Holiday spending may look different this year. Consumers are still buying gifts, but rising costs for everyday essentials are forcing them to make harder choices about where their money goes. For the prepaid industry, that shift creates an opportunity: focus on the customers who already understand the value of gift cards and are most likely to return.
“This is not the year to start trying to find new markets,” said Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research and author of 2026 Prepaid Holiday Preview: Gift Cards Are Reliable Winners, Even in Uncertain Times. “This is the year to understand who your buyers are, who they’ve been in the past, who’s reliable. Let’s not go out and try and do anything crazy this year.”
Return Customers
The most valuable holiday gift card customers may already be familiar to retailers. Existing buyers have already demonstrated an understanding of the product, making them more likely to return—and more likely to drive reliable holiday sales in an uncertain economic environment.
Last year’s buyers are likely to return to gift cards again this holiday season. Gift card churn is very low, and the vast majority of existing buyers will spend roughly the same amount they did the previous year. By focusing on repeat buyers, retailers will also capture the segment of that market that is likely to increase spending significantly.
One thing that doesn’t necessarily change with inflation is the amount consumers are willing to spend. While $25 today may not have the same purchasing power as $25 last year, buyers are still likely to purchase a $25 gift card. Inflation also does not alter the value of standardized gift cards that are already denominated at fixed amounts.
Timing is another important factor. Many holiday gift cards will be redeemed toward the end of the year. January marks a new quarter, generally a slower period, and for many businesses, the start of a new reporting year. Recipients with gift card balances will often be eager to spend them quickly. That spending can help businesses start 2027 on a positive note, despite a tough economic environment.
Let’s Get Physical
One major advantage of prepaid cards is that they remain a physical gift item, and physical gifts continue to be what many people prefer to give. Yet only about 10% of recipients specifically want a physical gift, because they know what suits them, which colors they prefer, and what styles they like—while the giver does not. Cash alternatives like gift cards allow recipients to choose something that feels more personal.
“Buyers still want to match the end brand or product with the recipient that they intend,” said Hirschfield. “What someone wants to get my son is going to be much different than what they want to get for my daughter. That might be the trendy fun coffee shop, and my son might be tickets to a sporting event. The beauty of gift cards is you can still personalize the gift.”
When someone receives a physical gift card, the issuer has an opportunity to bring that customer into its digital ecosystem. A well-designed rewards program can encourage recipients to spend beyond the card’s original value.
“The gift card is the entry point for that recipient to come into your store or website,” said Hirschfield. “How do you treat that consumer as someone who will reliably come back? There’s a lot of positives in giving an incentive or reward, signing up for the app, getting that gift card digitized.”
A strong loyalty or rewards program can also motivate recipients to spend additional money, increasing the overall value of the initial gift card purchase.
“They have that found money, and they can now afford something a little bit better at a little higher profit margin,” Hirschfield said. “Everyone wins. You as a retailer or as a program build a loyalty relationship, and it’s really a positive long-term relationship.”
Catching the Buyer’s Eye
The report emphasizes the importance of physical displays in retail stores, even when the ideal buyer is already a repeat customer. Tegular gift card buyers may not have a strong preference for one brand over another—and they may not know whether the recipient does either. They may choose the card that appears the most appealing, the one with the most engaging design, or the one packaged in a way that makes the gift-opening experience feel special. The physical display serves as a differentiator among brands.
“Same thing with open loop cards. The difference to a consumer between American Express, Mastercard, Visa, and Discover is pretty minimal,” said Hirschfield. “They’re all basically accepted everywhere. So the giver might will be persuaded by something that gives off a special feeling that he or she wants the recipient to have. It’s a differentiator between your gift card competitors more so than it is something that differentiates you from a non-gift card gift.”
Gift cards from employers have advantages of their own. They can generate significant employee loyalty and goodwill, and gift cards remain one of the incentives employees prefer most.
“This is a critical time for employers especially in tough economic times, to say, we appreciate you employees, you’ve done good work,” Hirschfield said. “And here’s a token of our appreciation.”
Competition from P2P
One competitor to prepaid cards that has seen an uptick in gift usage is peer-to-peer payments. The percentage of recipients who prefer receiving a P2P payment has increased from 10% to 12% over the past year. The primary advantage is convenience: the money goes directly into the recipient’s wallet.
Although that remains a much smaller share of the market than gift cards, the prepaid industry should take the threat seriously. Consumers are becoming increasingly comfortable with the concept of using P2P payments as gifts.
“Every year we do the survey, another group turns 18 who’s been doing this since they were 13,” Hirschfield said. “As the Gen Alphas start to come into adult range, they’re predisposed to P2P. It’s just ubiquitous to them as this is how you give people money.”
Nevertheless, gift cards are stickier than P2P payments, which are sometimes described as “the laziest of the gifts.” The tangible experience, flexibility, and opportunity for brand engagement continue to give gift cards an advantage.
“With cash, at least you’re probably putting in a card and a check,” Hirschfield said. “But the gift card still has that ability to be personal. Gift card programs need to lean in on the relationship, the loyalty, and everything that you can lean in on that with.”