CardBreakageCardbreakage

Gift cards

Closed-loop gift card programs

Retail, restaurant, and franchise programs where years of issuance have accumulated into a liability nobody has re-modeled since launch.

What drives breakage here

The behavior specific to this program type

Denomination behavior

Low-denomination cards break at materially different rates than high-value and corporate bulk loads. A blended rate averages away the difference.

Partial-balance residue

Small remainders left after redemption almost never come back, and they aggregate into a persistent, highly predictable breakage layer.

Channel mix

Third-party mall and grocery distribution behaves differently from in-store and e-gift issuance, both in timing and in terminal redemption.

Seasonal issuance spikes

Holiday cohorts dominate volume and distort portfolio-wide averages when they are not isolated by vintage.

How we analyze it

Our approach for this structure

Every step is built from your own history and reconciled to your reported position.

  1. 01Extract issuance and redemption history at transaction level, keyed to card activation date.
  2. 02Group activations into monthly cohorts and segment by denomination band and distribution channel.
  3. 03Construct empirical redemption curves per segment and identify where decay flattens.
  4. 04Extrapolate each curve to a terminal state and derive segment-level breakage rates.
  5. 05Weight segment rates by outstanding balance to produce the portfolio position with sensitivity bands.
  6. 06Test aged, inactive balances against dormancy characteristics for potential escheatment exposure.

Signals

When an audit is worth running

A rate you inherited

The current breakage assumption predates the current program and cannot be traced to its derivation.

Aged balances growing

The share of outstanding value older than 24 months keeps rising year over year.

Audit questions

Your auditors have started asking how the breakage estimate is supported.

Engagement

Run your breakage audit

A confidential, analyst-led review of your stored-value liability — expected breakage, redemption behavior, and escheatment exposure quantified against your own data.

No engagement commitment required. Scope is confirmed before work begins.

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