Digital Transactions Authoritative, insightful and timely information for payments professionals
Prepaid and gift card provider Blackhawk Network Holdings Inc. is further broadening its reach beyond supermarket gift card malls with its deal to offer gift card services within PayPal Inc.’s digital wallet and its pending acquisition of InteliSpend Prepaid Solutions, which offers corporate incentives and consumer promotion products.
Announced Wednesday, the PayPal deal calls for adding the ability to buy and reload electronic and physical gift cards through a PayPal account. PayPal, the payments arm of San Jose, Calif.-based eBay Inc., says it has more than 137 million active accountholders. Once the integration is complete, which is expected in the first half of 2014, PayPal accountholders also will be able to check their prepaid and gift card balances, a Blackhawk spokeswoman says.
PayPal and Blackhawk also will cooperate on distributing PayPal’s reloadable debit card in Blackhawk’s network, and ensuring PayPal users can use Blackhawk’s retail merchant locations to reload their PayPal debit cards.
“What’s important here is that with $43 billion in gift cards used during the 2012 holiday season and estimates that 95% of all U.S. households have purchased or received gift cards, adding gift card services to PayPal’s mobile wallet will be well received by consumers,” a Blackhawk spokeswoman says.
In buying Fenton, Mo.-based InteliSpend, Blackhawk is gaining access to the corporate-incentive and consumer- promotions arena, Blackhawk says. InteliSpend is known for developing technology that can restrict where a prepaid card can be used, such as with a specific merchant. Terms of the deal, announced Monday, were not disclosed, though Blackhawk expects to add between $50 million to $60 million to its revenue in fiscal 2014. InteliSpend has 1,500 direct clients, and works with more than 300 channel partners.
Both the PayPal and InteliSpend deals may signal the future of Blackhawk, says Ben Jackson, senior analyst of the Prepaid Advisory Service at Maynard, Mass.-based Mercator Advisory Group Inc. Blackhawk realizes the physical gift card and the gift card mall concept is mature, and it is looking for ways to increase sales, he says. “They’re saying, ‘OK, we recognize the future is not necessarily plastic cards,’” Jackson says. “These are both smart moves for Blackhawk. They need to think about a digital future.”
And, given the fragmentation within the prepaid industry, consolidation will continue, says Madeline K. Aufseeser, senior analyst at consultancy Aite Group LLC. “The consolidation of the prepaid market is overdue,” Aufseeser says. “Margins are razor thin. There are way too many players in every part of the vertical.”
She expects consolidation will march on until only the largest companies are left. “It’s still a rapidly growing market,” she says. “But, it’s also seeing a lot of price compression. It’s the race to the bottom.”
