Will Mobile Gift Cards Take Off This Holiday Season?

2010 has been a watershed year for mobile commerce. It seems like everywhere you turn, you’re seeing or hearing something about how shopping and mobile technology have collided. Things like Foursquare, shopping apps, and mobile coupons are becoming more accessible, due to both increased smartphone adoption (IDC: Smartphone Sales to Jump 55% in 2010) and companies’ willingness to send consumers deals directly to their phones.

A few months ago, we ran an article (see Cellphone as Loyalty Card) about how even retailers’ loyalty-card format was making its way onto phones. Based on consumers’ location (via GPS), buying trends and ability to get friends to make similar purchases, they are rewarded” with credits and discounts sent to their phones.

It turns out companies are looking to cash in this holiday season, with mobile gift cards. Mike Freeman of the San Diego Union-Tribune recently wrote an article (Sept. 19) about two companies – Transaction Wireless and Qualcomm-owned Firethorn – who are among numerous firms betting this year’s gift giving season will push mobile commerce – and particularly mobile gift cards – forward.”

Freeman quotes ABI Research analyst Mark Beccue, who says overall mobile commerce has to overcome hardware-related obstacles before it will become mainstream. However, Beccue calls gift cards low-hanging fruit” because it solves a problem for people. You have all these cards, and you’re not utilizing them very well. It’s just easier (having them on your phone).”

San Diego-based Transaction Wireless offers a mobile and e-mail gift card platform for retailers including Applebee’s, Bass Pro Shop and AMC Theaters. The company serves retailers. It provides the technology that allows retailers to sell gift cards on their websites or Facebook pages. The gift card is delivered to customers’ mobile phones or to a computer e-mail account.

Firethorn, an Atlanta-based mobile banking firm (bought by Qualcomm three years ago for $210 million), hopes to release its mobile gift card app (called SWAGG) before the holiday season. This company serves consumers. It helps people manage all the available promotions, membership cards, loyalty cards and gift cards – directly on their phones.

The jury is still out as to whether or not consumers can be bothered with all of these services and discounts. Security and privacy top the list of reasons why U.S. consumers might balk,” according to iSuppli analyst Tina Teng (as quoted by Freeman).

Teng said that U.S. consumers are not accustomed to buying things via their phones. By contrast, people in Japan and Korea, where public transit tickets are often purchased via mobile phone, have accepted mobile commerce to a greater extent.

Still, Freeman writes, consumer reluctance is slowly easing, as web-capable smartphones become more powerful: Mobile banking is now mainstream. Some airlines allow customers to send boarding passes to their smartphones, with the bar code scanned at the airport.

ABI Research predicts U.S. mobile purchases will reach $2.1 billion this year, up from $1.2 billion in 2009 and $390 million in 2008.

But before adoption of mobile gift cards is widespread, companies need to convince them that they’re worth using. When it comes to consumers using something, there are two drivers. It’s either cheaper or easier.” said Ben Ackerman, vice president of business development for Firethorn (as quoted by Freeman). Consumers would find this more convenient, and retailers are looking for ways to move gift cards into a more electronic space. It’s cheaper. They don’t have to deal with the plastic.”