Gift Cards are Uber’s Secret Weapon

Uber has unveiled its secret weapon for penetrating the American working class and generating some much needed revenue: the humble gift card.

Geeks and upper-income types; such as tech analysts, might snarl at this, but gift cards are a huge business in the United States. Americans spent over $100 billion on gift cards in 2015, GiftCards.com reported.

Around 93% of Americans gave or received a gift card in 2015 and 72% of those people spent more than the value of the card, GiftCards.com also noted. To add icing to the cake online gift card sales were growing at 29% a year.

Uber Gift Cards Coming to a Supermarket near You

Those figures tell us why Uber is planning to sell gift cards directly from its own website and 35,000 retail locations in the United States, as our friends at Tech Crunch reported. Uber’s website says online sales are coming soon.

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Sorry Brits, the first generation Uber gift cards are only available in America, but I imagine they’ll be coming to the United Kingdom soon. Unfortunately the cards are not available for Uber EATS or UberRush (the delivery service) either.

The Uber cards; which do not expire, will come in $25 and $50 versions, according to Tech Crunch. There will also be one you can load with between $15 and $500. An Uber business card that large organizations can provide to employees is also in the works.

Cardholders will use the plastic to pay for any sort of Uber ride. They will be available at some of the biggest names in US retail including Walmart (NYSE: WMT), (the world’s largest retailer), CVS Health (NYSE: CVS) pharmacies and Target (NYSE: TGT). Note: Walmart is the only retailer currently listed on Uber’s website.

How Gift Cards will take Uber to the Masses

Gift cards will help Uber reach working class Americans, many of whom do not go online and don’t use credit cards. Many working class people still prefer to use cash for most transactions which presents a real problem for Uber.

Gift cards solve that because people can buy them with cash in a store. Selling gift cards also helps Uber cater to the 9.6 million households in the United States that do not have bank accounts.

It would also help the company reach the 24.8 million American households that are considered to underbanked by the Federal Deposit Insurance Corporation (FDIC). Underbanked means those people use bank alternatives such as check cashing and money transfers for a significant part of their financial transactions. Surveys also estimate that around 20% of US households lack a credit card.

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The hope is that offering gift cards will make it easier for Uber to market to working-class families. Working families; many of whom have no car or drive an unreliable old beater are the next logical market for Uber. Such people need to get to work, and with the lack of public transit in the United States, they are a huge potential market for Uber.

Another potential market for Uber cards is for parents to buy for children, particularly college students. Grandparents might also buy Uber gift cards for their grandkids. Other heavy users might be bars, which want to keep people from drinking and driving; after all a dead customer does not buy many drinks.

Uber needs to expand its business beyond Millennial hipsters and gift cards can help it do that. Selling the gift cards would also generate significant amounts of revenue and float in itself. The ridesharing service needs all the revenue it can get because Uber lost $1.27 billion during the first six months of 2016.