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How Stored Value Card Systems Work
SalesMerchants use in-store displays to merchandise Gift Cards much like they would any small impulse-buy product—by the register with counter signs and colorful card hangers. A customer purchases a Gift Card with cash, check or credit card for any dollar amount desired. The amount purchased is recorded as “stored value” or “prepaid” in the host database.
RedemptionsThe Cardholder presents the gift card for full or partial payment of a purchase. The merchant swipes the card through their POS terminal for authorization and transmission of transaction data on the host platform. The card’s magnetic stripe identifies the card number and merchant location for which the card has been issued. |
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Reload IncentivesThe cardholder can purchase additional value or “reload” the card for any amount—by phone. The merchant can offer an incentive to customers to encourage card reloading. For example: increase the customer’s stored-value amount by 20% (i.e. a $50 reload is recorded as $60 in stored value for the cardholder).
Data ProcessingThe stored value card system operates in real time as a closed loop debit network. Transactions, such as card activation, sales, voids and balance inquiries from the point of sale, are transmitted to the Data Center. The transaction request is fulfilled or authorized, data is captured in the merchant / client database and an approval or requested information is transmitted via the POS terminal. The POS printer produces a paper receipt of each transaction—including the card balance—for the merchant and the customer.
Gift Card Facts
- Gift cards sales are growing at an annual rate of 15%, reaching nearly $15 billion in 2000.
- Industry analysts project that 60% of retailers are expected to convert to plastic gift cards by 2005.
- By 2005, stored value cards will represent about 80% of the gift certificate market for a total of 850 million cards.
- 50 of the top 100 retailers offered gift cards in 2000.
- The average amount spent by individuals on gift cards in 2000 was $200.
- Stored value cards will reach 2.5 billion transactions a year in five years.
- According to an AC Nielsen survey, 64% of US households said loyalty programs were important in shopping.
- Loyalty cards tap into our need to belong; to be recognized; and to be rewarded. More than 50% of Americans use them regularly.
- 38 million US youths spend $153 billion annually though few of them are likely to own credit cards.
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