Friday, November 02, 2007

This Holiday, Most Gifts Will Be Gift Cards, According to PayPal (via BW release)

According to the Oct 31, BusinessWire release, "the Nielsen survey [for PayPal] revealed that more shoppers are playing it safe this holiday season by buying gift cards, rather than purchasing tailored gifts for their loved ones. In fact, 64 percent of shoppers said they plan to give gift cards. But recipients don’t seem to mind. Fifty seven percent of respondents said they would actually prefer to receive money or a gift card in place of the traditional present."

In 2006, just under 30% of all holiday shopping was online, this year, according to the PayPal release, it will be 40% which means that the card associations and member banks are poised to take even more money from interchange fees. Nearly all online orders require electronic payments. For our business, 100% of all ecommerce business requires electronic payments.

Why is this so important to our interchange battle?

When you use a credit card, where the acquiring and issuing financial institution are the same, effectively, they mirror gift cards. The gift card is being electronically transacted by the issuing business and ... there are no interchange fees. Just like when you write a paper check, or use a PIN-based debit card in Canada, there are no interchange fees. So, the question is, how can Visa® and MasterCard's® market power still force this $40 billion hidden tax on retailers and consumers?

The banks might counter and explain that gift cards prove there is a choice and that there really is competition. But, not so fast. How are most gift cards paid for? That's right, plastic! And, Visa and MasterCard have nearly an 80% market share of the electronic payment network.

[Commentary,, via survey data from the Oct 31 PayPal BW release]