Two companies are working to make gift cards not only interactive, but almost self-aware.

The problem they face is that retailers' gift cards are easily forgotten by recipients. The eventual solution is to use mobile and location-based technology to provide a steady stream of data and alerts, so that the card can remind its owner when it is near the retailer's store and of the funds remaining on the card.

Kofax Ltd and Blackhawk Network Holdings are taking the first step in this process by overcoming the technology hurdles that prevented consumers from scanning gift cards into a digital wallet as easily as they scan credit and debit cards. Gift cards did not work well with smartphone cameras until recent advancements in mobile technology made it possible to accurately read a gift card's details, said Drew Hyatt, Kofax's senior vice president of mobile applications.

Gift cards are subject to a number of ailments that conventional credit and debit cards don't have. For example, the small printed account numbers on a gift card's back are more easily damaged than the large embossed numbers on a credit card's front.

"It's more than just the resolution of the camera. It's also how they focus on images," he said. The phone's processor speed, video tracking ability and megapixel count all come into play. A six-megapixel smartphone camera can read gift card details with 80% accuracy, a significant improvement from the 60% accuracy experienced with a two-megapixel camera, but generally "we stay away from accuracy percentages because there are way too many variables," he said.

This technology solves the enrollment process, and geolocation is in the works, said Tomás Campos, general manager of digital and emerging products at Blackhawk.

Blackhawk is working with some unidentified retailers this year to test full geolocation capabilities so that shoppers can be alerted when they are near a store associated with a gift card they have in their digital wallet.

Blackhawk is also working to enable retailers to scan gift card codes directly from its mobile app, echoing the process of paying through the Starbucks app, Campos said. The company is also pursuing Near Field Communication, the technology Apple Pay uses for contactless payments.

Blackhawk also offers the ability to connect with retailers using the backend network—asynchronous redemption—where the app would signal the server to tell the retailer which terminal the customer is using to spend the funds on one of its gift cards. "We have the capability to do it direct, but no merchant has agreed to accept it yet," Campos said.

Campos added that Blackhawk is also looking to enhance the redemption data it shares with retailers, especially when a shopper exchanges a gift card from one retailer for a gift card from a competing retail brand.

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