This year, holiday shoppers can say goodbye to plastic gift card hassles and hello to mobile gift cards.
Mobile gift cards -- the "cooler, more sophisticated and smarter cousin to the gift card," according to one expert -- are simply gift cards consumers can use on their smartphones. They made a big splash in 2011, with retail giant Starbucks leading the way. However, Starbucks isn't the only retailer letting its customers go mobile, and many, many more will likely jump on board in the near future. Why? Convenience.
This past summer, Doug Schneider, president and CEO of San Diego-based Transaction Wireless, sent a mobile gift card to his son to use in New York City, where he happened to be for his birthday. "On his birthday, he's walking down the street in New York and presto -- there's the gift card that shows up on his mobile phone with the personalized text message from me," says Schneider. "He's actually walking down the street and talking to me, and he walks into American Eagle and he's able to use it immediately. Then he calls me back to say, 'Dad, this actually works.'"
How they work
Typically, mobile gift cards are sent via email, Facebook or text. The recipient is notified that he has a gift card, and can take his smartphone into the store and use it immediately. The store clerk simply scans a bar code from the recipient's phone, and the card is applied to the balance.
But the reality is that many retailers aren't physically equipped to make that happen. For that reason, mobile gift cards can be used in three different ways: by directly scanning a bar code on a mobile phone, by printing them out or by inputting the gift card number at a website or point-of-sale terminal.
Many mobile gift card applications only work on iPhones or Android phones at this time, although the Starbucks mobile program can be used by approximately 90% of smartphones currently in use.
Starbucks leads the way in adoption, but isn't alone
Many experts agree that Starbucks has led the way into the strange, new world of mobile gift cards -- and the numbers back up this assessment: "Within nine weeks of the national launch of mobile payment, customers paid more than 3 million times using our mobile payment application in stores and this number continues to grow at a steady rate," says Adam Brotman, senior vice president of digital ventures for Starbucks Coffee Co.
The coffee giant's mobile gift cards can be used like the traditional gift cards via Starbucks for Android, Starbucks Card Mobile App for BlackBerry, iPhone and iPod touch. "To pay, just hold the mobile device in front of a scanner on the countertop and scan the app's on-screen bar code to make a purchase," says Brotman.
Starbucks isn't the only player in the mobile gift card game, however.
Applebee's and California Pizza Kitchen are among those that allow shoppers to send an e-gift card to someone's mobile phone. All that's required is to enter the recipient's phone number when purchasing the card. And retail giant Target debuted its new mobile gift card program on its website, complete with a video on how to order and redeem, combine and share gift cards on your mobile devices.
The future of gift cards
Schneider anticipates that while the evolution of technology, both at point-of-sale and at the mobile level, will take some time, the ultimate goal is to create the right user experience. "The user experience has to be magical in a way to become the big market that we think it can become," says Schneider.
"This will be the first real holiday season of mobile gift cards, and we believe that there will be many consumers who utilize digital gift cards for their shopping," says Chip Fishburne, vice president of mobile commerce for Atlanta-based Firethorn Mobile, creators of Swagg, a gift and rewards card mobile management system. "As adoption grows, merchants will continue to become more comfortable with this payment method. And consumers will continue to be more comfortable using a mobile device to buy and send gift cards."
"The idea of having all of your gift cards in one easy to access location is tremendously appealing to consumers. Couple that with the number of mobile smartphones on the market the number of people who are already connected to one another via their phones, there is opportunity for massive consumer adoption over the next few years," says Todd Ablowitz, president of Double Diamond Group, a payments industry consultancy in Centennial, Colo.
Top 8 mobile gift card benefits we can look forward to
Ditch that plastic. That's right. Those 13 cards in your wallet? All gone. Mobile gift cards are all stored on your mobile phone.
Pitch the punch cards. Many mobile gift cards are -- or will be -- tied into merchants' customer rewards or loyalty programs. No need to carry around physical punch cards. Your wallet is dropping inches by the moment. In fact, you may end up tossing the wallet, too ...
Breakage no more. Breakage -- gift cards that are lost, unused and/or partially redeemed -- is a thing of the past. Mobile gift cards are always with you -- on your cell phone. No more tossing the gift cards in a drawer and forgetting about them.
Convenience and accessibility. "If you've always got your mobile phone with you, and if you've got a mobile gift card with you on that mobile phone, then you've always got that gift card," says Schneider. "It's kind of the new 'don't leave home without it.'"
Personalization perks. "Personalization allows the purchaser to add things like their own text message, their own picture -- and that picture can be easily pulled out of your Facebook albums and loaded up into the digital gift cards. You can also include an audio message or even a video message, if the retailer has set it up that way," says Schneider.
Opt in for special offers. "Your favorite retailers have the opportunity to communicate with you right on your phone," says Adam Weizer, president of ServisTree, a mobile marketing company. "For example, they could have sent a message to you and said, 'I haven't seen you in a while. Come on in,' or 'Happy birthday. Come on in to Adam's Pizza Shop and the pizza's on us.'"
Use it as a budgeting tool. If you know you eat at the same diner four days a week, load your mobile gift card with a specific amount of money for that week, suggests Weizer. Extra bonus: "That now cuts down the hassle of saving those credit card receipts, reconciling them against my credit card statement, and I know how much I've spent," he says.
Security. If all your gift cards are stored in the cloud, there is no risk of losing them or having them stolen. Even if you lose your phone, the thief could not access your gift cards, which are on a password-protected network, says Weizer. "That's the misconception a lot of consumers have, and that's going to change once the devices are being used much more frequently."