At last count, there were 16 categories of closed loop prepaid cards, including transit, health care and government. Of all the important functions that these cards provide, it is gifting that is most popular.

The in-store gift card continues to be the darling of this market, and the e-gift card is gaining in acceptance. Designed for a specific store chain or location, the closed loop gift card serves as currency and a mini-billboard for the brand; in effect, the gift card is a multi-functional promotions and sales tool.

Consumer protection reform, embodied in Dodd-Frank, has buoyed the gift card market further. New regulations eliminated dormancy fees and extended expiration dates, among other changes. Essentially, the climate for gift cards has never been cleaner.

Growth has also been driven by the recession, because in a tight economy consumers have a more practical mindset. The National Retail Federation (NFR) recently reported that practicality wins as the most likely reason shoppers will buy gift cards. NRF’s 2011 Holiday Consumer Intentions and Actions survey, conducted by BIGresearch, found that eight in 10 shoppers will give gift cards this year.

According to First Data’s 2011 Prepaid Consumer Insights Study, the average value of closed loop cards grew significantly in 2011, increasing by more than 70 percent compared to 2010, with the total average amount spent on closed loop gift cards increasing to $291, from $161 last year.

Michael Hursta, vice president and category manager, Prepaid Solutions, First Data Corporation, said, “We expect this upward trend to continue in 2012 and beyond.”

We asked a number of prepaid experts for their prognosis about gift cards, and closed loop prepaid in general, and here’s what they forecast: read more