Blockchain based gift cards could fundamentally change the industry

Print

Email

Blockchain technology which supports Bitcoin currency has become popular in recent times. Many financial service providers are researching on potential usage of this technology for settlement of publicly traded financial instruments, elimination of friction in international trade, and as contract authentication or document identification.

Gift cards are becoming popular gifting options across the globe both for developed and emerging markets. However, 95% of small businesses which have POS systems in place lack gift card options. There are three major reasons behind it. Firstly, cost factor associated with gift cards makes it an expensive choice for small businesses. Secondly, this segment is riddled with fraudulent cases. Currently, the system lacks security and 12 to 16 digit code on gift card can be used by the processor retailer or any other intermediate party before reaching the actual recipient. Thirdly, the system is riddled with counterfeiting, skimming of numbers, leakage and theft by employees.

According to National Retail Foundation, 78% retailers have been subjected to gift card fraud. Blockchain technology can aid towards making this segment more secure, flexible and cost effective. Securing this system with blockchain technology is likely to draw in new set of merchants and consumers and lead to increasedgrowth of gift cards.Online gift card platform Gyft, owned by First Data is one of the first companies to offer this solution.

The company announced partnership with blockchain based infrastructure provider Chain to run blockchain based gift card system last year. New program Gyft Black is targeted at small businesses. It is first of its kind as the program will be based on blockchain but will not be a Bitcoin initiative. It is cost effective in comparison to plastic cards which costs approximately USD 1.50 per card, based on a 2.5% charge along with 20-cent bank card transaction fee. Initially, the program will focus on virtual gift cards only followed by physical cards in coming years.

Among other initiatives, earlier this year Visa started experimenting with blockchain technology. The company plans to include it in its products related to debit, credit, mobile, prepaid and fund transfers.

The major advantage of blockchain technology both at consumer and retailer end is flexibility. Reward points, gift card and vouchers, all will be linked together. Moreover, gift card exchange at digital marketplace is expected to become convenient.

To know more and gain deeper understanding of how prepaid gift card industry is shaping up globally, click here.