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Retailers Allow Their Gift Cards to Be Spent Elsewhere

Mercator Advisory Group by Mercator Advisory Group
January 4, 2012
in Analysts Coverage
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Openbucks Corp. has created a system allowing closed-loop gift card holders to spend the balance on their cards at merchants other than the issuer. The company says that it can provide increased value to the cardholders by giving them more options and to the issuers by driving incremental sales. So far, Subway, CVS, Sports Authority, and several other companies have signed on to let Openbucks facilitate redemption at other merchants. Openbucks primarily facilitates redemption at online gaming sites, but is in discussions with other types of online shopping sites to allow gift cards from other merchants be redeemed for hard goods as well.

Initially, Openbucks promoted the service to consumers without credit cards looking to participate in gaming online. For example, they could use cash to purchase a Subway gift card and use it to buy sandwiches then go online and use the card to participate in games. The program has created significant incremental sales for Subway to date. According to Rochman, consumers who purchase an Openbucks card at Subway will use approximately 18% of the investment for Subway purchases.

So far, the company has not run into competitive issues, and the product is sufficiently new that it has not encountered fraud or money laundering problems. Openbucks has told Mercator that retailers can opt out of particular redemption partners and that the company has an anti-money laundering program in place. It says that its system allows people without bank accounts and credit cards, including teenagers, and those who do not want to use a credit or debit card online, to make purchases with an easily accessible card.

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