Holiday Sales Create Annual Spike in Year Round Gift Card Business; Five-Year Tracking of...

ENGLEWOOD, Colo. -- Gift card sales are expected to spike once again during the 2005 Holiday season as American consumers continue their love affair with the product, purchasing gift cards for family, friends and coworkers. According to the most recent survey from First Data Prepaid Services'

ValueLink, 54 percent of the respondents who purchased gift cards indicated that they have purchased gift cards for others at Christmas time. Christmas purchases have more than doubled since ValueLink first began tracking consumer behavior in 2001 when the figure was just 23 percent. Gift cards accounted for more than $17 billion in holiday sales in 2004, roughly 8 percent of all holiday retail sales, according to the National Retail Federation.

The 2005 First Data Prepaid Services survey of 1,003 U.S. adults aged 18 or older revealed significant growth and stability in gift card use across several measurable categories for the previous 12 months and when evaluated over the past five years. American consumer awareness, use and satisfaction with gift cards are as high as they have been at any time during the first half of the decade, according to the study which tracks consumer behavior related to gift card purchase and use.

Originally seen as a simple replacement for paper gift certificates, electronic gift cards have quickly become the product of choice as consumers continually cite flexibility, convenience and value as key factors in both the purchase and use of gift cards.

"The benefits of gift cards for both consumers and businesses in diverse industries have driven the phenomenal growth of the product, particularly over the past five years," said First Data Prepaid Services President, Ed Labry. "For the American consumer, gift cards are now planned purchases that have become an integral part of our holiday gift giving. But, just as important, they are a part of our year-round gift giving, general retail purchase activity, as well as, a growing factor in our corporate and customer incentive, reward and loyalty programs. Why? Convenience, choice, flexibility and success in giving a gift that delights rather than disappoints."

Approximately six out of 10 (59%) American adults, an estimated 131 million people, either purchased or received a gift card in the previous 12 months, up 23 percent from 2001.

In addition, people are buying and using gift cards from and for a much more diverse list of retailers, food service and entertainment providers than at any time in the past five years. While major retailers continue to enjoy a dominant share (70%) of gift card purchases, restaurants, food stores and entertainment-based stores have seen impressive increases in volume. In 2005, restaurants accounted for 12 percent of gift card purchases, more than double the 5 percent reported just two years prior. Food stores accounted for another 6 percent of gift card sales in 2005 while entertainment-based businesses accounted for 5 percent.

FIVE-YEAR TRACKING OF AMERICAN CONSUMERS
                YEAR-ROUND GIFT CARD PURCHASES & USE(a)

                                       2001   2002   2003  2004   2005

Consumer awareness of gift cards        76%    79%    92%   94%    92%

Purchased or received a gift card       36%    37%    59%   64%    59%

Average # of gift cards purchased      4.1    4.6    5.6   6.9    6.2

Average value of gift cards purchased  $44    $50    $41   $59    $44

Avg. $ spent on all gift cards in
 previous year                         N/A    N/A   $197  $247   $228

Spend more than initial value of gift
 card                                   58%    61%    56%   55%    56%

Overall satisfaction with gift cards
 (10 point scale, 10 = extremely
 satisfied)                              7      9      9     9      9

(a) Source: First Data Prepaid Service/ValueLink - Consumer Insights
    Survey 2001-2005

Of those who purchased gift cards in 2005, a record 84 percent went into a retail location intending to purchase a gift card. Another 13 percent decided to purchase a gift card once they were in a store.

Although birthdays continue to be the most common occasion for giving a gift card, 78 percent, up 20 percent from 2001, it is the double, triple and quadruple increases in gift card giving for a variety of occasions that is creating the retail industry buzz.

Christmas gift card giving increased from 23 percent to 56 percent from 2001 to 2005. Gift cards given as wedding and baby gifts more than tripled, going from 3 percent to 10 percent for weddings and 2 percent to 7 percent for baby gifts. Quadruple increases occurred in the anniversary (3% to 12%) and graduation (2% to 8%) categories.

The average value loaded onto gift cards has fluctuated over the past five years from a low of $41 per card in 2003 to a high of $59 per card in 2004, reflecting increased gift card sales at diverse retail, restaurant and entertainment locations offering lower average ticket goods and services, according to First Data Prepaid Services Vice President of Marketing, Karen Larsen.

Of those who receive cards, more than one half, 56 percent, spend more than the initial value of the card they received.

"With consumer awareness and acceptance at mainstream levels, new, innovative applications and technology are driving the market and allowing consumers and businesses to choose and use gift cards and stored value products for a variety of needs and rewards," said Larsen. "Gift and stored value cards have quickly entered into our lives as traditional gifts, as incentives and loyalty rewards for purchasing behavior and as incentives and rewards in the workplace. While traditional gift cards will continue to be a healthy business, more innovative solutions, enhanced features and non-traditional gift, spending and paycard applications will help transform the market in new directions."

Other key research findings include:

--Twenty five percent of the consumers surveyed who purchased gift cards for themselves, did so because the cards offer a way to budget or control what they spend;

--A little more than one quarter, 27 percent, of those who purchased a gift card in the previous 12 months said they purchased gift cards at a store that offers gift cards from multiple retailers/merchants;

--Nearly three out of four respondents who purchased a gift card in the previous 12 months, 72 percent, said they purchased and gave gift cards as a primary gift.

--Fifty percent of gift card receivers reported using up the value of their gift card within one trip, while another 21 percent used up the value of their gift card within two trips.

--One quarter, 24 percent, of those who received a gift card in the previous 12 months report spending the total value of their gift card within one week of receiving the gift. Another 29 percent said it takes one month to spend the total value on their card.

--The average dollar amount spent on all gift cards remained well above $200, coming in at $228 for 2005.

--Sixty-one percent of the respondents said they are likely to purchase a gift card in the next 12 months.

--Overall, respondents said they are likely to purchase an average of 5.5 cards in the coming year. That reflects an average of 1.5 more cards per year than when First Data began tracking consumer's gift card behavior in 2001.

--More respondents, 50 percent, prefer to give a gift card over cash (42%).

--Forty-one percent of the respondents said they are interested in a spending card that is tied to a rewards program.

Data for ValueLink's Consumer Insights Survey was collected Aug. 3-7, 2005, by TNS Financial Services Group using its Express Telephone Omnibus, a weekly random survey of U.S. consumers aged 18 or older. TNS, the second largest market information company in the world, uses sample weighting by age, gender, region, education and race to minimize statistical variation from U.S. Census data.

About First Data

First Data Corp. (NYSE: FDC) is a leading provider of electronic commerce and payment solutions for businesses and consumers worldwide. Serving 4.1 million merchant locations, 1,500 card issuers and millions of consumers, First Data powers the global economy by making it easy, fast and secure for people and businesses around the world to buy goods and services using virtually any form of payment. The company's portfolio of services and solutions includes credit, debit, private-label, smart and stored-value card issuing and merchant transaction processing services; money transfer services; money orders; fraud protection and authentication solutions; check guarantee and verification services through TeleCheck; as well as Internet commerce and mobile solutions. Western Union and its subsidiary, Orlandi Valuta, together make up one of the world's largest money transfer networks with approximately 242,000 Agent locations in more than 200 countries and territories. The company's STAR Network offers PIN-secured debit acceptance at 1.7 million ATM and retail locations. For more information, visit www.firstdata.com.

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