Square Shuts Down Digital Gift Card Service (July 1, 2013)
July 1, 2013
Square Inc. is shutting down its digital gift card operation after little more than six months, due to operational difficulties, according to Reuters. Square announced its gift card program in December 2012, touting it as a way for small businesses that lacked a gift card program to instantly enable users to send gift cards in amounts ranging from $10 to $1,000 to anyone using only his email address. Recipients could redeem the gift cards through Square Wallet, Apple Inc.’s Passbook wallet app or by printing out a QR code to show to merchants at the point of sale.
Twitter is abuzz with theories about why Square abruptly ended its gift card program. “Does it mean Square’s struggling to deliver value-added services to merchants beyond credit card processing?” Tweeted Cherian Abraham, mobile commerce and payments lead at Experian Global Consulting. Other observers wondered if fraud was a trigger for Square’s move. But analysts closely watching Square tell Paybefore the startup’s pullout on gift cards is par for the course for the company’s test-and-learn strategy.
Building out a gift card platform can be a challenging prospect in the physical world, let alone through emerging digital channels, according to John Grund, a partner at First Annapolis Consulting. And the climb is even steeper for micro-merchants, Grund tells Paybefore. “Digital [gift cards], for most retailers and especially smaller, local merchants, is highly developmental with very limited adoption at the consumer or merchant level,” he says. And creating a seamless customer experience for digital gift cards is especially tough when platforms lack ubiquity and broad scale, Grund notes. “Digital will be a marathon and not a sprint, so we expect plenty of fits and starts along the way,” he says.
Beyond merely facilitating gift cards for consumer convenience, mobile payments players exploring digital gift cards are looking to craft the right approach to working with merchants, suggests David Schropfer, head of mobile commerce at Luciano Group. “Square, like everyone in this space, is testing many different elements and services related to mobile wallets to see what works best, what changes consumer and merchant behavior, and what has real profit potential,” he tells Paybefore.
