First Data Bulks up in Digital Gift Cards with Its Transaction Wireless Deal

First Data Corp. has added another digital gift card company to its portfolio with the purchase announced Tuesday of Transaction Wireless Inc., a digital gift card distribution company.

The purchase of San Diego-based Transaction Wireless complements First Data’s 2014 deal to buy Gyft, a digital platform that enables consumers buy, send, manage, and redeem gift cards using mobile devices. First Data would not disclose terms of the Transaction Wireless deal, but said it closed June 9.

While the market for physical gift cards is healthy, the future is pointing to digital gift cards, Barry McCarthy, First Data executive vice president of network and security solutions, tells Digital Transactions News. “We are seeing increased demand from consumers who want to access their cards in a digital format,” McCarthy says.

The Transaction Wireless deal gives First Data the ability help merchants sell digital gift cards directly to consumers, and the ability to distribute these cards in bulk for merchants, McCarthy says. “That is the functionality we acquired with Transaction Wireless.”

Enabling the greater use of digital gift cards also is a step in the march toward increasing mobilization or digitization of payments, McCarthy says. “Consumers are increasingly interdependent on technology to drive all of their commerce-enabled decisions,” he says. “Commerce doesn’t work if there is no payment. We see that moving to the digital frontier.”

First Data’s gift card moves could be smart ones, says Ben Jackson, director of the prepaid advisory service at Mercator Advisory Group Inc., a Maynard, Mass.-based payments-consulting firm. “First Data is trying to build out its ability to offer gift card processing and gift card provisioning across all of the different channels,” Jackson tells Digital Transactions News.

Gyft offered mobile prepaid products, but no transaction processing, Jackson says. “Transaction Wireless does a lot more in terms of distribution and the ability to create these cards,” he says. “Now, when First Data goes to a retailer and says we can help you put together a prepaid card program that goes across all channels, they have everything in house to do that.”

That could be an asset for retailers because the gift card market rebounded in 2014, with gift card loads growing 9% over 2013, according to Mercator research.

First Data may even be able to cross-sell its other services, Jackson says, because while some Transaction Wireless customers may have used those services, not all did. “Thus far, First Data has not said they are going to limit that,” Jackson says. “But it does make you wonder if this is an opportunity to get a foot in the door with some other retailers.” First Data could use Transaction Wireless’s existing merchant relationships to recruit merchants that are using no other First Data services.

“This will turn up the competitive heat in a very subtle way, depending on how big the overlap is between the First Data portfolio and the Transaction Wireless portfolio,” Jackson says.