Gift cards don't seem like the coolest technology in the payments world, but new and reinvented digital gifting platforms are changing the conversation – by borrowing text-messaging staples like emoji.
Newcomers like Slide, a mobile gift card platform developed by three former American Express execs, have decided to succeed they must develop a platform, not a product. Slide's system provides real-time balance updates and includes a communication system with emoji and other features expected of a modern social messaging app.
"We've seen the power of transactions as social updates, and we think that consumer trend will continue to gain momentum," said Mike Morris, Slide's CEO.
The guys at Slide say their application can work great for parents wanting a bit of control over their kid's spending, couples experimenting with combining their finances or roommates that want to share budgets.
"Sharing also presents a new type of marketing channel for brands to delight and convert their customers by inserting themselves at the right place and time," said Morris. The company is working with several merchants to send offers directly into the shared mobile account. Plus it's also working with merchants to present three or four items from the retailer's online store under the digital gift card so that consumers can shop online.
Retailers are starting to care more and more about unique gifting platforms because they increase both conversion and buying frequency, said Roy Erez, cofounder and CEO of Loop Commerce, during a panel discussion at Money2020 in Las Vegas on Oct. 27. Loop Commerce ties a specific product to an e-gift card, which lessens the chance of return or exchange compared to buying a physical gift, since the recipient gets to customize the gift before it ships. For example, a recipient of a jacket can choose a preferred size and color.
On Loop Commerce, 80% of gifts are redeemed within 24 hours, Erez said.
One of the big problems these providers are trying to solve is the substantial amount of money left unspent on both physical and digital gift cards.
Blackhawk Network's Cardpool is a different kind of social gifting platform. It allows consumers to exchange unwanted e-gift cards for cards they want. Blackhawk then finds a consumer to buy the initial unwanted card so merchants can still benefit from the exchange.
"Gift cards are a retailer's currency," said Patrick Ramsey, Blackhawk's general manager of Cardpool. If the retailer can get their currency into consumers' hands, more than 90% of them will overspend, Ramsey said.
Raise has a similar marketplace platform for gift cards, except it's peer-to-peer. The company has found that the majority of consumers using its site are purchasing the gift cards for their own use, so Raise is now working with retailers to sell their cards directly to the website's users.
"There's a consumer appetite for buying gift cards for personal use at a discount," said Tyler Spalding, chief strategy officer at Raise. About 85% of those buyers redeem either online or in-store within five days, he said.
Earlier this year, Raise worked on a marketing campaign with three separate retailers, sending push notifications or emails about available e-gift cards. About 88% of people had some level of response, and of the people that bought an e-gift, 42% of consumers redeemed it online and 58% of consumers redeemed in-store within 12 days, said Spalding. On top of that, 90% of people paid retail price for their purchases instead of stacking the discounted gift card on top of other sales, and 63% overspent, he said.
The increased popularity of e-gifts can also be linked to the spread of mobile wallets. About 25% of gift card users have mobile wallets now, and a majority of them have gift cards inside, said Monika Kochhar, cofounder and CEO of SmartGift.
With plastic gift cards, recipients were faceless, but as soon as the gift is put on a digital platform, data began rolling in about how each user shops. This customer data can be especially important for small to medium-sized retailers, which is Yiftee's target market.
Donna Novitsky, CEO of Yiftee, says there's a $25 billion untapped local retail and restaurant gift card market. Plus small and medium-sized merchants, of which Yiftee supports 51,000 across the U.S., can get very creative with their marketing of digital gift cards extending the benefit.
"As soon as the merchant has an e-gift card, they think of other ways to use it … for loyalty and customer rewards," Novitsky said.
For example, Pizza My Heart, a restaurant chain in the Bay Area, used its electronic gift product for a marketing campaign tied to football. That campaign led to 10 times more rededmption of offers than traditional coupons, Novitsky said.