The world of gifting is taking a quick turn. At the same time that the world of finance is undergoing rapid transformation, advancements in digital payment solutions are reshaping how we transfer and receive money. One key trend emerging from this shift is the growing impact of gift cards on traditional transfers, offering new ways to send value across borders quickly and efficiently.
Even though traditional bank transfers have been the default way for personal and business transactions for a considerable amount of time, digital alternatives such as gift cards are gaining popularity for specific use cases, including international gifting and low-value payments.
However, they are not direct substitutes for traditional bank transfers.
The purpose of this blog is to investigate the influence that gift cards are having on traditional bank transfers, highlighting the significant contrasts, advantages, and potential future implications for financial transactions.
Understanding Traditional Bank Transfers
How Traditional Bank Transfers Work
A sender initiates a bank transfer by providing information about the recipient, including their name, account number, and the financial institution they are affiliated with. The transfer is then processed through a financial network, which frequently necessitates a number of verifications and certifications before it reaches the appropriate recipient.
Types of traditional bank transfers include:
- Wire Transfers: Typically used for international or large transactions; processed quickly but at a high fee.
- ACH (Automated Clearing House): Common for domestic transfers in the U.S.; slower but less expensive.
- SWIFT/IBAN Remittances: Used globally to send money across borders with strict banking protocols.
Timeframe and Costs
Traditional bank transfers can take one to five business days, especially for cross-border transactions. Fees vary but can include:
- Flat-rate wire transfer fees
- Currency conversion charges
- Intermediary bank fees
See Also: The Most Popular Ways to Send Money to Family and Friends
Challenges with Traditional Bank Transfers
High Costs
International wire transfers often involve multiple fees, sometimes as high as $30–$50 per transaction. These costs can accumulate quickly, especially for frequent senders.
Time Delays
Banking infrastructure, compliance checks, and time zone differences can delay funds. International transfers may require additional verification, extending the process.
Complicated Procedures
Bank transfers require detailed information, such as the bank name, SWIFT code, IBAN, account numbers, and more. Errors in any of these can lead to delays or failed transactions.
What Are Gift Cards and How Do They Work?
Introduction to Gift Cards
A gift card is a prepaid payment card that holds a fixed monetary value. It can be physical or digital and is often used for purchases or to transfer funds.
Types of gift cards:
- Prepaid Visa/MasterCard gift cards
- Retailer-specific gift cards (e.g., Amazon, Walmart)
- Digital eGift cards for online use
How Gift Cards Are Used for Transfers
Gift cards can be sent physically or online, making them versatile for use in both personal and professional settings. Rather than going via the traditional banking system, digital gift cards are sent to the recipient by email or a mobile application and can be redeemed immediately.
The Advantages of Gift Cards Over Traditional Bank Transfers
Instant Transfers
Unlike bank transfers, which may take days, digital gift cards are typically delivered within minutes. For example, a prepaid Visa or Amazon eGift card can be sent and received almost instantly—ideal for last-minute gifts or emergency situations.
Lower Fees
Traditional banks charge various fees for transfers—especially international ones. In contrast, most gift cards:
- Have no or low issuance fees
- Avoid intermediary bank fees.
- Bypass currency conversion charges in many cases.
Depending on fees and usage limitations, gift cards can be a relatively cost-effective option for small, non-recurring payments.
Simpler Process
With gift cards, gathering account details or completing lengthy forms is unnecessary. All that’s required is the recipient’s email or mobile number. This simplicity is beneficial for:
- Technologically inexperienced users
- Those without access to formal banking systems
No Need for a Bank Account
One of the most significant benefits is that unbanked or underbanked populations can use gift cards. In developing regions with limited access to banking, gift cards offer financial inclusion without requiring a formal bank account.
The Impact of Gift Cards on International Transfers
Faster Cross-Border Transfers
Sending money overseas via banks can involve long waits and high fees. Gift cards, however, provide an efficient alternative. Depending on regional acceptance and network support, a digital prepaid card can sometimes be issued in one country and used in another.
Avoiding High Currency Conversion Fees
Banks often charge hidden fees for converting one currency into another. Some prepaid Visa or Mastercard gift cards allow spending in local currencies, which can help avoid unfavorable exchange rates and additional processing fees — though this varies by issuer and region.
Reducing Barriers to International Payments
Banking infrastructure is not universally accessible. Gift cards offer a solution by enabling money transfer without local banking compatibility, making them especially useful in remote or developing areas.
Security: Gift Cards vs. Traditional Bank Transfers
Security of Traditional Bank Transfers
Bank transfers are encrypted and secure, but they come with risks:
- Incorrect information can send funds to the wrong account.
- Fraudulent activity is challenging to reverse.
- Reclaiming funds post-transfer is often impossible without legal intervention.
Security Features of Gift Cards
Gift cards can offer certain safety benefits compared to traditional transfers:
- Most are PIN-protected, preventing unauthorized use.
- Digital cards are delivered through encrypted channels like email or SMS.
- They reduce the need to share sensitive bank information with recipients or third parties.
However, gift cards do have limitations:
- Some are region-locked or retailer-specific.
- If lost or stolen, physical cards may be difficult to recover unless promptly reported.
How Gift Cards Complement Traditional Bank Transfers
A Supplement to Bank Transfers
Gift cards are not a complete replacement but rather a complementary tool. Many businesses and individuals use both:
- Bank transfers for significant or recurring payments
- Gift cards for small, quick, or international transactions
This hybrid approach enhances flexibility and reduces dependency on traditional systems.
Usage in Business Payments
Freelancers, small businesses, and international clients increasingly turn to gift cards for:
- Payments in multiple currencies
- Avoiding banking delays
- Client rewards and incentives
Businesses also leverage gift cards in customer loyalty programs and seasonal promotions, using them as cash flow management tools.
Read related blogs: How to Send Money Overseas Without Paying Fees
Potential Downsides of Gift Cards Compared to Bank Transfers
Limited Use
Not all merchants or regions accept gift cards, especially retailer-specific ones. Recipients may need access to specific platforms or apps, which can be a barrier in less-connected areas.
Risk of Loss
Once lost, physical gift cards may lead to permanent loss of funds if not reported quickly. Unlike bank accounts, there’s limited tracking or recovery support.
Non-Reversible Transactions
Gift card transfers are generally final. Once the card is delivered, the sender has no control. In contrast, some bank transactions can be reversed or halted if caught early.
Conclusion: Impact of Gift Cards on Traditional Transfers
The introduction of gift cards is transforming the landscape of personal and company finance. They provide a quicker, less expensive, and easier-to-access alternative to traditional bank transfers, particularly for minor transactions and international remittances from one country to another.
Gift cards, on the other hand, have restrictions. Although their adoption is still expanding, security must be controlled carefully. Despite this, gift cards are an empowering financial tool for millions of users, particularly those who do not have access to a bank.
Beem makes it easier than ever to support loved ones abroad with instant transfers and no hidden fees. Thanks to its unique ‘Send Now, Pay Later™‘ feature, you can send money right away—even if you’re low on funds—and pay it back later, giving you flexibility when you need it most.
As the digital economy continues to develop, gift cards and bank transfers are likely to coexist in the future. Individuals and businesses will choose between the two based on several factors, including speed, cost, and convenience.
