That unspent gift card might have new life somewhere else
Do you have a Subway or Sports Authority gift card going unused because you don't eat foot-long subs or need new golf clubs?
Openbucks may be able to help. The startup gift card payment company is building a network of retail brands that allow consumers to use their gift cards as payment for online games and at unrelated e-commerce sites. Participating issuers in Las Vegas include Subway, Sports Authority, CVS drugstores and Circle K convenience stores.
Consumers may use their cards to shop online at some 500 locations, and the company wants to expand options to 2,000 sites.
"We've created Openbucks to provide consumers with a simple and safe way to pay online, similar to cash in a brick-and-mortar world," said March Rochman, CEO and founder of Redwood City, Calif.-based Openbucks.
The new payment network arrives when 25 percent of U.S. households and many teenagers have little or no access to credit cards, and many consumers are cautious about giving out financial information.
"We're aiming to give these people a frictionless way to purchase online," Rochman said.
An online shopper buying shoes, for example, could pay by entering the face and personal identification numbers of a sandwich shop card. But if the shoes cost $39.95, you need to have $39.95 on your card at the point of purchase.
Openbucks processes the transaction, charging the merchant who accepts the card a percentage of the sale. The card issuing merchant gets a cut, too, Rochman said. He declined to say how much Openbucks charges for its services, but stressed that the consumer doesn't lose a penny in the deal.
He said card-issuing merchants might not see the full face value of the card coming back their way in sales, but they should benefit from increased foot traffic as more customers come to their stores to buy cards and reload accounts.
It's also a way for retailers to get consumers to use "breakage," or the value left unused in gift card accounts.
"Retailers sell products and gift cards to make money, not to not make money," he said. "A gift card with value remaining is not what (they) want. This is a good thing for retailers."
Rochman said Openbucks is also different from prepaid Visa cards that charge consumers fees to open an account, check their balance, refill their cards and pay fees on transactions such as ATM withdrawals.
"The ones who can least afford it pay the most when it comes to fees," he said. "A $20 gift card should be worth $20."
Openbucks recently added Bigpoint to its list of online game sites that let game players pay for digital or virtual goods with gift cards. Bigpoint games include Battlestar Galactica online, Farmerama and Dark Orbit.
"Virtual goods purchases are projected to reach $10 billion by 2014, so we believe the gaming market is a great place to start," Openbucks President and co-founder Itamar Kandel said.
Openbucks' current merchants have a combined 100,000 locations, and since the company's launch in September consumers have conducted thousands of transactions, he said.
By June, Openbucks plans to add mobile functions. Rochman said the company plans to limit card-issuer participation to avoid confusion and to make the product easy for the consumer.
Contact reporter Chris Sieroty at
csieroty@reviewjournal.com or 702-477-3893.
