Start-Up Launches Network to Enable Closed-Loop Gift Cards Pay for Online Goods

by Mercator Advisory Group 0

Openbucks aims to let shoppers use closed-loop gift cards from major retailers to pay for games and other online games and stores. The company made its announcement on Sept. 13 at a technology conference.

Today, during TechCrunch Disrupt, Openbucks ( www.openbucks.com ) is launching the Gift Card Payment Network. For the first time ever, consumers can use gift cards from trusted retail brands, such as Subway, Circle K, CITGO, Hess, and Sports Authority, as payment for online games and at ecommerce sites. Openbucks turns gift cards into a convenient online purchasing and payment method and is ideal for people who do not have a credit card or prefer not to use them when paying online.

The idea is an interesting one for retailers and shoppers, but a number of questions remain to be answered. The value for Openbucks and the online merchants is clear. Openbucks get a fee and the online merchants get new business. For the shopper, there is potentially more convenience and a new way to spend a gift card that they may otherwise would not use. For the issuing retailer, however, the value proposition is not as clear.

Openbucks touts increased brand awareness and possible increased foot traffic as cardholders come into store to reload their closed-loop card for online purchases, but this still means that the merchant is now holding money for other companies. There are accounting, regulatory, and even marketing questions that remain to be answered. How are these liabilities tracked? Do participating retailers become money services businesses? What are the brand awareness benefits and how do they weigh against the risks?

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