How to Evaluate Gift Card Providers When You're Ready to Buy

Gift cards are a key part of the restaurant guest engagement ecosystem, providing guests the opportunity to share their favorite brands with others. And in today’s mobile-driven world, eGift cards with the option to reload acts as a way for guests to store value that they can use for regular orders.

Making a final decision on a gift card provider isn’t just about crossing off a task on your to-do list, nor is it simply about finding the cheapest provider available. It’s a decision that has broad-reaching effects on customer engagement, revenue, and business operations that you need to take seriously. That’s right – if you’re a decision-maker for your restaurant’s gift card program, you’re tasked with one of the biggest responsibilities in shaping how customers interact and experience your brand. 

How secure will your gift card program be? Does it integrate smoothly with the systems you already have running? Will it be able to scale with your business? What happens when you need support? These are hard-hitting questions you’ll need clear answers to make a quality decision. 

There’s a reason why the biggest retail companies and most lucrative restaurants offer gift cards – they’re a powerful strategy and marketing tool. So, let’s maximize those benefits and show you how to select the perfect gift card provider. 

4 Key Criteria for Selecting Gift Card Providers 

Gift card service providers tend to become long-term partners with your business, which is why finding the perfect match is so important. With criteria in place, you can evaluate each provider against those requirements and judge whether they’re up to standard. Here are four important factors to look for: 

1. Reliability and Security Features: Above anything else, your gift card provider needs to be secure. Reliable companies have features like data encryption and fraud prevention systems and are PCI (payment card industry) compliant. With these measures in place, both your business and your customers are protected against potential risks. After all, managing gift cards means handling sensitive information and monetary transactions, so every aspect of the program should be protected. 
2. Customer Support: Things can go wrong with gift card programs. They’re built and maintained online, and occasionally, technology and customer experiences go awry. Top providers will have a strong reputation for handling all sorts of issues and won’t make you or your customer wait days for a resolution. 
3. User Experience: Is the gift card system easy to use? Patrons love simplicity, and simplicity makes business operations that much more streamlined. All touchpoints, from the point of purchase to redemption, should be smooth as silk. 
4. Costs and Contract Details: The cost structure of gift card programs involves multiple fees you need to be aware of. They typically involve two main charges: the monthly or annual fees and then the transaction fees. There are also potential setup fees, hidden activation fees, redemption fees, and even inactivity fees that can creep up and surprise you. So, don’t overlook the fine print – get a true idea of the cost both today and tomorrow. 

6 Digital Gift Card Benefits 

Gift cards have historically been associated with physical plastic cards that can be easily tucked into a wallet, but many prefer digital alternatives nowadays. And it’s no surprise, as digital gift cards offer specific benefits that physical ones don’t: 

1. Convenience: Rather than having to physically go into a restaurant and make a transaction, digital gift cards can be purchased online from the comfort of a customer’s home. These gift cards can be integrated into your restaurant’s app and be redeemed and managed online as well. 
2. Accessibility: Customers can receive and send cards using a phone number or email address instantaneously, and recipients can store them in their digital wallets. 
3. Cost: Digital cards come with the benefit of zero production and reduced distribution costs because the fulfillment process is automated and there’s no need for physical production. 
4. Environmentally Friendly: With no plastic packaging, physical message cards, and need for decorative envelopes, digital cards are much more environmentally friendly. 
5. Customization: While a few design options are usually available in person, an online system can be updated more frequently. This means being able to provide occasion-specific designs or personalized messages without any hitches. Starbucks famously offers extensive designs online, with a  limited range in physical stores. 
6. Better Security: There’s no risk of physical theft with online gift cards,​ a practice that has been refined over time. Although there is still some inherent risk with digital gift cards, no thanks to sophisticated hackers, in-person hacking has been around since the advent of gift cards. Digital cards remove the risk of in-store hacking techniques like scratching off coverings and replacing them with stickers.​ 

Third-Party Gift Card Providers 

When we talk about gift card providers, we’re referring to third-party gift card providers. They handle everything from customization, distribution, and management to support, which takes a lot of pressure off your resources and staff in-house.  

Managing a gift card program in-house can quickly become overwhelming despite the perks of having more control over design and branding. Especially if you don’t have the expertise and capabilities to manage a complex gift card program, a third-party provider can better support those goals with the proper safeguards and infrastructure. 

Comparing Gift Card Providers 

Once you’ve decided whether you want to go entirely digital or opt for a hybrid approach, it’s time to evaluate gift card providers. When you’re performing your structured analysis, follow these steps: 

1. Evaluate your business size and volume needs: How complicated and scalable will you need your system to be? Smaller startups and businesses would be able to work with a simple solution, while large corporations need something that can handle your volume. 
2. Consider your industry: Different industries will have unique priorities, and you’ll want to work with a provider with experience in your field. Retail businesses may value integration above all, which means the gift card provider should be able to cater to those specific needs. 
3. Recognize your customer demographics: Your customer base should ultimately influence the trajectory of your gift card program. Your choice between a digital-only solution or one that offers both physical and digital capabilities will depend on whether you serve multiple age groups or target just one. 
4. Make sure they align with your business objectives: Gift card programs exist to support a specific business goal, so it’s not much use if a provider can’t help. For example, if your primary objective is to use gift cards as a marketing tool, your provider needs to offer robust customization and promotional features. 

10 Gift Card Provider Transition Tips

Transitioning to a new gift card provider's platform is no simple or brief task. Multiple teams are involved and you need to keep your customers well-informed, too, to prevent frustrations or potentially lost sales. 

Here are 10 tips to conduct as smooth a transition as possible: 

1. Make sure you always own your data and can easily access it, both today and tomorrow. This includes transaction histories, customer information, and usage statistics. Being able to easily transfer this data to a new provider is essential for continuity and for maintaining insights into customer behaviors. 
2. Create a team that handles gift card migration, which may involve different team members from marketing, IT, finance, and operations. This team will oversee the migration process, ensure all logistical and technical aspects are diligently prepared for and executed upon, and address any issues that arise. 
3. Streamline the migration process to ensure all appropriate parties are weighing in. This should include a step-by-step process on transitioning operations, managing customer communications, and handling technical setups. 
4. Make the transition timeline clear so both your employees and your customers handle it easily. Ensure that there are no surprises and that everyone understands the phases of transition, particularly how they may impact service or accessibility. 
5. Perform POS configuration and testing to all but guarantee success. Thoroughly configure and test the point-of-sale systems to integrate seamlessly with the new gift card provider. This testing phase is crucial to iron out any issues before going live to avoid affecting sales or customer experience. 
6. Make an inventory of your current gift card stock to ensure you can meet demand. Conduct a complete inventory of existing physical gift cards to ensure you have enough stock during the transition phase. This helps in managing the phase-out of old cards and the roll-out of new ones without disrupting availability. 
7. Integrate online ordering so that the customer experience is as smooth as possible. This ensures a seamless customer experience when using gift cards for online purchases, which deepens convenience and drives sales. 
8. Consider third-party channels, while understanding that they add complexity. Coordinate with these platforms to ensure they are aligned with the new gift card system without interruption. 
9. Consider eGift cards for added convenience. They offer convenience to customers and reduce physical logistics for your team. eGift cards are extra appealing to some audiences due to their instantaneity and ease of distribution. 
10. Be sure your new provider matches or improves your current reporting. Accurate and detailed reporting is critical for tracking sales trends, understanding customer preferences, and making informed business decisions. 

These comparisons need to happen in a concrete manner rather than just being thought about in the abstract. You might choose to employ a decision-making tool, perhaps something ​Click here to enter text.​as simple as a checklist or a more elaborate decision matrix, to measure up these providers against key criteria.

Frequently Asked Questions About Gift Card Providers 

How do gift card vendors make money? 

Gift card vendors make money primarily through commission fees. When they sell gift cards on behalf of businesses, they earn a percentage of the card's value.  

For example, a vendor might sell a $100 gift card and keep $5 as a fee. Vendors also benefit when gift cards are unredeemed or partially used—referred to as breakage—allowing businesses to retain unused funds.  

Some vendors also charge setup or transaction fees to merchants for managing the gift card system, including features like customization, digital delivery, and reporting tools. 

What are the most sold types of gift cards? 

The most sold types of gift cards are retail, dining, and entertainment gift cards. Here are some examples: 

• Retail Gift Cards: Cards from big-box stores like Amazon or Walmart are especially popular for their versatility.
• Restaurant Gift Cards: Cards from restaurant chains like Starbucks and Applebee's are top sellers, as they make practical and appreciated gifts
• Entertainment Gift Cards: Cards for services like Netflix, Spotify, and Twitch are gaining traction due to their growing demand

How do you become a gift card vendor? 

To become a gift card vendor, follow these six steps: 

1. Research Your Target Market: Decide whether you want to focus on physical gift cards, digital gift cards, or a combination of both. Identify industries or businesses that align with your goals. 
2. Set Up a Platform: Develop or invest in a system to manage gift card issuance, tracking, and redemption. Ensure it’s secure, user-friendly, and scalable. 
3. Comply with Regulations: Familiarize yourself with local laws around gift card expiration dates, breakage, and consumer rights to avoid legal complications. 
4. Establish a Payment System: Integrate a reliable payment processing system that supports various transaction methods, including online and in-store purchases. 
5. Market Your Services: Promote your gift card services to businesses and consumers through online platforms, social media, and networking events. 
6. Partner with Businesses: Reach out to companies that want to offer gift cards, such as retail stores, restaurants, or service providers. Negotiate terms for selling and managing their gift cards.

What percentage of gift cards are never used? 

10-20% of gift card balances go unredeemed, while 6% of gift cards are never used at all (The Hustle). This unused portion, known as breakage, can represent billions of dollars annually

People often leave gift card balances unredeemed due to factors such as lost cards, forgotten balances, or small remaining amounts. While breakage benefits the issuer financially, some regions have laws requiring businesses to honor expired gift cards or redirect unclaimed funds to state treasury departments. Vendors often encourage cardholders to use their full balances by offering reminders or promotions tied to gift card usage. 

The Bottom Line 

If you take away one thing from this article, let it be that choosing a gift card provider requires careful thought and intention. There are several non-negotiables in choosing the right provider (regardless of your restaurant’s growth stage or goals), as well as flexible elements that are up to your specific preferences, like hosting things digitally or staying analog. 

Gift card programs don’t exist only as a method of gift giving. With the right marketing and sales strategy, gift card offerings provide your business with significant gains you may not have expected. Closer connections with customers, improved sales numbers, and a stronger brand footprint aren’t just byproducts; they’re the rewards and results of proper program leverage. 

Interested in learning more? Check out the Paytronix Marketer’s Guide to Gift Card Strategy to harness the power of gift cards.