Written by: Mrudul

What Is An Ecommerce Gift Card And How Does It Work?

The holiday season is about to start, and it is at that time when people will be hunting for gifts. Choosing gifts can be a headache, and for most people, it can even add anxiety. Not getting the gift right can be stressful as choosing one that doesn't behoove of who you are can end.

The holiday season is about to start, and it is at that time when people will be hunting for gifts. Choosing gifts can be a headache, and for most people, it can even add anxiety. Not getting the gift right can be stressful as choosing one that doesn’t behoove of who you are can end in ridicule. This is exactly where an e-commerce gift card enjoys immense clout in the hearts of customers. Not only is it a boon for shoppers, but also for merchants.

With better technology in product offerings, more adoption of gift cards in the retail industry , and the increasing use of smartphone adoption will act as a fillip to the gift card market.

How do gift cards work?

It is a prepaid gift debit card that contains a certain amount of money using which the owner can redeem it for products or services. Customers buy these gift cards to give to their loved ones in exchange for gifts.

There are two types of gift cards:

Open-loop gift cards

These are usually offered by major credit card companies, which is accepted in most outlets. The most popular ones are AMEX, Visa, and Mastercard. They can be used both in online transactions as well as in-store payments.

Closed-loop gift cards

These are gift cards that are specific to a retailer. A gift card offered by store “A” cannot be used at store “B”.

Physical gift cards used to dominate the market, but digital gift cards are becoming popular these days as it is easy to carry them around.

Let us learn about open and closed-loop gift cards in a bit more detail.

Open Loop gift cards

The open-loop cards offer the equivalent of cash, a credit or debit card that can be used at any merchant’s as long as it is accepted. As we mentioned earlier, American Express, Visa, Discover, MasterCard, etc., are all open-loop gift cards. It can also be used to make all kinds of electronic payments as it also serves as a standard prepaid card. Open-loop gift cards are reloadable. Users can add their own funds to the card, which is used for making electronic payments. To start using it as a gift card, there is an activation fee sometimes.

Closed-loop gift cards

These types of cards are the ones that are given by the stores specifically to use from them. While you can use a closed-loop gift card online or during an in-store purchase, you will not be able to redeem the card’s value at a different store. Let’s say that you have a Walmart gift card, you may redeem the value in the card not only at a store in your neighborhood but across the other states too, but the catch is that it is only redeemable at a Walmart store.

Stores consider closed-loop gift cards like a marketing activity too, so there are no activation fees, and they are not usually reloadable too. The gift card’s value needs to be redeemed within a particular date, after which it cannot be used. So it is in the consumer’s best interests that they use the gift card as soon as possible.

Digital Gift Cards

It has become one of the most popular forms of gift card options. Consumers love it because there is no hassle of carrying around a card. Merchants also love it equally because it reduces the expense of manufacturing physical cards. It can be transferred to the customer over email. All that the customer needs to know is the gift card code. With that tiny piece of information, they are good to go. In these times, when we are advised to maintain social distancing, digital gift cards are your best option.

What’s so special about gift cards?

People don’t have to spend hours walking through a gazillion stores to find something of value to gift their loved ones. Ecommerce gift cards contain a gift code assigned by the store using which you can redeem the card’s value. If it is an online-only gift card, then the code can be added on the checkout page; alternatively, the amount can be added to the store wallet while making the payment.

Gift cards are easy for the customer to redeem and easy for the store to make money from. One of the most significant advantages of doling out gift cards is that the card recipient might never have thought about stepping foot in your store at all. They might not have figured in your target market list at all, either. For all you know, they might become ambassadors of your brand.


The growth of gift cards in the consumer market has been nothing short of phenomenal. It has almost become a habit in our buying patterns. The fact that gift cards have changed consumer behavior shows the kind of influence it has gained over us. Gift cards are the sign of a win-win relationship between the merchant and the customer. From bringing in new customers, increasing sales potential to improving brand personality, it does all of this and more. It is a simple process of buying for the consumer,which saves tonnes of time and lets them take little stress.