Over the past five years, digital gift cards have grown to become a popular choice for all gifting occasions — from birthdays and holidays to graduations, Valentine’s Day, and those “just because” moments. They are easy for consumers to purchase, personalize, send and redeem. Since they are delivered instantly via email and even text messages, gift givers can now literally wait until the last minute and still not miss a gift-worthy moment.

Retailers have embraced the digital gift card, leveraging it as another option for consumers and providing the marketing team with an additional tool to help inspire purchases. However, retailers that view digital gift cards simply as an extension of an existing program are shortsighted. As digital, mobile and social innovations continue to change the way consumers shop, retailers have a big opportunity to use the digital gift card more strategically: As a catalyst for mobile payments.

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The Way To Mobile Payments

Smartphone users already redeem coupons, look up product information and compare prices on their devices. A new report from Parks Associates confirms that they are also doing something that retailers can’t ignore: one-fifth of U.S. smartphone owners, or 40 million Americans, used a mobile wallet in 2013. And the fact that the number is expected to grow 183% to 113 million by 2017 makes it clear that using digital wallets for in-store payments is a natural extension of existing consumer behaviors.

And while financial institutions, credit card companies, mobile carriers and technology companies are fighting about who will eventually own the mobile wallet, there are success stories that illustrate how retailers and brands can benefit from consumers’ willingness to pay with their phones and the role that digital gift cards play as a catalyst for this change in behavior.

Take Starbucks, for example, which was one of the first companies to enable mobile payments. By integrating mobile payments and gift cards, Starbucks allows customers to mobilize and easily reload their plastic cards or purchase new digital gift cards. This has provided an easy way for consumers to pay for their purchases, redeem offers and earn and redeem rewards. This strategy is massively successful, with more than 10 million people now using the Starbucks mobile app. Today, mobile and gift card payments represent 30% of the company’s total U.S. payments.

A number of other brands are enabling their gifting programs to integrate with Passbook due to the fact that nearly one third of all eGift cards sent today are opened on a mobile device. Of those, nearly three quarters are on an iOS 6 or iOS 7 device running Passbook. Of those consumers presented with the option to add their gift card to Passbook in 2013, an average of 34% are doing so. Within certain sectors, such as beauty and electronics, that number is as high as 40%.

What are those tens of thousands of consumers with their eGift cards in Passbook doing every day? They are making mobile payments. Because consumers always have their phones with them, the retailers integrated with Passbook are seeing consumers spend their gift cards more quickly.

Shifting Mindsets From Tactics To Strategy

To be successful in using digital gift cards as catalysts to mobile payments, retailers need to shift their mindset and begin viewing gift cards as strategic tools in their marketing arsenal.

Some things to consider:

It’s clear that those retailers tying their eGift programs to mobile wallets are setting the pace when it comes to driving mobile payments adoption, but other retailers that adopt a strategic approach now can start to catch up and become leaders within their category. By thinking beyond gifts and eliminating traditional organizational silos to unite all stored value instruments together for an integrated customer experience, retailers can drive mobile payments, influence purchase decisions, and build more valuable and enduring relationships.


Ben Kaplan is President and CEO of CashStar. He brings 20 years of experience to CashStar in senior operations, marketing, and product roles at software, e-Commerce, loyalty marketing and payments companies. Most recently, he was Chief Operating Officer at Cartera Commerce, a leading provider of card-linked marketing solutions for merchants, banks, and loyalty programs. At Cartera, Kaplan oversaw sales, marketing, client services, engineering, professional services, and technical operations. Prior to Cartera, Kaplan was Vice President of Marketing for KNOVA Software and Vice President of Marketing for North Systems, directing marketing and product management at both companies. Earlier in his career, he held product marketing and product management positions at Broadbase and Commerce One.