Sunday, 23 March 2014

THREE POINT CARD TRICK

It is always good to have a three point plan. So when the UK Gift Card and Voucher Association (yes, there really is one!) asked me to talk at their conference on 19 March 2014 I decided to draw one up.

It was brave of the Association to ask me. I have been very critical of gift cards, especially in 2012 and 2013 when almost every month a major High Street name disappeared into administration - and with it the gift cards bought in its name.

Gift cards and vouchers are big business. We spent £5 billion on them in 2013 - and when I say 'we' that figure splits almost equally between retail gift cards bought for presents and cards bought by firms to reward their employees. But out of that £5bn about £300 million (6%) paid by loving relatives and kind bosses is never spent by the recipient. So I decided my three point plan would tackle three things that cause that 'breakage' as it is sometimes called.

First, there is the big loss when a firm goes bust. A gift card with £20 on it becomes worthless overnight. Sometimes the administrator honours them and occasionally a new owner will revive them. But usually the whole lot disappears as card holders are unsecured creditors who seldom get anything when the company is liquidated. So point one of three was ring-fence the money paid for gift cards so that if a firm does go bust it is safe for the gift card holders.

Second, the money expires. Money on almost all gift cards can't be used after a certain time has passed. That can be as little as twelve months, though two years is more common. And the clock starts when the card is bought not when it is given. By the time the happy recipient opens the envelope the card can already be a few months old but nothing on the card shows when the money will disappear. So my point two was - scrap expiry dates.

Third, shops won't give change. Cards are for nice round sums like £25. But goods in shops are for odd amounts usually ending in pence. What happens to the change? The cards do not allow retailers to give it in cash. Instead any balance is left as a small sum on the card. So point three was allow shops to give small amounts of change.

To my surprise this three point plan was greeted well. There were those who said regulations made ring-fencing difficult and even that money laundering laws might scupper giving change. But many of the delegates from all parts of the gift card and voucher business said they broadly agreed with it and would take it back to discuss. We'll see.

But for now I still recommend giving the vouchers you can use anywhere, that never expire and which begin with the unbreakable promise "to pay the Bearer on demand the sum of £20" by the Chief Cashier on behalf of the Governor and Company of the Bank of England.

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