Gift cards have evolved from being a thoughtful, last-minute birthday gift into a mature industry that’s helping companies build loyalty both inside and outside their organizations. Their use cases are expanding rapidly, offering innovative ways for business to not only reward employees but also strengthen their bottom line.

In a PaymentsJournal Podcast, Samara Swenson, U.S. Senior Marketing Manager at Prezzee, and Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research, discussed how businesses can tap into this dynamic new landscape for prepaid cards.

A Strong and Growing Market

According to Javelin, the prepaid market was worth more than $300 billion in 2024 and is expected to grow over 8% annually over the next five years. That figure reflects just the closed loop segment; the open loop side adds an additional $40 to $50 billion, with a similar expected growth rate. Altogether, the industry is projected to reach at least $500 billion by the end of the decade.

The B2B segments that Prezzee specializes in are also gaining strength. They account for roughly 15% of the total market, with a comparable 7% to 8% compounded growth rate. Crucially, the B2B segment could expand beyond the current projections as more companies adopt the emerging use cases that are taking shape.

Aligning Objectives

A full-service gift card program can help organizations align their gifting strategies with specific business objectives, whether that’s employee recognition, customer acquisition, loyalty programs, or incentivizing sales teams.

Each objective requires a slightly different approach. For example, for employee engagement, HR leaders can offer highly personalized and meaningful rewards that recognize key milestones, accomplishments, and contributions. For customer acquisition, a prepaid program enables marketing leaders to execute impactful promotions, referral programs, and loyalty initiatives. Sales leaders can use gift cards to motivate teams and reward performance, ultimately driving higher productivity and sales outcomes.

New Frontiers in Employee Incentives

One of the key areas where gift cards are already very popular is employee incentives. Gifting employees helps them feel recognized and appreciated, and companies that do this often see increased motivation, loyalty, and overall productivity.

“What many organizations might not realize is that this positive internal atmosphere naturally extends outward,” said Swenson. “Engaged employees are often a company’s best advocate, allowing companies to channel this energy into external marketing campaigns, customer facing initiatives and sales programs.”

Javelin is also beginning to track how many people receive sales incentive through a prepaid program, and early data is showing strong signs of growth.

“That’s been a bit untouched in employee incentives, but there are so many great opportunities to go multimodal—maybe have some that is cash, some that might be stock, but also an immediate reward. ‘Hey, you can go out and treat yourself to something because you hit a goal,’” Hirschfield said.

“It’s not like you’re sitting and waiting,” he said. “You don’t have to do anything except load it in your wallet or go to a store and say, ‘I’m going to use that.’”

Employees who receive incentives are generally happier with their employer. But beyond supporting loyalty at work, card issuers have found that gift cards also foster loyalty among recipients. Javelin data shows that consumers who receive a gift card are more likely to join loyalty programs, become repeat visitors, and even advocate for the brand to friends and family. As a result, these incentives go beyond providing an immediate reward—they can spark long-term relationships.

Digital vs. Physical Cards

As an electronic gift card platform, Prezzee offers plastic-free gift cards that help companies reduce their environmental footprint, supporting broader corporate ESG commitments. By replacing traditional plastic cards with digital alternatives, businesses can cut plastic waste while signaling their dedication to sustainability.

Hirschfield anticipates that digital and physical gift cards will reach an equilibrium by the end of the decade, with a roughly 50/50 split in volume. Gifting is likely to remain popular in physical form, as people often value the tangible experience and gratification of opening a present.

“When you have that ability to provide immediate access, you look at employers and employees, especially when they are remote,” said Hirschfield. “A lot of times, the person giving that reward is not sitting with them. That’s where digital factors thrive.”

Solving for Unused Balances

One emerging and valuable benefit thatPrezzee offers is the ability for businesses to reclaim any unused or unactivated gift card balances, ensuring that no budget goes to waste. Unlike traditional providers, companies only pay for activated gift cards and can also set expiration dates to encourage timely redemption.

“From a broad perspective, unused funds (tend to accumulate) at what I call the edges of the value: either at full value or down to the last pennies on the card,” said Hirschfield. “These are mostly the scenarios where someone just forgets to use their card. When you eliminate that fully unused portion, you can provide better bang for the buck for that incentive provider and reduce those pressures on the brand. You don’t have that excess liability on the back end.”

Prezzee also provides reporting and analysis tools, enabling businesses to track gift card usage and redemption rates. This data allows companies to continuously refine their strategies, reallocating funds to maximize impact. The combination of transparency and flexibility ensures that every dollar invested in gifting delivers tangible results and measurable returns.

“We’ve seen some truly innovative and impactful applications,” said Swenson. “In emergency response situations, Prezzee has enabled organizations to rapidly distribute funds directly to those affected by crisis. Following natural disasters, our partners have provided essential resources to communities within 24 hours.