A Rewarding Business

Republished here on: 12 September 2012

As appeared in September issue of Outlook Business. By Michael Correya.

Why prepaid gift cards are becoming popular as an employee reward

Remember when Sodexo passes had become a sort of al- ternative currency? Companies doled out the meal vouchers as a form of tax-free compensation and the coupons gained acceptance virtually everywhere — you could use your Sodexo passes to not only buy a meal, but also your groceries, medicines, consumer electronics and clothes. And then, retailers tired of the high handling costs and delayed payments from Sodexo and stopped accepting the vouchers. There are murmurs that the French company is back in action in India, but it’s still muted.

A Swipe Ahead

  • Gifting market in India $30 billion
  • Prepaid gift cards and vouchers market in India $403.8 million
  • Growing at 30% a year

Source: Global Prepaid Exchange

Meanwhile, a similar concept is gaining popularity — prepaid gift cards. Gift vouchers from individual retailers and brands have been around for ages but they come with riders. You can’t use a voucher in part, there’s a time limit by when you have to redeem the amount gifted and it can’t be used across all stores.

Which is why companies that used to hand out gift vouchers as rewards or gifts (on birthdays, for instance) are now opting for plastic cards that can be preloaded and used for multiple brands — and reloaded for further gifting, if required. “Services like these help companies reduce costs and also eliminate fraud and misuse,” says Jayanth Narayanan, vice-president and MD, Asia Pacific operations, Rideau Recognition Solutions.

While several banks, including ICICI, SBI and Axis, and card company American Express offer preloaded gift cards, some pure-play gift card companies have also set up shop, seeing the growing demand. Bengaluru-based QwikCilver Solutions, for instance, is the largest provider of retailer gift cards and employee reward cards and finds business is booming. “We have tied up with over 50 brands in more than 250 towns across India,” says TP Pratap, chief marketing officer, QwikCilver, proudly. That includes big labels such as Titan, Madura Garments, Flipkart, Shoppers Stop, PVR Cinemas and Café Coffee Day. QwikCilver also provides employee reward cards for companies such as 3M, ICICI Prudential, Intel and CA.

It works like this. The client selects the retailer or brand whose card will be distributed among employees. The money to be loaded on the card is transferred to the retailer, who passes on a 1-2.5% commission to the cards company immediately. The company earns the same commission if the card is reloaded. For the retailer, though, the expense goes beyond the commission: it has to integrate IT systems and instal swipe machines for the gift cards, which can cost upward of Rs 10 lakh.

Sodexo’s popularity slipped with employees when it came under the scanner of the tax authorities. It remains to be seen how long the gift cards reign flourishes.

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