it critical for companies to consider their card program holistically, regardless of a card’s initial form factor, and identify ways that their prepaid products can work symbiotically.
For example, with a physical card, a merchant could incentivize a customer with loyalty and rewards tools to digitize their card and reuse it. When developing their prepaid strategies, organizations should also understand that digital and physical cards are essential tools.
“It takes away that talk track—that I think was getting stale—of ‘Digital is what you have to do,’ because it’s just not happening like that,” Hirchfield said. “As much as digital is happening and is critical, the physical step is going to remain important.
“You have to be engaged in a digital program if you’re in prepaid, both from a closed-loop retail gift card type environment and in an open-loop. But where I think the market is headed this year is, ‘How do you blend this omnichannel program into an equilibrium?’”
Filling the Slush Fund
As an extension of this big-picture mindset, more prepaid growth this year will be driven by self-use. While the term “gift card” has become entrenched in the lexicon, many products are better classified as stored-value accounts.
When consumers have this digital account that is tied into rewards and loyalty, it can be a powerful driver to self-use these products. This can deliver significant ongoing advantages for merchants and customers.
“If you are a retailer and people are beginning to load money into their account, you’re saving on transaction fees,” Hirschfield said. “Those are pennies at a time, but those pennies add up. Instead of five transactions of $5, it’s one of $25—and that’s five times less on transaction fees. That’s a big deal.
“For consumers, you reward them by having loyalty points, rewards, and offers, be it a quick-serve restaurant where you might get a free drink or a free side dish. But even when you look at other retail dollars, it might be a $10 reward, and usually that $10 reward creates—and our research shows it—$20 or $30 more in spending. You’re going to be incented to spend even more than you would have just by giving that $10 off.”
Prepaid cards are also often superior to many coupons and discounts because they represent a fixed dollar amount, whereas many coupons offer a percentage discount that could be more costly in the long run.
The promise of these programs has attracted the attention of many organizations, particularly in the peer-to-peer space. Many P2P companies like Venmo and Cash App have prepaid cards that are tied to P2P accounts. These products are designed to give customers incentives to spend their balances in-store.
“They’re going to use that P2P account more because they’re holding that money, so there’s a lot of opportunity,” Hirschfield said. “You’re seeing a lot of growth in Venmo and PayPal commercials for their cards because they’re seeing the benefit of that self-use.
“Sometimes it’s a slush fund account, they want to have that money on the side, and they’re using this to treat themselves or whatever it may be. Those are critical growth engines to make sure that the individual is engaged for the long term with prepaid cards.”
The Promise of Digital Assets
Another prepaid growth engine is just beginning to gear up: digital assets and crypto. In fundamental terms, there are now gift cards that allow users to purchase cryptocurrencies and stablecoins. However, the potential use cases go far beyond these simple transactions.
“Prepaid is a liability on the balance sheet where we owe you this money,” Hirschfield said. “But if you shift that—and there’s regulatory issues that will need to be worked through and a lot of what-ifs and hypotheticals—instead of buying a gift card that is a liability, you buy a digital asset. You then start to create an asset class that people can work from.
“It has the potential to be actualized cross-border much easier. If you have an account at Starbucks—as an example—that has a cross-border presence, you have to have separate accounts for different currencies. In a digital asset environment, you could pull from that, and they could convert it for you.”
Leveraging digital assets could also give program managers running multiple prepaid programs a valuable alternative when dealing with at-risk retailers. Now, if a retailer goes out of business, their gift cards are unsecured liabilities that are valued at zero.
However, if the prepaid cards are backed by assets the program manager holds, these assets could simply be transferred to another program.
“There’s a lot of hypotheticals and potential uses,” Hirschfield said. “This year, you’re going to start to see planning for it, and you’re going to start to see acceptance that there is potential for digital assets to play a role in the prepaid ecosystem as a shift from a liability to an asset. I think it’s something where you can’t ignore digital assets anymore, in any aspect of the payment space.”
