Online purchases thwarted the fears of a potential recession and grew by 21% year-over-year according to a recent report from ACI Worldwide. The strength of overall e-commerce transactions had knock-on effects in related markets as well. Peter Lucas adds additional information in Digital Transactions on the overall online results for the holiday season:
“In addition to strong e-commerce volume, gaming and travel both saw significant upticks in transactions, increasing 153% and 57%, respectively, from October to December compared to the same period in 2021. With consumers looking to save money on shipping costs and avoid lengthy delivery windows, many online shoppers used buy online pick-up in-store (BOPIS) options. BOPIS transactions increased 18% during the holiday season, while the average ticket value increase $26 for the period.”
While Lucas does not specifically highlight the positive effects on the prepaid marketplace, the results are in line with expectations for closed-loop gift cards as I wrote in the 19th Annual U.S. Closed-Loop Prepaid Card Market Forecast in December. In the report, I commented that closed-loop cards continue to get increased utility from integrated action in digital formats as well as the positively trending use of reloadable mobile wallets with stored value integrated with private networks.
The focus on increased usage of digital wallets and smartphones creates key opportunities, especially on the high-volume shopping Black Friday and Cyber Monday events, as described further in the article:
“The report indicates consumers actively used their smart phones to make purchases during the Thanksgiving weekend. Mobile devices drove a 17% increase in transaction volume during that period, with 36% of all transactions initiated using a mobile device on Black Friday. Cyber Monday played an equally significant role in the uptick in mobile usage, with transactions initiated through mobile devices increasing 43%, compared to a year earlier.”
In addition these results show that my predictions that I highlighted in my 2023 Outlook: Prepaid in November for increased use of prepaid cards in digital wallets are likely to be realized. In that Viewpoint I predict that digital avenues will make a more significant jump in the marketplace in 2023. Both universal wallet and retailer wallet payment usage should reach 40–50% utilization as consumers look to simplify their transactions and gain loyalty benefits. These avenues cover both post and prepaid options that consumers can easily utilize depending on the value or opportunity of the purchase.
The article also hits on reduced fraud attempts during the holiday season. This correlates with research from Mercator and reported in other outlets that indicates fraud issues are moving away from digital actions and instead focused on broad-scale attacks like card skimming that require less sophisticated opportunities. The use of digital wallets and online purchases helps reduce or eliminate the risk associated with skimming opportunities.
As consumer confidence continues to improve and the use of digital wallets continues to increase the opportunity for the 2023 holiday season could represent another step forward for retailers and their prepaid and postpaid strategies.
Overview by Jordan Hirschfield, Director of the Prepaid Advisory Service at Mercator Advisory Group.
