Social-networking website Facebook quickly is becoming the next playground for payment companies.
Transaction processor First Data Corp. is behind Cold Stone Creamery’s new Facebook application, which enables consumers to provide recipients a code to use to redeem funds provided as a gift at the ice cream parlor chain’s 1,400 U.S. locations.
First Data believes social networks are the ideal place to help jumpstart a stagnant closed-loop gift card market. “The space hasn’t been very innovative over the last few years,” Chris Wuhrer, First Data vice president of mobile commerce solutions, tells PaymentsSource. “We’re taking a relatively flat category and giving it new legs.”
The Atlanta-based company plans to use “electronic gifting to make giving gift cards more mainstream and help consumers give it more consideration when they pay at the [point of sale] and online,” he says.
Consumers may access the application through Cold Stone’s Facebook fan page or website. The sender can select one or multiple friends to send a gift either by adding them through Facebook or by entering their e-mail addresses.
The sender selects the type of gift, enters a personal message and pays using a credit or debit card. First Data eventually plans to add more payment options, according to Wuhrer.
Recipients receive a Facebook message, e-mail or both to alert them about the gift. The message contains the code and instructions on how to redeem the funds at the point of sale. The service is free for both the sender and recipient.
First Data takes a “small” fee per transaction, a company spokesperson says. The company declined to reveal the exact amount.
The application helps give First Data access to a potential consumer base of several million with which to generate revenue, Wuhrer says. Cold Stone alone has over 600,000 Facebook users who “like” its page, according to the company’s page.
First Data will be careful about which merchant-processing customers it offers the application. Merchants that specialize in offering products that often serve as gifts, such as treats and coffee, are an ideal fit, Wuhrer says.
First Data is not the first payments-industry company to target social networks.
InComm Inc., a Atlanta-based prepaid card provider, in May acquired GroupCard, which has developed a Facebook application that enables consumers to purchase gift cards from a retailer’s Facebook fan page or website (see story).
GroupCard’s application enables multiple consumers to add to a gift card’s value and participate in a “group gift.” First Data’s application lacks that option, but it is one the company is exploring, Wuhrer says.
First Data believes it can leverage the application with other social-networking websites. Though Wuhrer did not mention any by name, he believes location-based social networking sites would make a good fit.
Foursquare is one such site where users “check in” to venues such as restaurants and bars. Users receive points and earn “badges” by completing specific tasks.
Retailers such as Starbucks Corp. are using Foursquare to drive traffic to their locations with discounts for frequent Foursquare users.
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