Electronic Payments

Prepaid Shows Promise

Prepaid card sales are on the rise, and digital or ‘virtual’ prepaid cards continue to trend.

The U.S. prepaid card market grew at a compound annual growth rate (CAGR) of 8.6% from 2017-2021, according to Researchandmarket.com’s report “United States Prepaid Card and Digital Wallet Business and Investment Opportunities Databook – Market Size and Forecast, Consumer Attitude & Behaviour, Retail Spend.” The report estimated that, from 2022 to 2026, the market would rise from $542.26 billion to $826.96 billion, a CAGR of 11.1%.

The report further noted that, as more customers adopt digital payments, digital wallet providers are launching virtual prepaid card solutions.

Mario Spina, CEO of The PRIDE Stores, with 15 stores in the Chicagoland area and one in Indiana, predicted prepaid card sales will be up at his stores this year, and he expects customer demand to be primarily in restaurant gift cards.

Indeed, Paytronix’s “Restaurant Gift Card Sales Report 2022” noted restaurant gift card sales grew 22% in 2021. Family dining card sales were up 106%, fi ne dining cards were up 57%, and QSR cards were up 7%. Third-party sales of restaurant gift cards climbed 24%.

“The PRIDE Stores offers its own PRIDE gift cards, which is a great way to build brand awareness and retain loyal customers, as well as gain new customers,” Spina said. “They can be redeemed at any PRIDE Store, The PRIDE Beer Wine and Spirits Liquor Store, affi liated restaurants such as Urban Counter and Taco Urbano, plus our 93 Octane Brewery.”

The company also features a branded 93 Octane Brewery gift card that it sells out of its tap room. Gift cards are available in $25 and $50 denominations.

APP INTEGRATION

“Prepaid cards are a very important part of the convenience store’s payments mix,” said Richard Crone, CEO of Crone Consulting. “Of all of the gift cards they might sell, the most important to promote is their own private-label prepaid card. And that should be aggressively promoted. It should be accessible through their own branded mobile app.”

“Of all the different tenders they might accept, it’s the lowest cost — lower than cash, especially if they are their own program manager,” Crone said. Private-label prepaid cards have built-in loyalty. “It’s like their own cryptocurrency,” he said.

Prepaid Snapshot

• In 2021, restaurant gift card sales were up 22% from 2020 but down 13% from 2019, and digital sales were at their highest ever, per Paytronix’s “Restaurant Gift Card

Sales Report 2022.” • The global prepaid cards market is expected to reach $2.7 trillion by the year 2026, according to ReportLinker’s

October 2021 report “Global Prepaid Cards Industry.” • Some 36% of surveyed shoppers ran into out-of-stocks or shipping delays during holiday shopping in 2021, requiring them to purchase an alternate gift. Nearly 40% purchased a gift card instead. Some 30% of consumers reported buying more gift cards this holiday season compared to last, according to Blackhawk Network’s “2021

Post-Holiday Shopping” study.

C-stores with a mobile app should consider selling their store-branded prepaid cards digitally, as well.

When you enable the loading of your private-label card into your chain’s mobile app, it triggers a repeat spend, which is not only an important source of ongoing revenue, but also a contact point with the customer, noted Heidi Liebenguth, managing partner at Crone Consulting.

“It brings value far beyond the physical card,” she said, “because in letting someone check their balance, upload more funds, there’s a recurring contact point that can be used for marketing, that can be used for all kinds of customer engagement, that wasn’t possible before.”

C-Stores Integrating Frictionless Checkout

As technology evolves, the point of sale (POS) is transforming also.

POS systems are becoming more lightweight, and the overall hardware cost is decreasing, with many of the newer POS systems using cloud technology, said Perry Kramer, managing partner with retail consulting firm Retail Consulting Partners.

“The use of cloud technology, in most cases, reduces total cost of ownership and the time needed to develop and deploy new features. However, multiple outages this fall at cloud service providers resulted in significant POS and payment outages across all retail spaces, including c-stores,” Kramer said. “This has retailers looking at cloud POS systems through a slightly different lens. Support for offline has moved from ‘nice to have’ to ‘must have’ for most major retailers.”

Many POS systems today have moved their architecture to a microservice-based technology, Kramer added. “This will be critical in the long run for c-stores, which have many more peripherals than other retail verticals,” he said.

Typical POS integrations for c-stores today include things like digital ordering, kiosks for ordering prepared foods, car washes, digital signs, loyalty, fuel dispensers, storage tanks and more.

Upgrading newer architecture will help pave the way for c-stores’ long-term success by lower costs and reducing time to market when it comes to making changes, Kramer explained.

Kramer advised c-stores to remain focused on eliminating friction and improving speed at the POS by using contactless, mobile payments and prepayments. “These advancements must include the traditional checkout touch points and the expanding digital and mobile checkout touch points,” he said.

A FRICTIONLESS APPROACH

Delek US is one such c-store chain offering a frictionless checkout experience. Delek has 250 company-operated c-stores throughout Texas and New Mexico and is in the process of rebranding all of its locations under the DK banner.

In the summer of 2020, DK was the first c-store chain to pilot touchless checkout powered by Mashgin technology, and in 2021, Delek rolled the technology out to 25% of its DK stores. It plans to continue to integrate the technology, which it calls “DK Touch-less” into additional stores this year and beyond. “DK Touch-less is an artificial intelligence-driven checkout experience that uses computer vision to instantly recognize consumer products, including packaged goods, dispensed beverages and food items,” said Darshan Gad, senior vice president of retail sales, marketing & innovation, Delek US. “Consumers simply place their items on the unit to begin a transaction and use the adjacent pin pad to complete the process in as little as 15 seconds.”

Each store features one to two checkout units featuring the technology, which has reduced checkout times by 67%. Customers have responded, with 30% of store transactions going through DK Touch-less.

“Delek began exploring the future of checkout as early as 2014 when we