Not that CashStar Inc. needed validation for its bar code-centered virtual gift card network, but along came Apple Inc. with the latest version of the iPhone and its new Passbook feature – a mobile wallet driven by the scanning and loading of bar codes. David Stone, Chief Executive Officer at CashStar, declared the technology giant's decision to throw its considerable mobile market footprint behind bar code payments as a good sign for CashStar and for the digital gifting industry as a whole.
"When CashStar pioneered virtual gift cards, we were very focused on bar codes, rendering that paint on a mag stripe into a bar code," Stone said. "That's how we got started. That's what we thought would be 'it.' Everybody thought we were crazy when we started it and, lo and behold, now arguably the largest company in the world has gone the bar code route."
Passbook enables iPhone 5 users to store and manage digital coupons; boarding passes; event tickets; and loyalty, gift and affinity cards as bar codes. To redeem funds stored in virtual gift cards (called "store cards" by Apple) at the POS, users scan the bar codes as they appear on the iPhone's display. Passbook is also time- and location-enabled, which allows the correct store card to always be top-of-wallet on the iPhone.
Stone characterized Passbook as typically "Apple-esque" – simple and intuitive. For store cards, Apple chose to allow only closed-loop, retailer-specific gift cards. Open-loop, network-branded cards, and credit cards for that matter, are not part of the mix, in part because of consumers' security concerns, according to Stone. "Am I comfortable storing my credit card credentials in a mobile device?" he said. "With a gift card, it's a one-time thing."
Another aspect of mobile payments noticeably absent from the iPhone 5 is near field communication (NFC) technology that facilitates brick-and-mortar proximity payments when smart phones are tapped on NFC-enabled card readers. Stone said the infrastructure for NFC lacks definition: not enough readers are NFC-equipped and no universal standards govern how NFC payments are accepted. On the other hand, bar code technology is "relatively ubiquitous," Stone said.
In many cases, standard bar code readers need to be upgraded to scan smart phone displays because they rely on the reflective characteristics of paper to read bar codes. However, consumers, not to mention merchants, are comfortable with scanning technology, Stone said. "The advantages are multiple," he noted. "I can scan my UPCs [universal product codes] for my inventory. If I want to do coupons, they work. QR codes are easy on the mobile device. It's just not about the hardware."
Passbook represents another change for Apple. Although famously known for its closed and tightly controlled ecosystem of software and mobile applications, Apple allows third-party developers like CashStar to integrate with Passbook via its application protocol interface.
CashStar provides digital gifting solutions for two of the national retailers prominently displayed in Apple's launch of Passbook: Starbucks Coffee Co. and Sephora USA Inc. Stone said about a third of Sephora's stores are set up to handle bar code mobile payments, a timely move given CashStar's recognition that a transition is taking place among consumers. The majority of consumers who receive virtual gift cards from merchants on CashStar's network still print out the bar codes and present them at the POS, Stone said. But that is changing.
"Increasingly we are seeing more and more people open their e-gift cards on their mobile device," Stone added. "At some of our retailers, it's as much as 33 percent. And increasingly, we're seeing redemption occur with a scan of the phone."
Mobile bar code solution provider Scanbuy Inc. published research that showed bar code scanning is escalating. Using the company's ScanLife technology, over 16 million scans were performed in the second quarter of 2012, with June recording the highest recorded scan month ever, with 5.3 million scans, Scanbuy said.
Additional Scanbuy metrics support the increasing role QR code scanning, in particular, is playing in customer engagement via the mobile channel. Fifty percent of companies surveyed by Scanbuy in July 2012 said they are using QR codes to encourage engagement, compared with 35 percent who are employing mobile apps and 26 percent using text messaging for that purpose. Of those businesses using QR codes, 47 percent started using QR codes in 2012 – "a dramatic increase from just 8 percent a year ago," Scanbuy said.
The role of digital gifting in the bar code paradigm is clear to Stone. "Passbook confirmed this – that gift cards, or digital gifting, is a catalyst for driving consumers to mobile payments," he said. 
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