How Cautionary Spending Is Fueling Gift Card Purchases

Speaker A: Foreign.

Speaker B: Welcome to the Payments Journal podcast. I'm your host, Reema Katz. Consumers are feeling the strain of rising costs and it's changing the way that they spend. As affordability concerns grow, shoppers are becoming more intentional, relying more on gift cards, embracing AI powered shopping tools, and they're seeking greater value through loyalty programs and digital channels. Today we're diving into BHN's latest research on this, which reveals how economic anxiety is reshaping consumer behavior and redefining brand engagement. But before we unpack it all, let's do a round of introductions. Sarah, we'll start with you.

Speaker C: Hi everybody. My name is Sarah Kasytski and I'm excited to be here today. I am, um, with Blackhawk Network and I've been there almost five years in kind of leading global research for the organization.

Speaker B: Thanks, Sarah Jordan.

Speaker A: I'm Jordan Hirschfeld. I'm the co director of payments and head of the prepaid payments practice at Javelin Strategy and Research and have been researching the behaviors of prepaid cards for about the past four years.

Speaker B: It's great to have you both here. Affordability and economic anxiety seem to be a major theme in this year's research. Sarah, what are consumers most concerned about right now and how is that changing shopping behavior?

Speaker C: Yeah, there is definitely that economic uncertainty that is happening. I would say that there's something that we've been researching and we're really calling it at this point, defensive spending. So consumers are still shopping, they're still gifting, so don't worry. But they're just doing it a bit more cautiously and strategically. Grocery and food prices are definitely at the top of the list in terms of concerns. But we also found that inflation and fuel prices are right up there as well, which is sort of leading consumers down a path of what am I going to purchase? Especially as we start to think about the overall needs in terms of lots of occasions, but also maybe this upcoming holiday. In fact, fuel prices nearly doubled since we had done the study earlier in the year. So we looked at kind of a time point of February and then we ran a study again in April and by the time we ran it in April, that's where we saw those really double. So it's definitely a quick shift too that we're seeing with some of those economic concerns and they're coming definitely more deal motivated. They're very intentional about where every dollar goes. We saw people really leaning into, uh, loyalty rewards, looking at AI tools for support on where to find the best deals, comparing prices, comparing brands. We saw a huge shift to the buy now, pay laters and all of those particular programs and then gift cards too, as a real way to maximize value that they're getting just for gifting purposes, but also for themselves. So it's really important too, that we understand that consumers are not abandoning gifting traditions. They're really adapting to how they want to participate in them. And again, they've got all of these various channels in which they can leverage to find those cards. It really is this major opportunity for people to think and brands to think about how do we offer more flexibility, how are we thinking about the value that we're driving and the convenience, especially as we think about the economic times we're in.

Speaker A: Yeah, and I think I'll add to that. And what I think we're seeing here at Javelin is a lot of consistency in shoppers spending the same amounts year over year. Like, you do have a nice percentage, but smaller, that are going to spend more than the previous year, especially on gift cards. Not so many that are thinking about spending less. People, by and large, I mean, huge majority are spending the same amount year over year. So they're towing that line. And now really the factor is, if everyone's going to toe the line on what they spend, how do you enact things to make sure that when it's redeemed, that there are behaviors that are changed to make it better for the merchant to say they're going to come back, they're going to spend on, um, more expensive things, we're going to entice them to be that loyalty member to use our technology tools. So that's really the driving force now. It's not about just trying to get people to buy that. Buying a gift card, either for yourself or as a gift, is only that first step. It's really activating beyond the purchase into that redemption behavior and into really understanding the motivations of what's going on with that redeemer once they have that card in their hands.

Speaker B: I found that one of the most interesting findings was how consumers are increasingly turning to gift cards instead of physical gifts. Kind of see this myself. I give gift cards as gifts and I get them back as gifts. I'm curious, Sarah, why is that happening?

Speaker C: Yeah, they're really becoming more of this, like, safe purchase because again, if they are thinking about their budget that they might have or just even delivering upon flexibility for the people who they're gifting to, gift cards really are kind of that, that choice that fits that fine line. As Jordan said, like, what's really kind of toeing the line. Gift cards are toeing the line between all of the things that are going on. We also saw that really about 72% of younger generations, so think your Gen Zs, your millennials, and even 38% of older generations, so your Gen X, your boomers, they're also telling us that they have purchased gift cards this past year in replacement of maybe PH gifts. So again, they're thinking about that overall budget that they have and they're looking for how they can maximize the value but also really deliver something to consumers. And I think that what's really fun is they told us that they truly want to be able to deliver something to somebody that is going to be the most usable gift that they can. And so we saw things like, hey, it gets them what they truly need. It helps me to avoid waste or wasting even just time on finding the wrong gift and it helps me stay within budget. So those are definitely key benefits and point proof points for what consumers have told us about that gift card experience and purchasing that for others. We also saw some of the key categories that where those maybe gift cards were purchased instead of physical gifts. It was when it came to groceries. So again I mentioned groceries being sort of the top of the list of economic concerns while people are trying to then find a way to cover that for others as well as clothing and electronics. So again, thinking across those major categories and really finding that way to kind of balance the wants and needs of others alongside of being able to still give a really good and desirable gift. We also saw growth sort of in the projected gift card spend as well as purchasing. So 77% told us, hey, we're going to probably definitely purchase a card this upcoming year to give to somebody else. And self use actually showcased almost like a double digit growth. So it was like, hey, they, you know, they're starting to really recognize that budget value just even for themselves. Younger consumers are especially likely to use gift cards for both gifting and themselves. Again, it's creating that incremental revenue opportunity for brands. And this is just really reinforces that. I know we talk a lot here about holidays, but it's across. Uh-huh. Every occasion where this is really benefiting.

Speaker A: We see amazing consistency at Javelin and kind of the research we do annually on gift cards, especially retail gift cards, always the number one choice for gift givers. That's the most important first step. I was mentioning before, there is no gift if someone doesn't actually buy it. And if they're buying it, that's what they want to buy. Even if a recipient may want some other things in a little different preference, they're going to get the gift card because that's what buyers want to give. And again, that's that critical part. But I do want to hone in on that self use angle that you were talking about because that's a great intersection. And the givers are increasingly more likely to respond to an incentive gift card purchase if they purchase a gift. So that ability to treat oneself while giving a gift, uh, it really hit that narrative of that defensive spending narrative that you had mentioned. It's huge. 61% of our respondents would be more likely to purchase a gift card if a bonus card was attached. And that's up several points from our 2025 survey. And as a side note, that benefit doesn't need to be that big. It can be just $10 or less. So what you're doing at that point is again, that whole activation of the redemption comes in there. You're allowing someone to give a gift. You're then saying by giving this gift, you're going to give yourself a gift and those people are going to immediately redeem it. And it starts that cycle for self use where the individual realized that benefit for their personal needs. And the research that we also have shows consumers are alert and aware of many reasons for that self use. So they're going to take advantage of those promotions to use it for themselves. They're going to do it to get discounts, multiplying that benefit. They're going to do it to earn points for later use, fuel discounts, all these things that in that defensive spending mentality bank further reward and motivation to spend as you're doing that. So you have activated the buyer of the gift card by giving them a little something to use for themselves. They're going to then continue that cycle and then that redemption, the recipient when they redeem their cycle starts at that redemption and potentially more self use. So it's really critical. And that whole idea that just a little bit of a nudge, $5 bonus, potentially it's better than a discount, $5 bonus is much better than an open ended 10% discount. That can be a lot more. It's all it takes to get that cycle started. And that cycle is so revenue beneficial in the end in terms of increasing spend, profitability, all these types of things that are metrics that really matter in the long run.

Speaker C: You know Jordan, that reminds me, a couple years ago we did some research where we were looking at different promotional values and you're absolutely right, that Even just that little bit of a nudge. There was a question that we had around, buy this gift card and get free ice cream. The younger consumers gravitated to the free ice cream. They were like, oh, my gosh, you're going to give me free ice cream. It reminds me of, like, the kids who are just starting their first job out of college or even just they're out on their own and they're just like, oh, my gosh, if I could get free ice cream and not have to buy it myself. But I've also been able to get this card and like, now I can give somebody a gift, but I myself was rewarded. It's really all that it does take.

Speaker A: Yeah, it's huge rewards. You give your dog a treat, you can give them a huge bone or a teeny little nibble treat. They respond the same way. People are just like that. Not that we're, you know, we have the same animal mentality of a treat. Sometimes just to say, all I need is a little treat, you know, like you said, a little ice cream. Uh, you know, it's a hot day. We're giving. You know, everyone at school gets a popsicle. The kids get excited, hey, $5 at my favorite store just because I bought something I was buying anyway. Now I'm going to go use that $5 and maybe get that something I didn't really need, but I was planning on buying at some point. The psychology of it is so important to making that consumer, that purchaser of the gift, feel rewarded not just for giving the gift and the emotional feeling you give of being able to provide someone with a gift, but the emotional feel, your relationship with the retailer.

Speaker B: So you've both spoken a lot about the consumer shopping behavior, and I will definitely buy a gift card if ice cream is offered. And, um, I'm seeing more retailers actually offer an incentive if you purchase a gift card. Sarah, the stats that you spoke to are so relevant because they're kind of already put into play. Many retailers are doing it today. Something that you had mentioned earlier on, Sarah, was the use of AI, and we're seeing that happen a lot, especially influencing shopping behavior. Can you speak to what the research uncovered about how consumers are using these technologies, whether it's AI or other emerging digital tools?

Speaker C: Yeah. So AI is definitely a hot button, I think, across all retailers right now. And we did see that younger consumers especially are definitely in the house of like, yep, I'm definitely going to use it. I'm going to look at it to compare prices. I'm going to look at it for product reviews. Older consumers are using it too, but we didn't see maybe as great of an increase there. So definitely one that you should not forget on the list of things where you're like, what else could we do in our strategy? It's like how do we get our brand, how do we get gift cards? In that talk track of the AI gift recommendations. The other thing too that we saw was that according to an Adobe study, we saw that traffic has Significantly increased to AI as well. It was up like 4700%. So it was like, hey, that's a huge stat and huge increase. So again, retailers definitely to take note about that. Consumers are also building what we call kind of this value optimization toolkit where it combines kind of AI searches, loyalty rewards, deal discovery, flexible payments, all the things that really help us be smarter across that purchase journey. I think of it as the place to find all that stored value or the change that you have in your couch cushion. So I feel like AI is definitely going to be leverage, probably even embedded in there somehow to combine all of these things together. And then we found across the United States, about 92% of people are also participating in loyalty programs and they're redeeming points for gift cards. It's very strong for self use, but you know what, it's also a giftable moment where people are like, you know what, I don't really need this for me right now, but I especially need it for somebody else. So I just think that's another way to kind of optimize your program to really think about how do I get gift cards delivered to somebody who is self use, but how do I get them really to feel like that giftable moment that somebody wanted to give to somebody else. And this just means your brand really needs to think about kind of traditional search, but also what's beyond traditional search with some of those other kind of e commerce optimization tools that you might need to leverage.

Speaker A: One thing I always like to say though, even with self use, a gift to yourself is still a gift. But I do agree, like they need, you know, those technology tools to allow that redemption of points to be then forwarded on very easily is really critical because you do want to be able to, I'm um, being careful with my money, how do I spend on that and get the gift I want to give my loved one, but do it in a way that's budget conscious. So uh, so that's really interesting. And actually you know, in terms of AI broader like this is actually a really important, expanded part of our research this year we really started to dig in a little more. And consumers definitely see AI as part of their overall toolkit. And one area that consumers are demanding, at least in what we're seeing, is that may be a next step beyond the search and Shopping Assistant goes to the overriding theme of spend management as well. And that's AI tools to help determine unspent balances and to help give notifications and alerts and you know, promotions, all these things. If the, if you can enable tools and customers want this from their AI and from their retailers and everyone to say utilize AI to alert me to these things, to give me knowledge, uh, of what's happening on my spending. And that was the number one option of how confident consumers are that AI can help them. So it's really, the number one thing is really kind of pragmatic. How can I spend my money in the best way possible? How can I be alert to what I have available in my wallet? So it's really a win win if developed properly. The reminder of the balance also acts as a reminder to spend that balance. So hey, you have this balance is also a, hey, if you spend it, here's what you can do with it. And one thing we also looked at, and one thing that I'm really particularly interested in right now is how fast people spend their gift cards. So we added uh, some questions on that and are cutting data left and right. And to me, at least to me, not surprisingly, those that spend their gift card faster are more m confident that AI can help them with balance updates with shopping suggestions with potential fraud. Also because if you're spending it quickly, you're kind of more alert to these things. So the frequent users have the most confidence in AI tools and I think that's something to capitalize on. Those are your core gift card enthusiasts. So utilize them. And yes, some of the older generations may be behind. They may not catch up and that's okay. Um, they're comfortable with what they're comfortable with. So we also see that too, that the two younger generations, uh, are significantly more likely to, to spend their balances in a gift card versus the older generations just in general. They see that budget tool and they see, I'm going to spend this money, it's in my pocket, I need to use it. And um, the older generations be like, I don't need to spend the money right now. So I'm going to make the assumption that it all ties together. The younger generations understand that value to spend quickly, also understand the value of the technology and so they're comfortable with all of it. We want to spend it quick and we want the technology tools to tell us what we can do better, what we can do more interestingly with the suggestions and how we can be protected with fraud.

Speaker C: I think that's great as an end of one. I just got a couple of emails this week that told me my loyalty point balances went to like, basically went to zero because I didn't spend it. So having an AI tool that could really like highlight that to me before that happens and then knowing like, oh yeah, by the way, you also have, you know, X amount available for a gift card or you have this gift card that's over here that you did, you know, you could add to that balance. All of those things would be so, so helpful. I know I'm Gen X, but I would still love to get closer to where Gen Z and the Millennials are in terms of usage because I do see the value of it. I just wonder if there's time as

Speaker A: a fellow Gen Xer, it's a, it's a technology forward version of the, the mailers we used to get like in the 80s and 90s of your airline miles are about to expire. Would you like a magazine subscription? Which obviously, thankfully, I don't think our airline miles expire anymore. But that, you know, that's an old technique that worked. Yeah.

Speaker C: Ah.

Speaker A: And you know, for magazine subscriptions, which clearly won't work anymore. But the idea of that, to move that into technology is absolutely applicable. And one of those things I think

Speaker B: people have forgotten, in addition to AI, Sarah, digital and social channels also seems to be playing a, um, much bigger role in gifting behavior. When you looked at the research, what stood out to you about that?

Speaker C: So consumers are actually wanting to have gift cards delivered through some social channels that they already use to communicate. So think of like any sort of social media channels like Facebook messenger or you know, the other apps that are leveraged in terms of texting and imessage. Like they want to be able to almost have this seamless experience where things are just where they're supposed to be, rather than kind of the channels that maybe they're not as familiar with or not using as much as others. I mean, email is definitely still the strongest in terms of delivery method. But again, younger generations are showing definitely more strong interest in some of the social media and text delivery methods. I think we also uncovered this round in our, uh, research that, you know, not just delivery of these gift cards being important but where they can actually purchase them. So we saw more interest in, in terms of, uh, purchasing on social channels and then especially through social streaming events. So think of any of those events where you're like, kind of captivated in terms of, oh my gosh, I wish I could have this. And maybe you're not ready for that full breadth of product line that is being offered in that moment, but a gift card, again, kind of helps to say, I know that I'll purchase this, but maybe it's like I have this gift card and I have to add some additional funds later. So again, there's definitely strong interest in getting gift cards during those events. And in fact, we saw, uh, you know, about 50% are already purchasing gift cards through social streaming events, and about almost 7 in 10 want to in the future. So again, there's that strong interest in saying, it's something I've done, I'm getting more comfortable with it. Maybe I'm spreading word of mouth with friends and family that, hey, I've done this. And now you see kind of that interest continuing to grow. And these audiences, I don't know, Jordan, if you've seen it too, but like, they're on these social channels and it seemingly, when we did some underlying digging, it was about 35 hours per week. So again, they're on these channels constantly. It's in their face, they're attending these events. This is where we need to be. Um, at the same time, though, I will say physical gift cards are not dead. Like, they still actually prefer them. 50% say, yep, you know what, I'd rather have a physical gift card. 31% are telling us, yeah, you know what? Either one, I suppose it depends on the moment, it depends on where I'm planning to shop, it depends on who I'm giving it to. So the takeaway is really about this omnichannel flexibility in terms of, you know, making sure that you have the options available for consumers depending on that moment and the recipient.

Speaker A: Yeah, I think one, totally with you. And you know, again, back to the small sample size of my family and, you know, NF2 of which I'm not one. The number of times I hear TikTok chop come up in conversation in my household, especially between my wife and my daughter, so Gen X and Gen Z, it's amazing. Like just TikTok in itself. The ecosystem it's created and the shopping ecosystem it's created is massive. With that being said, I'm still on that physical card still matter bandwagon as well, especially in A gift scenario. Um, in fact we actually see a uh, big, a major uptick in likelihood to buy when cards have interesting packages or designs. So like don't leave behind physical, you know, 35% are more likely to buy one gift card over another due to the design. So take care to say, you know, your design matters, that design actually matters in digital as well. And digital's even more flexible because you can have much more unlimited array of designs on your, on your digital. But 56% will choose a gift card due to the appropriate messaging. So if it's Mother's Day and you want a Mother's day gift card, they might choose that over the generic one obviously birthday, that the year round holiday birthday cards are you know, simple to have because they, they aren't as time specific and 40% will choose due to that ancillary packaging. So there's that tactile experience that's not going anywhere that you're still giving that gift. However, of course digital is still vital and we see similar stats in showing that email is still the number one choice for digital delivery. SMS is growing, social media channels are growing. Um, that's just a volume perspective at this point. Right now email is pretty much ubiquitous across the lines of generationally everything. Social media still isn't sms, you know, comfort level still not especially with delivering more than just a message in that, in that text. But that's still critical. So that's really important. And actually the one thing I want to hone in on as well is that whole idea of again back to my redemption, uh, mentality. And that's part of what I want to talk about is even with a physical card there's opportunity to make it digital. And that's something that's really critical as well is the digitization of the cards and how you manage and handle both a digital card and a physical card into the digital atmosphere. 70% of our respondents, uh, with higher numbers for younger generations say redemption would be easier if they could upload that card to a digital wallet. It's an important step. It may not, it's not necessarily the most beneficial to the retailer or everything, but it's just an expectation now to do that. But if you do that, 65% say they'd redeem it faster. So you're making that whole cycle go further and further. And I think that's really critical is that idea that digital and physical are not opposing forces, they are complementary forces and there is a merging of them at a certain point into the digital realm. That is really Important.

Speaker C: You know, what's really interesting is, uh, we did some research and we were trying to figure out the percentage of people that were trying to take that physical card but somehow digitize it. And I want to say it was close to half. And by digitize, it could have been that they were trying to upload it to the digital wallet, to the retailer's app. Uh, it might have even been just to the notes applied on your phone. Again, they were trying to find a solution to make it more of a digital card. So again, I totally agree with you. They want physical still there. But how can I digitize it? And I do think, even though email continues to be the number one place where people get their digital cards, and it's an unfortunate thing, but a lot of people are storing them in their email too. And so it's like, how do we get those? Again, thinking about that ecosystem, right. And the value optimization tools, it's like, how can we make sure that we get those out of email and into a place where it's front and center? And it's like you have this value and you should definitely think about how you could best use it.

Speaker A: Yeah. And a digital redemption doesn't mean it's not an in person redemption. I think there's a lot of confusion that once it's in the digital world, I've lost that. You know, one, if you're a dining establishment, for the most part, yeah, you can use it for delivery, but for the most part it's, I'm sitting at your establishment, but I have a boatload of gift cards at home. And because it's on my phone and that's the one thing that's with me at all times, I can redeem it for this experience I just had in person. And that's really the same with, you know, all these behavior traits where you're more likely to actually go to the store if you have a gift card, but you might not actually have the gift card with you, or you might be out and about, be like, oh, I didn't bring my gift card, but I have my phone. So if you have a good way to store it digitally. And Sarah, like you said, not scroll through your email and deck, where was that email I got? It's, it's got to be really easy because if you make it easier to redeem, guess what, it's going to be quicker to redeem as well.

Speaker B: So as I said in the beginning, I was really excited about this podcast because I was excited to dig into all this research and data and you both delivered. But as we come to an end, having covered so much ground in regards to AI and the difference between digital and physical gift cards and where we're going to head next, what are the biggest strategic takeaways, you know, for brands for retailers and issuers that you know for the rest of the year as well as uh, into 2027.

Speaker C: So I think some of the biggest takeaways from today that you can really kind of set your clock to or set the strategy to are really kind of thinking about the economic pressure that is really fueling gift card demand. Think about that self use and the loyalty behaviors that are really growing rapidly. But also think about loyalty being able to deliver that really special gift to somebody because again, there's equal amounts of people trying to leverage it for self use, but also the giftable moments. And then really think about your digital channels and your social channels because those are becoming really important, especially to younger consumers and it's a way that they can find your brand. You want consumers to really be met where they are shopping. I think Jordan and I have covered a lot of that today. It's like you've got to still be in store, but you got to remember that digital is online and growing and in these loyalty ecosystems as well as through social channels. And then how to get your brand to be really recognized within that uh, AI ecosystem too. Because it's like you want that to come back and be like, hey, this is exactly the things that you should get. And gift cards should be woven into that narrative. And in this constrained economy, gift cards are no longer just really this nice to have. They're really the strategic advantagement that you've got for engagement, for retention and for incremental revenue.

Speaker A: Yeah. And I think for me, going back to, you know, my kind of broken record, uh, feeling of what I'm talking about, but it's redemption and self use is so important, uh, to think about as a retailer, as a program manager, whoever may be putting on the gift card program. Because with those economic pressures, with everything that's happening, you have to treat the buyer with care and the redeemer with care. And that buyer then becomes a self user. So you have that positive redemption experience. It keeps the cycle going. It's use it again, do it for yourself, give it as a gift so that exponential growth by continuing the process for yourself, but then giving it more and more and then they use it for themselves and then give it more and more. That's real and that's so important and really, uh, it all focus on using those technologies for those good experiences. Have some way to digitize the card to make it simple to use and accessible at all times. Reward that user with more, be it points, a bonus gift card, whatever it may be to keep that going, get those alerts going, those proactive balance alerts and use again, use those incentives or that motivation or that hey, you know, here's a quick offer to really capitalize that especially you might use it for a certain item. Hey, if you use your gift card today on X, Y and Z item that maybe are slower selling or maybe you're just, you know, sitting behind or off season, you might be able to get that inventory moving and then all all that capitalizes on the behavioral returns. We consistently see redeemers come to the store more, they spend more than the value of the car, they buy more expensive items. So when you focus on that behavior again, the cycle keeps moving in positive ways and that redeemer who has a positive experience will buy more cards for themselves and for others. Self fulfilling prophecy.

Speaker B: Those are great key takeaways to end this on. For those out there to learn more about how affordability pressures are Reshaping Gifting, loyalty, and digital commerce behavior, can download BHM's new research eBook, Stretch How Affordability Pressures Are Reshaping Consumer Spending and Gift Card Preferences. There's going to be a link in the article below and I want to thank Sarah and Jordan so much for joining me today and sharing your insights and perspective. And thanks to everyone for tuning in. Be sure to subscribe and stay updated on the latest payments journal episodes. And don't forget to share this podcast with your friends and colleagues. RA.