3 ms·

Oh wow, ok, for curiosity, when I have a Shell Gas Gift Card, or balance in Starbucks app, or walmart or dominos gift card, somehow that money is being held in

• Nbox9 5y ago
  Gift card balances do not have to be held by a bank. If it were held by a bank you’d need to provide ID for purchasing one and there would be more regulation around _gifting_ them. You can’t just _give_ someone a bank account. However, balances held by PayPal or Venmo? Yeah those are backed by a bank.
• h2odragon 5y ago
  you may find this useful: https://whyisthisinteresting.substack.com/p/the-gift-card-economics-edition https://whyisthisinteresting.substack.com/p/the-gift-card-ec...
• sjburt 5y ago
  Yes and no. In your examples, there card has been sold by an individual merchant and there is not an individual account at a bank for your gift card. There is certainly money in Shell's bank, and a liability on Shell's balance sheet labelled "unused gift cards". If Shell were to go bankrupt, it would be quite difficult for you to recover the gift card balance. On the other hand, there are "universal gift cards" that work as a debit card and can be used anywhere (that supports that type of debit card). These would require a bank to hold the balance; when the card is used the money would go from that bank to the merchant's bank.
• tomrod 5y ago
  The term is "brokered deposits" -- Starbucks has a bank backing the app (not sure they publicize which one). But the bank doesn't declare those deposits under their control, can't loan it out, etc.