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Bank Opportunity #307: Online/Mobile Gift Cards

By Jim Bruene on December 13, 2013 9:37 AM | Comments

imageRegardless of the form factor, a favorite holiday gift is money. Some people like to give crisp 20s, the hand-written check still has a certain charm (as long as the recipient has mobile deposit capture), but the biggest growth area has been the plastic gift card (note 1).

Banks should have owned this trend, at least in the United States. Those 100,000 branches would have been good distribution points (note 2), a place that you trust far more than the express checkout lane at Safeway. But alas, that ship has sailed.

The good news? Financial institutions still have an opportunity to be major players in digital gift car distribution, especially mobile. Here's why:

  • Purchase time is reduced to seconds, since you already know the customer
  • Customers trust you to deliver a valid gift card, and if there is a problem, it's relatively easy to find someone to help them
  • Buyers are already logged in to your site; it's super easy to get a promo in front of them
  • Funding the card has almost zero cost with "on-us" funds transfers
  • You can sell a mix of real and/or electronic (see note 3) store cards, prepaid/reloadable Visa/MasterCard/Amex
  • You can save previous info (recipient name, address, birthday, etc.) so customers can purchase again and again with a single click
  • Knowing the user's location and spending patterns, you could deliver targeted card offers
  • Electronic cards can be stored in the bank's mobile wallet and used at the POS

A gift card program is not without costs and risks. But you can choose to outsource most of that by working with third-parties such as the Blackhawk Network (see 2012 Finovate demo; Gift Card Mall screenshot below), CardLab (screenshot below), or others.

Bonus #1: For extra credit, you could get into the gift card exchange game, facilitating the buying and selling of preloaded cards. While a unique and potentially valuable service, it has more customer education, service, and fraud issues. See CardPool screenshot below. 

Bonus #2: Distribute thin gift cards through ATMs, see Better ATM Services (FinovateSpring 2013 demo).

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CardLab offers hundreds of gift card choices at GiftCard.com (13 Dec 2013)
Note: "Design your own" option mid-page

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Blackhawk's GiftCardMall.com

image

 

Cardpool gift card exchange for buying and selling

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Notes:
1. See our July OBR report on prepaid card opportunities (subscription) for more info.
2. Though labor costs would have killed profitability, unless branches invested in POS technology to automate the checkout process    
3. GiftCard.com offers the option of printing out a facsimile of an e-card to wrap up for a real-world gift.
4. See our September OBR report (subscription) for another 499 bank opportunities.

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