It has been interesting to listen to the debate about gift cards offered by retailers. Some people seem to view them as a valid alternative to and safer medium by post than cash. Yet recent events have highlighted that card holders are dependent on the issuer to honour their obligations rather than the Bank of England. Sound familiar?
Gift cards are undoubtedly helpful for both providers, purchasers and the ultimate beneficiaries. Especially the latter, we all enjoy being given the chance to choose a present! For the purchaser they offer a simple way to make a gift to a family member or friend. The recipient is free to choose a items of their choosing to the value of the card. The retailer is able to access short term retail funding without paying interest incurring some costs for providing and operating the card. The providers are also assured that the recipients will spend the money in their onliine or high street stores.
In the same spirit and for the same reasons, I recently purchased a gift card for are relative who celebrated his birthday earlier in January. I bought the card from a major department store with a branch in my home town where he likes to shop.
As a seasoned structured investment professional I searched for the risk warning. After all, if this had been a solution provided by our industry it would have had numerous health warnings. Designed to alert would be purchasers to the potential risks.
I looked for the warning highlighting the risk that the store might not honour it’s promise to exchange the cash on the card for goods and services. Was it on the card itself? No. Was it on the receipt or the attached terms and conditions? No!
You might say, fairly, that the sums involved are relatively small but perhaps not for the people who bought and received the cards.
Where am I going with this line of questioning? My point is that the authorities need to protect consumers but they also have a duty to be fair to suppliers too. To provide a level playing field across countries and industries as well. For sure, be vigilant towards industries that have had issues in the past but look out for future problems too.
Unregulated lending where clients can borrow money at interest rates with APRs in the 100’s or even 1,000’s of percent may be an area worth reviewing.
Even though the sums involved may be also be relatively modest, the idea that someone may have to repay £145 after three months on a loan of £100 has to be open to question.
It is all a question of balance, which is never easy to achieve but I suspect that our industry is due some soon! What do you think?