Physical gift cards may want to look over their shoulders, so to speak. Digital gift cards are gaining ground, especially among younger consumers, finds new research from Blackhawk Network Holdings Inc., a Pleasanton, Calif.-based gift card specialist.

Chief among the results is that 41% of Generation Z consumers, generally those born since 1996, and 39% of Millennials, born between 1977 and 1995, purchased e-gift cards at least once every three months. That compares to 26% of Generation X, 1965-1976, and 14% of Boomers, 1946-1964.

To be sure, physical gift cards are still purchased by more people. Fifty-one percent of Gen Z consumers and 47% of Millennials bought a physical gift card at least once every three months, for example.

In what may be good news for merchants, most younger consumers are receptive to using digital gift cards as branded payment tools, Blackhawk says. Of Millennials, 72% used a digital gift card as a payment device, as did 63% of Gen Z consumers.

When it comes to how consumers purchase digital gift cards, 51% of Millennials shop online compared to 46% of Gen X, 42% of Gen Z, and 30% of Boomers.

Still, not all merchants are prepared to sell digital gift cards across all channels. In the “2018 Merchant Gift Card E-Commerce Evaluation” from NAPCO Research, only 51 out of 100 brands offered both digital and physical gift cards across desktop, mobile, and mobile app. Blackhawk sponsored the report.

“As interest in innovative shopping and payment tools continues to grow among younger generations, our findings indicate that the gap between [digital gift cards] and physical cards is quickly closing for Gen Z and Millennial consumers,” Theresa McEndree, Blackhawk vice president of marketing, said in a press release. “We anticipate demand for [digital gift cards] from these generations to continue to rise in the near term. By optimizing their digital gift card solutions, retailers can keep these younger consumers engaged by giving them the digital experience that they crave.”

For the survey, Blackhawk in February canvassed more than 3,300 consumers between 18 and 75 years old.