THE BLOG
07/22/2013 02:08 pm ET Updated Sep 21, 2013

Pay-Later Gift Cards Cut Waste Using App Store Logic

The gift card industry continues to grow steadily with a projected worth of over $120 billion in 2013. According to industry experts, at least $10 billion dollars will be wasted this year on unclaimed gift cards -- 8 to 19 percent of all prepaid gift cards are never used.

A new online service called Kiind is making this waste as thing of the past while helping retailers reduce billions of dollar in outstanding financial liability.

Kiind allows people and businesses to send a gift card over email, but rather than pre-paying, gifts sent with Kiind are only paid for when the recipient chooses to use the gift. Kiind works like an app store where the giver's credit card is securely held and only charged when a purchase is made.

Kiind allows gift givers to defer when they pay for their gift. If the recipient doesn't want it or use it, then the givers never pays for the gift they have offered.

To ensure that gift givers don't have a potential charge looming over their credit card long term, Kiind allows users to set an expiry date on their offer. Because no payment has been made up front, gifts on Kiind can expire without anyone losing money. Pre-paid gift cards fall under strict legislation protecting consumers from having retailers expire traditional gift cards and then pocket the cash. Kiind is outside these laws, allowing givers control over their spending.

With integrations to Salesforce, Mailchimp, and Gmail, Kiind makes giving to multiple people simultaneously easy. Users can create gift campaigns that mail-merge first names with a personalized message to gift recipients -- a handy tool for businesses gifting employees.

With digital wallets like Apple's Passbook increasing in popularity because of their ubiquity and convenience, it's no surprise that Kiind offers gift recipients the ability to send gift to their digital wallet. Email is a bad place to store anything. By harnessing the location feature native to iOS, recipients get geolocated gift reminders if they near a location that they have a gift card to. Since many gift cards go unused simply because people forget they have them, this is a welcome feature for recipients.

Kiind appears to be a win for retailers, too. Although retailers still make millions through breakage, breakage is becoming less and less attractive due to new legislation and accounting practices. "The regulatory environment, including tax and financial reporting for gift cards, has become increasingly complex by tax, regulatory and financial reporting changes in this area," cautions Giles Sutton, of Grant Thornton LLP.

State governments are cracking down on how pre-paid gift cards are handled by enacting escheatment laws that claw back profits from breakage from retailers under the auspice of retrieving unclaimed property. Meanwhile, retailers want to increase redemption, not breakage because people typically spend more than the face value of the card when redeeming them. By deferring when a gift is paid for, Kiind helps retailers reduce billions of dollars of outstanding financial liability while driving more customers to them.