Thought Leaders in Mobile and Social: David Stone, CEO of CashStar (Part 6)

Sramana Mitra: What about loyalty? We’ve talked a lot about the process of gift giving. Would you talk about loyalty? You said you’ve also worked quite a bit on the intersection of loyalty and payments.

David Stone: Yes, there are obviously a ton of players in the loyalty space, and a lot of interesting companies that are doing some cool innovations. For us, in our world, believe it or not gift cards – not really gift cards, their incentives – have become the number one or number two way for companies to build loyalty or change consumer behavior. [Health] insurance companies are giving them out so that people will lose weight or stop smoking. Large companies like AT&T, IBM, and Google use them to give incentives to employees and reward their sales organizations. It’s an incredibly fast-growing market. It’s somewhere around $15 billion or $20 billion today.

And then, for reward points – we all know about reward points – gift cards have become the number one or number two way for you to redeem reward points today for your bank card reward programs. There are a couple of reasons [for that]. One is because airline miles are hard to get, and two, a lot of people don’t want to wait until they accumulate 250,000 points before they can use their rewards. So, we’ve done a lot of innovation there. We did a pilot last year with JPMorgan Chase where you could download your reward points to your iPhone and burn them at 25 retailers.  If you can, imagine for a minute that you turn your points into a currency.

And then we introduced at Finovate. Finovate has become the demo or South by Southwest for financial services innovations. We introduced what we call mobile gift rewards at the conference in September 2011, and that application allows you, again, to download your reward points and get geolocation notifications. For example, if I’m walking down the street or driving and I want to go shopping, go to Starbucks or eat at P.F. Chang’s, I’ll have all these reward points. I can turn them instantly into a gift card and then use them at the point of sale. Again, we estimate there are 10 billion unused reward points out there.

SM: And that happens on the mobile phone?

DS: Correct. That’s an innovation, and we’re working with banks to do that. It was piloted last year, and now we’re looking to roll it out. Are you familiar with Foursquare?

SM: Yes.

DS: That’s about checking in. Well, now you can check in for real cash.

SM: Yes, but you know, the place where this is most needed is in frequent flier miles. We’re all sitting on huge amounts of frequent flier miles. That is where there need to be more ways of converting those loyalty points into other types of redemption other than just buying tickets. It already exists. If you do it online, you can turn your frequent flier miles into restaurant certificates and so on. It’s just that it’s not in an instant, mobile kind of mode.

DS: I think that’s a great idea. And the bank cards have also billions of reward points.

SM: The same issue, yes.

DS: I think that’s a great idea and one we should consider. We haven’t thought about that one.

SM: Are there any other major topics in this general area that we should discuss?

DS: I don’t know how important it is, but we forget that there’s a green part of this, too. It’s not just something I’m making up. There are at least 100 million gift cards in landfills. Most gift cards are used once and then tossed in the rubbish bin. When you send an e-card digitally, depending on how you use it, it’s at least a thousand times greener from a carbon footprint standpoint. If you consider the shipping on top of that, the fact that you have to ship it in a FedEx truck or envelope through the post office, it’s much more convenient and much better for the environment. I think that’s an important attribute as well.

I don’t know that there’s anything else, other than the convenience factor. We refer to the gift card graveyard in people’s homes. They sit in a drawer and people forget about them. I think, particularly in the mobile world, if you have it on your phone, you’re much more likely to remember it and use it more. Some gift cards have a bad reputation because they don’t get used, not a lot, but about 10% to 15% or so claim not to get used. But if you make it more convenient for the consumer, they’ll be used more regularly. This is a big opportunity for people to use them and for retailers to get people into stores.

This segment is part 6 in the series : Thought Leaders in Mobile and Social: David Stone, CEO of CashStar
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