The Gift Card Economy

The economy of gift cards is vast and often perplexing. For years economists have forecasted that the world will transition from traditional government-issued currency towards “branded currency.” Harvard Business Review predicted “The Coming Branded-Currency Revolution” in a very positive recent article. We’ll define this booming economy and more importantly, what it means to consumers.

What is branded/corporate currency?

Aptly named, branded or corporate currencies are currencies created by corporations. Most consumers know these in the form of gift cards. It is also the fastest growing currency, with $165 billion in estimated purchasing power according to the Harvard Business Review. That’s $300,000 dollars per minute, 365 days a year.

Gift cards remain a staple of gift giving, with 43% of US consumers expecting to purchase one during the year, according to Mashable.

What you may not know is that 20–30% of Branded Currency goes unused. This means two things:

1. Sellers love corporate currency.

For merchants corporate currency is a a financial boon. From their perspective, they get cash up front and then wait until someone spends the “money”. Best Buy, for instance, recently earned $16 million in gift-card “breakage,” which is the term for card value that was bought and not redeemed.

2. Customers are leaving money on the table.

Despite this, every year gift card sales go up. As many as 3 out of 4 people will have a gift card with their name on it this holiday season and most of those will have unused funds left over. How can we address the issue of breakage, and reap the benefits being offered to us as consumers?

How you can take advantage of the situation

Instead of leaving money lying around, users can sell their corporate currencies through websites like Zeek in exchange for dollars, or even on Zeex in exchange for cryptocurrency.

With no fiat and no fees, Zeex users can both convert unwanted gift cards into crypto, as well as buy discounted gift cards to places like Amazon where they’re shopping anyways.

While many consumers continue to lose money with gift cards, even more are losing money with cryptocurrency.

The Transactional Friction Problem (That we covered in our earlier article, aptly titled The Transactional Friction Problem)

Converting cryptocurrency to fiat generates a lot of transactional friction. Transactional friction refers to the inherent costs involved in making a transfer. The fact is that we need middlemen, and the middlemen must take their cut. There are many trying to develop high-tech solutions to this problem, each more complex than the last.

Whether through transaction fees or the fact there are so few places to spend it, cryptocurrency users are stuck between a financial rock and a hard place. Companies like Zeek do accept bitcoin for gift cards, but as centralized systems they have some intrinsic friction. Because they are providing a service, they do charge fees.

The solution

Luckily, Zeek founders Ziv Isaiah and Daniel Zelkind, and Guy Melamed found a solution. They started Zeex, a sister company to Zeek where the marketplace is decentralized. On Zeex users can seamlessly exchange branded currency and crypto with no fiat and no fees. This is possible because gift cards aren’t technically money so they can be freely traded on the blockchain.

Obviously, it would be nice if companies would just start to accept crypto directly, however this presents a host of complications for the merchant such as:

• Installing infrastructure to accept the crypto (expensive)
• Volatility of crypto/storage security (risky)
• Converting it directly into fiat (back to square one: high transactional friction)

Gift cards are the solution to Crypto we’re all desperately seeking

It’s a simple solution, to skip fiat entirely and go straight between crypto and corporate currency. The merchants will be delighted to accept their own branded currency, and the customers get discounted gift cards without any of the headache.