Hoping to take advantage of what it says is a growing popularity of ‘virtual’ gift cards that use card numbers but no plastic, gift card processor TenderCard is offering independent sales organizations the ability to sell merchants Giftango Corp.’s virtual gift card system.
Based on Giftango’s internal research, more than 70% of consumers choose to purchase a virtual gift card from merchants offering that option.
“We believe this a very likely avenue that the gift card industry is going down in the upcoming years,” TenderCard spokesperson Michael Petrone tells PaymentsSource.
The East Falmouth, Mass.-based gift card processor has more than 1,000 ISO relationships representing more than 50,000 small to midsize merchants. TenderCard is in the process of working with some ISOs to launch the system with merchants in the coming weeks, according to Sandy Sullivan, company support manager.
“This kind of product is going to work best for merchants that have a strong Web site presence” because they can promote the virtual cards there, she says.
Consumers can purchase the gift cards at a participating merchant’s Web site. Those who purchase a virtual, closed-loop card have two options to redeem its value. After receiving an e-mail with a link to access the “card,” a consumer can print the card information and take it to a merchant. Consumers also may access the card information from a mobile phone’s Web browser.
The majority of retailers do not charge a fee for a gift card, but some will charge a convenience fee to have the card information e-mailed, Fletcher says, suggesting the fee could be $1.50.
Merchants deduct the funds by entering the gift card’s number or by scanning the bar code included with the card information at the point of sale.
Merchants with an image scanner attached to a POS system should be able to scan the bar code displayed on a smartphone, according to Mike Fletcher, Giftango chief marketing officer. “We make sure the card can be displayed properly” on all smartphone platforms, he says.
Though the majority of consumers print the virtual cards, Giftango views the printed card as a bridge to more mobile use in the future. Consumers generally use the cards once, but there is a reload option, according to Fletcher. The majority of merchants do not charge a reload fee.
Certain merchant categories such as coffee shops would benefit from card reloads, and consumers would want to use the card on a mobile phone because of the convenience, Fletcher contends. Giftango is in the process of putting more emphasis on the mobile aspect because it believes that is the best delivery method, “but we still need to deliver a solid printed version.”
Founded in 2005, Giftango develops software for the virtual gift card system that the card processor integrates with its system. Under the TenderCard deal, TenderCard’s system holds the account funds. “What we do is add power to [TenderCard’s] existing gift card program,” Fletcher says. “All we are doing is delivering the gift card number in a different way.”
A virtual gift card system may save a merchant from $2 to $4 per card based on the expenses associated with a plastic card. Those costs include the cost of a plastic card (approximately 35 cents), shipping and employee time, Fletcher says.
At the moment, Giftango has 20 “large” merchants using its virtual gift card system, but Fletcher declined to give names. Some of those relationships merchant processors, such as Chase Paymentech Solutions LLC, forged through agreements with their customers.
Significant midsize merchants include Springfield, Mo.-based Andy’s Frozen Custard and Portland, Ore.-based hotel chain Shilo International.
Though no independent industry data support the notion virtual gift cards are on the rise, at least two other companies are turning their attention to the space.
In December, Blackhawk Network announced it would sell virtual gift cards from Bass Pro Shops, Sears Holding Corp. and J.C. Penney Co. Inc. (
The main difference between CashStar and Giftango is that Giftango has a “turnkey” option that enables it to set up a small merchant in a couple of days for a $300 start-up fee, Fletcher says. CashStar does not have such an option, the company says.
