PayPal has added support for prepaid gift cards through PayPal Checkout, thanks to a “patent-pending and innovative method” that the company claims took “months of research and investigations” to develop.
Though prepaid gift cards are a highly lucrative industry–research firm First Data estimated that more than $43 billion worth of gift cards were purchased during the 2012 holiday season–they can be difficult to use on e-commerce sites because most don’t have a billing address attached to them. In fact, 60% of people who received gift cards told First Data they preferred to use them at brick-and-mortar locations.
By offering gift card support through PayPal Checkout, the company may encourage more shoppers to redeem their gift cards online. PayPal isn’t doing this out of altruism, of course. The company currently collects a 2.9% fee on total sale amounts from merchants plus 30 cents per transaction, so it’s in their best interests to convince gift card recipients to gravitate toward sites with PayPal Checkout.
Offering prepaid gift card support is the latest push by PayPal to find more revenue streams in the upcoming holiday shopping season. At the end of October, PayPal struck a partnership with Blackhawk Network to bring the company’s gift card services to PayPal’s digital wallet. This means that shoppers can use PayPal to purchase Blackhawk’s gift cards and check balances.