First Data has acquired a San Diego-based digital card distribution firm called Transaction Wireless Inc. (TWI), a company which, paired with First Data's 2014 purchase of Gyft, rounds out the company's gift card strategy.
Although retail chains have always been in love with the idea of gift cards, the product has proven frustrating from a marketing and upsell perspective. It is hard to track the gift card from its purchaser to its end user, especially since the prevalence of online gift card exchanges make it possible for a card to change hands multiple times. The eventual recipient may not even be known by the card's purchaser.
With Gyft and TWI now fully under the control of First Data (the TWI purchase closed last month for an undisclosed price), the processor asserts that it the only vendor able to do follow the trail of a gift card from purchaser to user. But like most matters in payments, it's not quite that simple.
For a retailer to have the full visibility that First Data can provide, its shoppers must use First Data's mobile apps. The idea is for someone to purchase the gift card from within the First Data app and to then use app's functionality to sell or transfer the card to someone else.
The shortcoming is that consumers can always veer away from the app, either by printing out the gift card or sending its details by email.
First Data already offered digital cards through Gyft; the TWI purchase makes it more compelling for retailers and users to stay within the app. TWI enables businesses to purchases and distribute a large number of gift cards, along with customization. That capability replaces an older process of cutting separate deals with different companies, said Mark Murphy, First Data's communications VP.
TWI was launched in 2006 and had a customer list including Lowes, Lands' End, AMC, Boston Market, Domino's, MCX, Overstock and the Cheesecake Factory.
"Once TWI is fully integrated with [First Data], that centralized data will allow for a central dashboard, a hub that the program manager can access to manage and analyze all aspects of a gift program, whether the cards are physical or digital," Murphy said. "This means, for example, that retailers can (better) understand which distribution method is most effective."
First Data also hopes that as gift card sales move to mobile, it will facilitate shoppers' behavioral changes that could create marketing opportunities. The smaller screen size of mobile devices could make it more likely that consumers would be willing to stay within one gift card app, if they like it and trust it.
Barry McCarthy, the First Data EVP for network and security, said as more retailers are trying to offer gift cards online, they are discovering complexities such as needing fulfillment houses to print and distribute plastic cards in the mail. The authentication and security needed to offer fully digital gift cards is another learning curve.
"What we have not had until now was really a complete distribution mechanism for digital cards," McCarthy said.