eBay Gift Cards Going Digital: PayPal Integration

With holiday season around the corner shoppers may already be figuring whom to gift and what to gift. According to BHN research, last year an average shopper spent over $155 on gift cards during the holiday season.

Earlier this month, in a move which took shoppers by surprise eBay announced that it would be pulling off their gift cards from retail locations. According to eBay, it was a business decision to pull off the gift cards off the shelf but they would be available online ( eBay had first launched this service back in 2007 through a collaboration with Blackhawk network which is a subsidiary of Safeway and is a leading prepaid payment network that distributes gift cards, prepaid telecom products, etc. In order to redeem the gift cards consumers had to link their PayPal account with their bank account or a credit card.

On October 23, 2013 through a press release Blackhawk Network announced that they would collaborate with PayPal to bring gift card services to the digital wallet. What this collaboration would mean for a user is he/she can buy a gift card through PayPal app and redeem the gift card within the app. The solution is planned to go live in the first half of 2014. Once live, the solution would also let users to reload gift cards from the app and check balances, according to claims made by PayPal.

Through their partnership Blackhawk Network and PayPal also claim to address some of the biggest consumer paints around Gift Cards:

· Ensuring gift cards are always available at their fingertips

· Providing easy ways to check balances

· Ability to simply purchase and reload cards

Speaking about the collaboration with PayPal, Talbott Roche, President, Blackhawk Network says, By allowing millions of PayPal account holders to more easily purchase, spend and reload their gift cards, we will not only improve the consumer experience with gift cards, but we will help drive increased sales for participating retail brands.' Talking to the media Patrick Gauthier, general manager, PayPal's Emerging Retail Services shared his thoughts on the collaboration Digitizing gift cards is one of the many ways PayPal is connecting consumers and merchants to deliver personalized commerce. This collaboration is another example of PayPal's work with industry leaders, such as Blackhawk Network, as together we continue to bridge the online and in-store worlds of commerce, helping to drive the adoption of digital payments.

LTP View: Though there are a significant number of users who spend on gift cards, research also says that 78% of them ‘leave them behind when they need the most.’ Considering this statistic, it’s quite interesting to note how eBay has moved the gift cards platform from offline to online. Same with PayPal’s move to tie up with Blackhawk Network and integrate gift card shopping and redemption through digital wallet. The move from eBay and PayPal makes business sense as our buying habits have shifted from online to offline. But, still there is a large population of shoppers who are under-banked and would like to buy offline. As the big players making a transition online, we need to see if small players in the gift cards space will capitalize this business opportunity.