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Gift Cards in Retail Industry and Testing Challenges

We are nearing the holiday season and one of the problems on everyone’s minds is what to buy as a gift for loved ones. For last few years Gift cards have been a good rescue for me to avoid lot of hassle in selecting the gift as well as providing an opportunity to my loved ones to choose what you like. I believe this phenomenon is somewhat similar to holiday/greeting cards- today more than 60% of the holiday cards are sent electronically.

Gift card industry surpassed the $100B mark in 2007-2008 and is continuing to grow at 20% pace year over year. Gift certificates is a story of past, today gift cards are being extensively used by retailers in almost every industry including Sports, Entertainment, kids, Home, Food, Telecom, etc…

It has been a favorite among gift givers because finding a gift card is much easier than actual gifts- no more gift wrappers!! The receivers like them because it gives them lot more flexibility to choose the gift of their interest. Some websites like giftcardmall.com and plasticjungle.com have even made it easier to trade gift cards.

  • Retailers like it because it gives them access to teens who do not have bank accounts but want to the ease of buying using plastic
  • Retailers don’t have to give the cash back for the remaining amount and can elude customers in coming to the store again
  • Gift card based prepaid sales generates immediate cash flow for the retailer
  • Electronic transactions result in accurate, Online Tracking – track activity by store, venue, issuer, account or by individual
  • Plastic cards eliminates Fraud – extremely difficult to duplicate and can be cancelled.

There are varieties of card available in market. Following are some examples.

  • Close loop: – Restricted to a specific retailer. It can be fixed or variable denomination cards.
  • Open Loop: – Visa or Master Gift cards can be used as gift cards with any retailer (secured credit card). Again they can be fixed or variable denomination cards.
  • Variable value cards.
  • Fixed denomination cards
  • Single step, 2 steps , Hybrid cards
  • Different digits (16-18-19) of cards. This will depend on the service provider.

In order to cater to this fast growing market service providers are making every possible effort to have quality product on the shelf and support most of the transaction types –

  • Activation
  • Balance Inquiry
  • Redemption
  • Reload
  • Refund
  • Void in some cases
  • SAF (Store and Forward) is the technique used for card activation in case the connection/communication with actual service provider (One who will authorize the transaction) is down. User is provided with information stating card will be activated within 24 hours.

Enough about the Gift Card Industry let me start talking about some technical details and how the gift card systems are implemented.

I have been involved in testing gift card solutions for various retailers and have learned a lot as part of my career. Gift card has become a vital part of the retail industry and hence the quality of their offering is the only differentiator that they can leverage to continuously grow. There are various challenges in testing gift cards transactions and ensuring consistent user experience. I will discuss this testing aspect in detail in my next couple of blogs, so stay tune.

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