Gift Cards, Having Gone Virtual, Now Are Going Mobile

First gift cards went virtual, and now they’re going mobile. Portland, Ore.-based Giftango Corp. introduced on Wednesday a software developer’s toolkit that mobile developers can use to let users receive gift cards while staying within a mobile application.

Giftango, which manages both plastic and virtual gift cards for merchants and incentive companies, says the new SDK is the first of its kind and meets a growing need among companies that create apps for smart phones. “We get called [by developers] a lot, which is why we developed this,” says Mike Fletcher, vice president of marketing.

Also on Wednesday, Firethorn Holdings LLC, a vendor of mobile-banking software and a unit of Qualcomm Inc., announced that 1-800-Flowers.com has adopted its SWAGG application, which lets mobile users buy, receive, and exchange merchant gift cards. Firethorn expects to introduce SWAGG before the 2010 holiday season starts to heat up. And earlier this year, Starbucks Coffee Co. expanded a virtual gift card application to outlets in more than 1,000 Target Corp. stores. The Starbucks card app relies on 2-D bar codes generated on smart phones for redemption.

Giftango’s developer platform could have a major impact on the young but fast-growing market for virtual gift cards, which are “cards” that consumers receive via e-mail or through an app on their handsets. Giftango this summer signed gift card deals with eight incentive and loyalty companies, which in turn bolstered its ability to sign up some 36 major retail brands, including JC Penney, REI, Nike, and Zappos. National brands are attracted to Giftango’s ability to aggregate the traffic of multiple incentive houses, says Fletcher. Indeed, incentives and promotions are “the primary area for virtual gifting right now,” says Tim Sloane, director of the prepaid advisory service at Mercator Advisory Group, Maynard, Mass.

Now, with the new SDK, app developers will be able to offer virtual cards as incentives without forcing the user to leave the app. “What [it] does is enable, say, a game provider to bake right into their game that if you get a million points, you can send a $25 gift card to anyone you want, and you don’t have to leave the game,” says Sloane. “That’s important to the supplier of the game, they don’t want you to leave their game.”

One developer that has adopted the Giftango platform is Wildcard Network Inc., which creates phone and virtual gift cards apps for the iPhone. Fletcher says there are “ a handful of others” but will not name them.

Consumers receive virtual cards on their computers via e-mail or on their handsets via text messaging or an app. To use the cards at physical stores, they can print out the e-mail and take it with them or show the cashier the card’s data as displayed on their handset screen. Virtual cards appeal to merchants because they cut inventory and fulfillment costs and get incentives into the hands of consumers immediately. Fletcher says Giftango’s fee to deliver a virtual card ranges from $1 to $5, whereas the issuer’s cost for a plastic card can run from $5 to $12, depending on method of delivery.

Instantaneous issuance also appeals to consumers. Given a choice of plastic or virtual cards, some 74% of consumers are choosing virtual, says Giftango’s Fletcher. Virtual cards “still represent a very small percentage of overall [gift card] sales, less than double digits by quite a bit, but it’s growing,” notes Sloane.

Founded five years ago, Giftango began with a tool for online merchants that lets them sell gift cards from their sites. The company has links with nine processors and maintains real-time balances on all of its cards. It has sold virtual cards from the start, and now, says Fletcher, the time is right for mobile. “The mobile component is evolving,” he says. With the new SDK, “we’re developing a foundation” for developers to do creative things, he adds.