At FinovateSpring 2011, Plastic Jungle Inc. and ChargeSmart Inc. demonstrated a new solution that allows consumers to use unredeemed gift cards to make utility, car, mortgage and student loan payments, with up to 92 percent of gift card value going toward paying those bills. The service, which is scheduled for commercial availability by the end of the second quarter of 2011, integrates Plastic Jungle's gift card exchange platform with ChargeSmart's online bill pay portal.
Most U.S. consumers have gift cards they are not planning to use, according to Bruce Bower, Chief Executive Officer at Plastic Jungle. "It's a perfect opportunity to tap that liquidity for something that has real practical value for you – paying for your everyday expenses," he said.
Plastic Jungle puts the secondary gift card market – where unused, discarded or disregarded gift cards are bought, sold and traded – at $30 billion. Bower said U.S. households have on average $300 in unused gift cards lying around.
"But that's an average," he added. "There are households who have thousands of dollars of gift cards lying around." As an example Bower gave teachers who might have more than that average, as they are frequently rewarded by the parents of their students with gift cards that go unused – money that can go to paying off debts.
"And it allows them to say, 'Well, listen, if you have this available to you, why not use it here?'" Bower said. "It's something that's sitting idle and you can't just quite get value out of them. You can use it. It has immediate value to you and what could be more valuable than paying your electric bill?"
Bower said the idea originated from calls Plastic Jungle received from customers who were selling gift cards and wanted to speed up transactions. When Plastic Jungle representatives asked why, consumers routinely answered that they needed the money to pay off monthly utility bills, Bower noted. Plastic Jungle then took this new use-case for its gift card exchange to ChargeSmart.
"It allows us to take the value proposition that Plastic Jungle represents and push into a context where it has an immediate value right then," Bower said. "So the impact value of that is extremely high. Not that it isn't high when people come to our website, but when you're fixed with paying a bill or … even if it's not an issue – I've got plenty of money in my bank account, but boy I would like to pay out of my sock drawer."
Since SellingPrepaid profiled Plastic Jungle ("King of the 'plastic' jungle," SellingPrepaid E-Magazine, issue Aug. 31, 2010, 10:08:B), the company reported gift card value sold on its website in 2010 has exceeded $10 million, a five-fold increase over 2009. Comparing holiday season gift card sales volume, Plastic Jungle saw a six-fold increase in 2010 over 2009. Additionally, the gift card exchange said registered users of its site nearly doubled in the fourth quarter of 2010.
A hurdle Plastic Jungle had to overcome was the perception by some retailers that the gift card exchange was unfairly profiting from their private-label gift cards. But a Plastic Jungle survey released in May 2011 concluded that merchants are increasingly recognizing the benefits of the secondary gift card market: greater brand awareness and favorability, as well as an increase in consumer spending. The new bill pay feature will only extend that positivity, Bower said.
"What we've found is the consumer actually has a net very positive impression about that brand after they've found that they can use [the gift card] for something else," Bower noted. "The reason is that they attribute that mechanism to the brand and they say, using Macy's as an example, 'Hey, Macy's is allowing me to trade this out and to take care of something.'"
Bower also pointed out that it will resell the gift cards traded in to pay bills, just as it does with all the other gift cards it processes on its exchange. Thus, branded gift cards sold at a discount on the Plastic Jungle platform settle in the hands of people eager to shop at those brands.
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