Are gift cards the antidote to Amazon?

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As Amazon experiments in retail models that remove cash and plastic cards in favor of online and mobile payments, traditional retailers may have an ace up their sleeve: the gift card.

People are changing how they use gift cards, with more emphasis on digital access over plastic cards and "self-gifting," or using gift cards to fund purchases at specific brands, making gift cards more like other prepaid cards. Self-gifting has always been a thing, but it's accelerating.

For Raise, a gift card "buy and sell" marketplace, that's a call to increase its focus on the merchant acquiring side of its business in addition to its core gift card marketplace for consumers to buy and sell unwanted gift cards.

“One challenge is getting retailers and consumers to view gift cards as not just something that’s used for gifting,” said Jay Klauminzer, CEO of the New York-based fintech Raise, which has finished work on new merchant page program to ease access to gift card programs, with the hope that can build a centralized, digital mix of incentive marketing, CRM and other broader merchant acquisition tools.

There's precedent in Starbucks, which built the popularity of its mobile payment system on top of the wild success of its gift card program. There's also a bit of Stripe here, since Raise is supporting the gift card portion of the online and mobile user experience for merchants.

And finally, there's a change in the gift card concept that Raise is honing in on. “Similar to what Starbucks is doing with their loyalty reward program, we’re helping retailers drive more traffic online and in-store via discounted gift cards and our cashback rewards program,” Klauminzer said.

Klauminzer became CEO of Raise in the fall of 2018 following a stint at DoorDash, the on-demand food delivery that used Stripe to streamline its digital transaction technology.

Raise, a six-year-old company, recently passed the $1 billion valuation mark with investors including Accel, Bessemer Venture Partners and Listen Ventures. It has been courting brands to connect directly with consumers who buy gift cards for personal spending. It offers incentives to consumers to lock in their purchases of a specific brand, and an affiliate marketing program.

Raise has also added enhanced merchant pages to tie gift cards deeper into general customer acquisition.

In an age where Amazon is increasing its market foothold on everyday purchases, retailers need to find ways to integrate with innovative technology to attract and retain new customers, Klauminzer said. Raise attempts to do this by supporting purchases of the gift cards on existing point of sale systems.

Raise's merchant partners would not comment for this story by deadline, though Klauminzer said the company has worked with about 500 partners, including, Chipotle, Subway, Macy's Domino's, and Uber, among others. About 170 merchants are on the new merchant page feature.

In addition to the merchant page, Raise, which charges fees based on its agreements with merchants, offers email marketing campaigns, location-based notifications and social acquisition tools to help inform marketing strategies and customer acquisition.

Despite the trends, gift cards are still a tough market—Raise’s own site says 20% of gift cards go unused each year.

“Physical cards are lost, or people forget them until they expire,” said Ron Van Wezel, a senior analyst at Aite. “Redeeming cards online can also be difficult. Electronic gift cards would solve these issues but these are not popular with gifters.”

There are several providers in the market that digitize traditional gift cards, such as Gyft (a unit of First Data), Slide, GoWallet and eGifter, which has added bitcoin support for gift card purchases. Simplifying the gift card management and redemption experience in this way will make the purchasing process much easier for consumers, Van Wezel said.

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Prepaid cards Online payments Mobile payments Amazon