Until recently digital gift cards were relegated to online venues. Today it's possible to use digital gift cards through mobile payment methods, including Apple Pay and Samsung Pay, and to split purchases between digital gift cards and other payment methods. As program managers and customers begin to appreciate the convenience they offer, digital gift card adoption is poised to accelerate.
And as tradition would have it, open loop is following closed loop in the virtual world much the same way as it did when gift certificates migrated to physical plastic in-store and then online. The influence of mobile technology on virtualization has created a measurable growth trajectory within the past six to nine months, according to analyses by CPI Card Group Inc.
"The challenge has been, if you get a virtual Visa card, for instance, in the past you could only use that online, but on top of that many online merchants weren't able to do split tender with two different types of debit products," said Stacy Jensen, Prepaid Product Manager at CPI Card Group. "Let's say you go to Amazon and you have a Visa gift card and a debit card from your bank, and you need both because your gift card is worth only so many dollars."
In situations like this, the customer might have been able to pay using a closed-loop Amazon.com gift card and bank debit card, but not the Visa Inc. gift card. Today the application of multiple tenders in the virtual world is beginning to open up, she noted.
Developing technologies have also made instant in-store redemption a possibility. "When you go into a Target store to buy an iPad, at checkout it might say, 'Purchase this iPad and get a $50 Visa gift card or Target card,'" Jensen said. "It's allowing that online experience of a gift with purchase and issuing a virtual gift instead of sending that physical gift to the consumer."
According to Jensen, virtual gifting is now driving rebate, corporate, employee and direct-to-consumer incentive programs in ways previously unimaginable. Still, users face a learning curve when considering virtual gift choices, and having the option available within a merchant's mobile application is a positive step.
Many financial institutions already vested in EMV (Europay, MasterCard and Visa) implementation have systems in place to offer virtual programs within existing mobile banking apps, giving banks an advantage in the emerging general purpose reloadable (GPR) card segment.
"A card that sees recurring volume and stays in the cardholder's hands for an extended period of time will be where we see that EMV chip adding the most value," said Troy Bernard, EMV and New Technologies Product Director at CPI Card Group. "It's an expense and investment that the issuer has to make in that new technology."
Cards with low value that will be disposed of after one use are probably not the target. Think GPR payroll cards and government-issued benefit cards. The influence of millennials will also shape GPR card programs, including advanced security features necessary to make them viable.
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