OP-ED: The Evolution of Digital Gift Cards in Africa and Their Market Impact

In an era of digital transformation, the traditional gift card experience is ripe for an upgrade in Africa. This market has already demonstrated significant growth, with the African and Middle Eastern markets projected to expand at a Compound Annual Growth Rate (CAGR) of 15.3% from 2023 to 2030. At the heart of this growth is the shifting preference towards digital gift cards in Africa, which offer a seamless, secure, and environmentally friendly alternative to traditional gift card experiences.

Powered by technological pioneers and modern platforms, these digital solutions address the complexities associated with physical gift cards. With demand increasing in line with other digital payment options, they offer a more convenient, personalized gifting experience that effortlessly crosses geographical borders, aligning perfectly with the dynamic demands of today’s consumers. The proliferation of digital gift cards not only caters to consumer preferences but also stimulates economic activity by promoting increased spending, especially in the retail sectors

Addressing contemporary needs

Digital gift cards address the shortcomings of physical gift cards, which often pose logistical challenges — such as the requirement of physical production, storage, and distribution (this also involves shipping, which can be slow and costly, especially for international delivery).

Digital gift cards, on the other hand, can be sent instantly via email or app, eliminating the need for physical handling. They also bypass the issues of physical loss and damage that commonly plague traditional cards.

While plastic production and disposal contribute significantly to waste and carbon emissions, digital gift cards eliminate this entirely, presenting a sustainable and user-friendly alternative.

They streamline the gifting process, offering a host of benefits that enhance the overall shopping experience – that also aligns with the growing global consciousness towards sustainability. The rising demand for digital gift cards is fostering the development of advanced digital payment infrastructures and technological innovation, paving the way for more sophisticated financial services in Africa.

A substitute for cash

The increase in demand for digital gift cards is more than a retail trend — it is an economic catalyst. Despite the rise of mobile money apps, the majority of point-of-sale (POS) payments in Africa are made in cash. Take South Africa, the highest-ranked African nation for digitization, where 73% of POS payments are still made with cash. Digital gift cards enable consumers to replace cash, providing a faster shopping experience whilst also reducing the risk of theft or accidental loss.

In Africa, the digital payments sector is projected to reach a transaction value of US$194.20 billion during 2024, indicating a substantial appetite for further mobile-based payments adoption throughout the continent. Moving away from physical payment methods, whether it is cash or physical gift cards, towards digital gift cards will spur economic growth in Africa, increasing consumer confidence when shopping and boosting support for retailers.

Introducing the future of gifting

Digital gift cards revolutionize the way people gift, offering a multitude of advantages that enhance the gifting experience. First, it provides instant gratification, where there is no longer a need to wait for physical cards or worry about shipping delays. Security and flexibility are also key features. Digital gift cards are protected with advanced security measures, allowing users to easily track balances and enjoy the freedom to use their gift cards through various channels.

One example of where a digital gift card works well is when shopping malls across Africa seek to modernize their customer experience. Digital gift card apps offer malls a chance to attract a wider demographic by leveraging targeted promotions and embodying a tech-forward image. These apps enable malls to engage customers who prioritize innovation, convenience, and sustainability. By adopting digital gift cards, malls can cater to both traditional and tech-savvy shoppers, with customisable branding that reinforces their identity and broadens their customer base, ultimately boosting customer satisfaction and loyalty. It also provides the commercial benefits of not issuing physical cards at kiosks.

Global context

While Africa’s embrace of digital gift cards is noteworthy, it is essential to place it within a global context. Compared to the rapid adoption in regions like North America and Asia, Africa’s digital gift card market is unique, marked by its diverse economic landscapes and consumer behaviors. The global shift towards digital payment methods is reflected distinctly in Africa, driven by mobile penetration and internet accessibility.

Over 84% of the population in Africa has access to a mobile device. This high penetration rate is a key driver for the adoption of digital services, including gift cards. Internet penetration in Africa is also growing, with around 45% of the population having access to the internet. This growth is crucial for the digital gift card market as it expands the potential consumer base.

It also highlights Africa’s potential as an emerging leader in digital innovation, where local solutions tailored to unique market needs could set a precedent for global digital payment models. The intersection of high mobile usage and growing internet access in Africa is creating a fertile ground for the rapid evolution and adoption of digital financial services, further solidifying the continent’s position in the global digital economy.

In summary, the rise of digital gift cards ushers in a new era of gifting in Africa, offering a streamlined, secure, and eco-friendly solution that caters to the evolving needs of modern consumers. As Africa embraces digital transformation, the digital gift card app stands as a testament to the power of technology to enhance everyday experiences and bring people closer together.