Fewer people are carrying gift cards in their wallets these days, but that doesn’t mean that they’re decreasing in popularity. Instead, these cards are increasingly going digital, with the help of new mobile apps that allow people to download their gift cards and access them using email accounts or smart phones. These apps are particularly useful for those who need to keep track of multiple gift cards.

What does all this mean for companies who use gift cards in incentive programs? Digital versions offer easy and fast distribution – even to employees in far-flung locations. Companies are also able to manage gift card funds and offer recipients options not possible with physical gift cards via a single distribution service.

Instant gratification

Digital gift cards can be sent almost immediately to recipients, who can turn around and use them just as fast using email, smartphones or by adding them to their “mobile wallets.” The latter use a technology involving near-field communication (NFC) chips to transmit payment information, so that when a customer is ready to pay for a purchase, they simply open an app on a mobile device.

Digital gift cards are also easy to register and nearly impossible to lose – an attribute that’s especially appealing to millennials (ages 18-29), whose propensity for losing gift cards is about double that of older adults, according to bankrate.com.1

Fewer lost gift cards means less “breakage” – value that goes unused – and often, more profits for retailers, since customers frequently purchase more than the value of the gift card. Retailers also appreciate being able to avoid customer service issues arising from lost cards. Finally, they are able to boost brand loyalty by pairing their digital gift cards with existing or enhanced loyalty programs.

Still small, but growing fast

The potential for digital gift card use is large, but they comprise only a small segment of the $85+ billion gift card market – approximately seven percent, by some estimates. Still, annual surveys by bankrate.com have found a steady rise in the number of retailers offering digital versions of their gift cards, with the rate currently at 59 percent (up from 18 percent in 2010).

Experts predict that the physical-to-digital shift will continue and accelerate, powered by millennials, who embrace all things digital in much larger numbers than older consumers. A survey1 commissioned by Bankrate.com and compiled by Princeton Survey Research Associates International found 14 percent of millennials have given or received an e-gift card, compared with only 7 percent of consumers ages 30 to 49 and only 6 percent of consumers ages 50 to 64. Less than one percentage of consumers 65+ sent or received mobile gift cards.

Not all digital gift cards are the same. They are available in several different forms. E-cards can be purchased online and delivered right to an inbox. Virtual cards are purchased online, or with a smartphone, and are sent to the recipient via email, text message, app or even Facebook.

Digital gift cards can be distributed with the click of a mouse. As workplace safety awards, they can be personalized with a customized design, message, images or even a video.  Some can only be used online, others can be redeemed in brick-and-mortar stores as well.

Apps and services

Microsoft's digital gift card app has some typical features. It allows the giver to: select a gift by occasion and interests; include a personal note and schedule a specific delivery date. A History feature enables recipients to track and manage their gift usage. 

Companies that want to include digital gift cards in their incentive programs can use services that allow them to designate who gets to send the rewards and who will receive them. They can also manage the reward fund, include their brand and a personal message in the notification emails and receive detailed reports on user activity. The notification emails will contain instructions if the recipient is required to go to a link or enter a verification code to redeem their digital gift card.

Interesting options include the ability to redeem the reward among a number of merchants and to donate it to a nonprofit organization.

Free of fraud

As with any new technology, growing pains have come with digital gift cards. Problems have occurred when email notifications ended up in spam folders or did not arrive at all due to an error in an email address. Some issuing companies’ terms and conditions state that digital gift cards cannot be rescinded once they’re redeemed, which leaves no recourse if the wrong person receives the email notification (i.e., due to an incorrect email address) and redeems it.

On the flip side, digital gift cards are considered more secure than their physical counterparts and are nearly immune to fraudulent activities. Would-be thieves can’t tamper with their packaging or steal blank ones from a rack in a store. Losing your wallet won’t result in the loss of your digital gift card (although the same cannot be said of your cash, credit cards and pieces of identification). Even if your smartphone gets stolen, your egift cards are inaccessible as long as your phone and apps are password protected.

Whether or not companies choose to use digital gift cards, they should keep OSHA’s recommendations in mind when designing their safety incentive programs. In the agency’s guidance for Voluntary Protection Programs (VPPs), OSHA recommends that companies accentuate the positive by encouraging or rewarding workers for reporting injuries, illness, near-misses or hazards.

“Such an incentive program can be a good thing,” said OSHA chief Dr. David Michaels.2

OSHA discourages incentive programs that focus on injury and illness numbers because the agency says they tend to make workers reluctant to report injuries and illnesses.

1. www.bankrate.com/finance/credit-cards/best-gift-cards-for-every-age.aspx

2. www.osha.gov/dcsp/vpp/policy_memo5.html