Leveraging Digital Gift Cards for High-Risk Businesses

Keeping customers happy and coming back for more is super important for online businesses, especially those that face more risks than others. Thanks to digital gift cards, this is becoming a reality. 

But why are they so helpful for high-risk businesses? Let’s take a closer look.

What Are Digital Gift Cards?

Digital gift cards are like traditional plastic gift cards, however, they only exist online. Instead of a physical card, you get a code or a digital wallet entry with a certain amount of money. You can use this code to buy things from a specific store or brand, just like you would with a regular gift card.

The main difference is that these digital gifting solutions are sent and used entirely online. You can email them, text them, or even send them through social media. This makes them super convenient for both the business selling them and the customers buying them.

How Do Digital Gift Cards Work?

Digital gift cards are pretty simple. It’s a straightforward process that’s easy for both businesses and customers to use: 

1. A business sets up a digital gift card program, usually through a specialized provider.
2. Customers buy the gift cards on the business’s website or through an app.
3. The customer receives a unique code or a digital wallet entry.
4. When they want to purchase, they enter the code or use their digital wallet.
5. The amount is deducted from the gift card balance.

Why Digital Gift Cards Are Great for High-Risk Businesses?

Now, let’s get to the heart of the matter: Why are digital gift cards a good idea if you run a business classified as high-risk?

1. Lower financial risk: When customers buy gift cards, the business gets the money upfront. This means less risk of chargebacks or refunds later on. Plus, getting paid in advance helps you manage your cash flow better. 
2. Customer loyalty: Gift cards encourage customers to come back. They might even spend more than the gift card amount, which is great for the business.
3. Easy to use: For online businesses, digital gift cards make it easy to sell to customers around the world without worrying about different payment systems.
4. More and/or better security: Digital gift cards can have extra security features that help prevent fraud, which is a big concern for high-risk businesses.

Potential Drawbacks 

While digital gift cards seem easy to use and offer many benefits, there are some challenges to keep in mind:

1. Setup costs: Starting a digital gift card program can be costly, especially for small businesses.
2. Technical issues: Businesses need to make sure their gift card system works smoothly along with their website and/or other tools or platforms they may use.
3. Regulations: There are laws regarding gift cards that companies need to follow, which can be somewhat complicated.
4. Customer trust: Some customers might be hesitant to buy digital gift cards, especially from businesses they’re not familiar with.

How to Start Offering Digital Gift Cards

If you’re a high-risk business owner interested in selling digital gift cards, here’s what you need to do:

1. Research providers: Look for companies that specialize in digital gift cards for high-risk businesses such as CCBill, DigiGift  or GiftFly. Compare their fees, features, and customer support.
2. Check the tech: Make sure their gift card system will work with your current website and payment setup.
3. Train your team: Everyone in your business should understand how the gift cards work so they can help customers.
4. Promote your program: Advertise and let your customers know about your new gift cards through your website, social media, and email lists.
5. Start small: You might want to test the program with a limited release before going all-in.

Gift Cards Laws and Regulations

When you’re dealing with money, there are always a few rules to follow. 

Here are some things high-risk businesses need to be aware of:

• Gift card laws: Many places have laws regarding gift cards, and how they can be sold and used. Make sure you know the rules in your area. It’s also a good idea to seek expert advice to make sure you are not breaking any laws. 

Key areas:

• Expiration: The U.S. Federal Credit CARD Act of 2009 requires gift cards to be valid for at least 5 years.
• Inactivity fees: Prohibited unless the card has been inactive for 12+ months; must be disclosed beforehand.
• Cash back: Some states require cash redemption for low balances.
• Escheatment: Unused balances may become state property after a set period.
• Disclosures: Terms and conditions must be noticeable and clearly stated.
• Reselling: Regulations may apply when selling other businesses’ gift cards.
• Records: Sales and redemption data must often be kept for a specified period of time.
• International: Rules vary significantly across countries.

• Anti-Money Laundering (AML) rules: You need to have a set of procedures and safety measures in place to prevent people from using gift cards for illegal activities.
• Know Your Customer (KYC) Requirements: You might need to collect certain information about customers who buy large amounts of gift cards.

Wrap Up

If you’re running a high-risk business and haven’t considered digital gift cards yet, it might be time to take a closer look.  

For expert guidance on compliant implementation, contact Electronic Transfer Inc. We specialize in tailored solutions for high-risk industries. Reach out now to explore how we can help grow your business with digital gift cards.