How To Integrate Digital Gift Cards Into Loyalty Program

Many businesses have a loyalty program, but not all are integrating it with gift cards. Whether you’re not yet offering gift cards or your current system isn’t connected to your loyalty program, you could be missing valuable opportunities to increase customer retention and drive repeat sales.

In this article, we’ll show you how linking digital gift cards to your loyalty program can boost customer retention, encourage repeat purchases, and strengthen customer relationships.

How Gift Cards Drive the Loyalty Cycle (Buy, Redeem, Return)

Gift cards can create a powerful cycle of customer engagement, driving repeat purchases and improving brand loyalty. The process begins when customers purchase gift cards, signaling brand trust and introducing new members to your loyalty program.

Upon redemption, customers often spend beyond the card’s value, leading to increased purchase frequency. This strengthens their connection with your brand and encourages return visits.

By linking this cycle to your loyalty program, you can unlock several key business benefits:

• Repeat Purchases: Customers often exceed the card’s value, boosting revenue and sales per transaction.
• Improved Retention: Gift cards help convert first-time customers into loyal ones, even without a formal loyalty program.
• Brand Recognition: Digital gift cards stored in mobile wallets act as constant reminders of your brand, encouraging repeat business.

Integrating digital gift cards with your loyalty program improves customer relationships, drives repeat business, and increases brand visibility.

What the Data Says About Digital Gift Cards Driving Repeat Business and Customer Retention

Data consistently shows that gift cards are not just a payment method, they are key drivers of repeat business and customer retention.

• The global digital gift card market was valued at $453.4 billion in 2024 and is projected to reach $1.53 trillion by 2033 (CAGR 13.3%)
• In the U.S., digital gift card sales grew by 7% year-over-year in 2023, making up 34% of all gift card sales
• 52% of gift card sales in the UK are digital, with mobile and online-based cards driving this shift
• Unused gift card balances in the U.S. total around $21 billion annually, indicating significant potential for businesses to re-engage customers by encouraging redemption
• 61% of consumers spend more than the value of their gift card, averaging an extra $31.75 over the face value.

In the gift card market, these statistics demonstrate that when businesses integrate gift cards with loyalty programs, they open up opportunities for repeat business, while the growing use of digital gift cards shows increased consumer preference and engagement.

More Digital Gift Card Content:

• What Are Digital Gift Cards
• What Are The Benefits Of Using Digital Gift Cards
• Gift Card Tracking Software Features, Benefits, and Best Practices
• Online Gift Card Software
• Gift Card Management Software

How to Integrate Digital Gift Cards with Your Loyalty Program

Integrating digital gift cards with your loyalty program is an excellent way to improve customer retention, drive repeat purchases, and build stronger relationships with your customers. The process involves a few essential steps.

Step 1: Evaluate Your Existing Systems

Before you connect anything, run a quick audit on what you already have. You’re trying to answer one question: “Can every gift card event get into my loyalty system and be tied to the right person?”

Check these four areas:

1. Gift card system capabilities
   Can your current gift card provider send events (issued, purchased, redeemed, balance updated) via API or webhooks? If it only exports CSVs once a week, it’ll be hard to award loyalty in real time.
2. Loyalty platform intake
   Can your loyalty program accept external transactions and attach them to a member ID/email/phone? You need a way to say “this redemption belongs to member #48392” so points go to the right profile.
3. Channel consistency (POS + e-commerce)
   Do your in-store POS and your online store record gift card usage the same way (same fields, same tender type, same identifiers)? If not, you’ll end up with store redemptions showing in loyalty and online ones disappearing.
4. Buyer vs. recipient identification
   Can you capture both the person who bought the card and the person who redeemed it? Gift cards often involve two customers, and you want both in your database the giver for future gift card incentives, and the redeemer to build a stronger emotional connection.

If you hit a “no” on any of those, that’s the part you either integrate with an intermediary platform or upgrade before moving to Step 2.

Step 2: Choose the Right Platform

Once you know what systems you’re working with, pick an integration platform that can handle every type of gift card you issue, digital, physical, and branded gift cards and pass those events straight into your loyalty program in real time. The right platform doesn’t just “connect”; it gives you the control to turn gift card usage into loyalty actions.

What to look for:

1. Real-time gift card events
   The platform should send issue, purchase, and redemption events to your loyalty system immediately. That’s how you award loyalty points or exclusive discounts the second a card is used, which is what makes the experience feel like an exceptional rewards program.
2. Channel and wallet support
   It should support cards stored in Apple Wallet / Google Wallet (like in your example), so customers can “own” their gifts on their phone. That keeps the brand visible and helps unlock customer loyalty because the card isn’t buried in email.
3. Reward mapping for every scenario
   You want to be able to say: “when someone buys a card, do X; when someone redeems, do Y; when someone spends over the card value or hits a certain spending threshold, do Z.” That’s where you can add bonus points, gift card incentives, or small financial benefits that boost sales without changing your whole program.
4. Buyer + recipient identification
   A good platform lets you capture both the giver and the person who redeems. That makes it possible to build stronger customer relationships with two people from one initial purchase.
5. Segmentation and personalization hooks
   Make sure it exposes data you can use later card value, redemption time, overspend so you can target customer segments with personalized experiences (e.g. “you still have $12 left” or “top up and get 50 pts”). That’s how you turn gift cards into a real marketing tool, not just stored value.

PassKit is a good example of a platform built for this it links digital gift cards and loyalty cards, pushes them into mobile wallets, and lets you trigger loyalty actions off those passes.

Step 3: Set Up the Integration

Connect your gift card system to your POS, e-commerce store, and loyalty cards platform so every gift card action (issue, load, redeem) lands in one place. The goal is simple: whether a customer buys online, redeems in store, or adds the card to a wallet to own gifts on their phone, the loyalty program sees it and can reward it.

Once the sync is live, set basic rules “gift card purchase = add to member,” “gift card redeemed = award points,” “overspend = bonus.” That turns gift card usage into repeat-purchase behaviour and helps with improving cash flow because the value gets used faster instead of sitting as breakage.

If you want a prime example of this working, it’s when a customer redeems a $40 card, spends $55, and your system instantly adds points, that’s loyalty doing its job.

Step 4: Automate Engagement and Rewards

After the connection works, let automation do the follow-up. Send balance reminders to anyone who hasn’t redeemed, nudge people who only spent part of the card, and trigger instant rewards when they go over the card value. That keeps the brand visible and builds brand affinity because customers see you noticing their behaviour in real time.

Set it so: “redeem → award,” “redeem + overspend → award extra,” “still holding a balance → reminder.” It’s simple, it keeps people coming back, and it stops gift cards from being forgotten in email.

Step 5: Monitor and Measure Success

Now watch the numbers that tell you if the integration is actually paying off: redemption rate, overspend, repeat visits after redemption, and time-to-redemption. High redemption and overspend mean the program is moving money off liabilities and into sales, which is good for cash flow and improving cash flow over time.

If redemptions are slow, send more reminders. If overspend is high, add a small reward for hitting a threshold. If repeat visits rise, you know the gift card + loyalty setup is doing what it should locking people into your brand. That’s how a gift card program becomes a retention engine, not just a payment method.

Strategies to Grow Gift Card Usage Inside Your Loyalty Program

To boost both sales and redemptions, treat gift cards as part of your marketing plan, not just a product. Here’s how:

1. Time‑bound Promotions

Launch limited‑time offers for gift card purchases such as “Buy $50, Get $10 Bonus” around holidays or major events. This creates urgency and drives immediate revenue.

2. Multi‑channel Visibility

Make gift cards visible across key touchpoints: website homepages, check‑out pages, in‑store signage, email newsletters, and social posts. Broad exposure helps capture both spontaneous buyers and planned givers.

3. Incentive Upsell

Encourage higher‑value gift card purchases by bundling additional value or perks. For example, “Purchase $100 gift card, receive an extra $15‑value voucher” can raise average order value.

4. Referral & Loyalty Integration

Use your loyalty program to promote gift cards. Reward members with special gift‑card deals or bonus rewards for referring new customers via gift‑card purchases. This leverages existing loyal customers to drive new gift‑card activity.

5. Personalized Messaging

Segment your audience and send targeted invitations: e.g., “Need a last‑minute gift? Send a digital card now”, or “You’ve been a member for 1 year, exclusive gift‑card offer inside”. Personalization improves response rates.

6. Gift Card Redemption Prompts

After a purchase, encourage recipients to redeem their card by sending reminders, in‑store prompts, or bonus offers for early redemption. Capitalizing on the moment prevents balances from going unused and avoids lost revenue.

7. Promoting Gift Card Adoption & Redemption

Use targeted marketing campaigns, offers, and incentives to encourage both the purchase and redemption of gift cards. These efforts help maximize customer engagement and ensure that gift cards become a recurring tool for loyalty.

8. Handling Unused Balances & Ensuring Redemption

Address unused gift card balances by offering incentives, sending reminders, and offering flexible rewards to encourage redemption. This is an important tactic for reducing breakage and ensuring that customers make the most of their gift card value.

9. Omni-channel & Physical + Digital Cards Management

Support both physical and digital gift cards to create a comprehensive customer experience across multiple channels. Customers should have the flexibility to use gift cards online, in-store, or through mobile apps, ensuring they can redeem their cards wherever they shop.

10. Using Wallet Passes as the Digital Front for Gift Cards

Digital wallet passes, such as Apple Wallet and Google Wallet, offer customers a simple, convenient way to store and access their gift cards.

By integrating your digital gift card system with these platforms, you provide customers with easy access to their cards in one place, ensuring that redemption is fast and efficient.

This integration not only simplifies the redemption process but also keeps your brand visible to customers, helping encourage repeat visits and purchases.

Customer Experience and Service Delivery Considerations

Getting the tech connected is only half the job, the day-to-day experience has to make gift card usage simple for customers and staff.

When redemption works the same in-store and online, when physical and digital/branded/prepaid cards follow the same loyalty rules, and when people are reminded they still have value to use, customer satisfaction goes up and it’s easier to retain customers and grow a loyal customer base.

Make Gift Cards Redeemable Everywhere

Enable issuing and redemption across POS, e-commerce, and mobile/app so loyalty program members get the same outcome in every channel. Send every one of those transactions back to loyalty so online sales and store sales both earn under the same rules. That keeps perceived value consistent and supports your wider loyalty initiatives.

Give Staff the Right View at POS

Let store staff see gift card balance and loyalty status on one screen. That speeds up service delivery, makes partial redemptions cleaner, and reduces the “does this earn points?” confusion that kills customer satisfaction.

Keep Rewards Consistent Across Card Types

Apply the same loyalty logic to digital gift cards, physical cards, and branded or prepaid cards. If one format earns and another doesn’t, customers assume the program is unfair. Consistency protects perceived value and helps foster brand loyalty over time.

Use On-site and In-store Prompts

Use in-store signage, account pages, order emails, and wallet passes to remind gift card users they still have value to spend. Keeping the card visible reduces unused balances, encourages frequent purchases, and supports the emotional connection you’re trying to build with the program.

Measuring the Success of Your Gift Card Integration

When you integrate a gift card program, measuring its success is key to understanding its impact and optimizing its value. Below are the most critical metrics to track and ways to leverage gift card data for customer retention.

To ensure your gift card program is delivering the desired results, focus on these essential metrics:

• Gift Card Sales: The total value of gift cards sold is a direct indicator of the program’s reach and effectiveness. High sales suggest strong customer interest and demand.
• Redemption Rate: This is the percentage of issued gift cards that are redeemed. A high redemption rate signifies engagement, meaning customers are not only purchasing but actively using the cards.
• Average Redemption Value: Monitor how much customers spend above the value of their gift card during redemption. This metric highlights the effectiveness of your program in encouraging additional purchases.
• Breakage Rate: This refers to the percentage of issued gift card value that goes unredeemed. A low breakage rate suggests customers are consistently using their gift cards, which is a sign of success.
• Repeat Purchase Rate: Track how often customers return to make additional purchases after redeeming a gift card. This indicates whether the program is fostering long-term loyalty.

These metrics will help you measure both the immediate success of your gift card program and its longer-term impact on customer loyalty and business growth.

Customer Data and Analytics from Gift Card Transactions

When your gift card program is integrated with your POS and e-commerce systems, you gain access to valuable customer data. By tracking gift card purchases, you can monitor key metrics such as redemption rates, overspend, and spending patterns.

This data not only provides insights into customer behavior but also helps improve your rewards program by fine-tuning loyalty solutions based on customer preferences.

Understanding redemption frequency and time to redemption ensures that your marketing strategies are aligned with customer needs, ultimately boosting brand reputation and customer engagement.

Using Gift Card Data for Customer Retention

Gift card transactions offer valuable data that can be used to enhance customer retention and improve engagement. Here’s how to make the most of that data:

Segment Customers

Analyze the data to segment customers based on who purchases or redeems gift cards. This will help tailor offers and loyalty rewards to specific customer groups, such as frequent buyers or new customers.

Personalize Offers

Use purchase patterns and redemption behavior to create personalized promotions. For example, offer discounts on items frequently bought with a redeemed gift card or create exclusive deals for high-value customers.

Automate Engagement

Set up automated emails or SMS reminders for gift card recipients to encourage redemption. You can also send follow-up offers after redemption to increase customer lifetime value.

Integrate with Loyalty Programs

Gift cards can be tied to your existing loyalty program. Consider offering loyalty points or special perks for gift card purchases or redemptions, encouraging customers to engage with your brand more deeply.

By tracking these key metrics and using gift card data strategically, you can maximize the value of your program, improve customer engagement, and increase long-term retention.

FAQs About Using PassKit For Integrating Digital Gift Cards

Here are a few of the most common questions we get about using PassKit to connect digital gift cards with a loyalty program.