Gift cards now come loaded with features

Business Standard, October 23, 2016

You received a gift card worth Rs 5,000 for Diwali last year, but could spend only Rs 4,500 because the brand was not to your liking. The card is no longer valid. While you did not lose money, inability to use the gift amount can rankle. Now, you can trade or sell gift cards that you have no use for, provided they are still valid. “On an average, there is a breakage (the unused amount) of three to four per cent on prepaid cards such as gift cards because these cannot be reloaded.

This happens because sometimes the article you want to buy may fall short of the card limit. In some cases, the retailer may be unwilling to swipe the card below a certain amount. In such a case, too, you cannot use the card,” said Ramki Gaddipati, co-founder of Zeta, a company that offers online employee-benefit solutions. Because of this problem with closed-end gift cards, a number of merchants are now doing co-branded prepaid/gift cards with other merchants, so the closed loop card can be used at more outlets, said Deepak Chandnani, chief executive officer, Worldline South Asia and Middle East, a payments-processing firm. Sell partly used or unused cards Earlier, if you received a gift card you didn’t want to use, you would pass it on as a gift or sell it to someone else at a discount.

While this was informal, there is now an online platform to do it. Qwickcilver, a gift card technology and end-to-end prepaid solutions company, has launched Woohoo, a gift card secondary market exchange, the only one so far. This allows consumers to convert their unused or partially-used gift cards to cash by listing these at a price of their choice on the Woohoo gifting app. How it works: You list your card and mention the price you want. Once verified, you need to give your bank account number and IFSC code. The money is transferred into your account once the card is sold. Usually, it takes two three working days. There is no rule on the discount you must list the card. Usually sellers list their cards at 5-10 per cent of the discount. There is no fee for listing, but once the card is sold Qwickcilver gets 10 per cent of the amount as fee. “One reason customers may want to sell their card is if that particular brand is not to their liking. For instance, I have a gift card for Rs 5,000 from a jewellery brand and I don’t want to buy jewellery. I can sell my card before the validity expires and make some money. Or I get a travel card worth Rs 10,000 as wedding gift and I use Rs 6,000 for buying tickets. If I have no use for the remaining Rs 4,000, I can sell it . The person buying it can use it and get a discount on hotel or ticket bookings,” said Pratap T P, co-founder, Qwikcilver. While the seller can list physical cards, the buyer gets only the digital format of the card. So, there is no need to physically send the card. The security is the code on the card, sent to the mobile number and email ID of the buyer. Only gift cards for brands that are managed by Qwickcilver can be listed but this is about 90 per cent of the gift cards issued, Pratap added. Choose your card Zeta offers a digital product that allows receivers to select a gift card of their choice.

The receiver gets an email and a PIN, which shows the value of the card and the several brands available. So, if the value is Rs 5,000, you can use Rs 3,000 on Amazon and the rest on another website or even at an offline store. To use digital cards at stores you have to first generate a voucher and share that code at the store’s point-of-sales. “The giver can also select a list of stores that you want to offer the card for, say, only book stores or only apparel stores,” says Gaddipati of Zeta. Open-ended vs closed-end For ItzCash, a leader in prepaid cards, 20-25 per cent of the entire year’s volumes comes in the 45 days during Diwali, says Bhavik Vasa its chief growth officer. “This year digital cards are the flavour. While we offer gift cards of individual retail houses, we find the open-ended gift cards powered by Visa are more popular,” he says. ItzCash’s digital cards can be used only online but there is no restriction on the kind of transaction they can be used for. They can be used for booking tickets or making purchases. The Visa-powered gift card can be used in any store and both offline and online. However, they cannot be used at an ATM or be reloaded, as the purpose is gifting. The maximum amount that can be loaded is 50,000, which is the limit permitted for pre-paid instruments by the Reserve Bank of India.  “While we do offer gift cards for specific brands, we are seeing the shift towards the open-ended cards,” says Vasa.

Merchants also issue their own gift cards, which are closed-loop and can be used only at their own stores. But they run loyalty programmes through these and it is easier to do a chargeback by putting the refunded amount into the prepaid card, says Chandnani. “Since these are not PIN-based prepaid instruments, ensure that the card does not fall into the wrong hands,” he adds. A lot of the closed-end cards are similar to gift vouchers and hence cannot be used after the expiry date. Some of these also specify the products can be that bought or not on the particular voucher, says Vinay Bhatia, head – analytics & loyalty, Future Group. “Most retailers in India do not give the option of redeeming the card/voucher in parts,” he adds.