As digital gift cards increasingly replace the plastic version, mobile is playing a bigger role in how consumers purchase, store and redeem them, thanks in part to mobile wallet applications such as Passbook.

Tango Card, which sent more than 11,000 digital gift cards last year, expects that number to grow ten times this year. With the growth in digital gift cards, recipients are increasingly looking for ways to store these cards on their mobile devices so they will have the cards when they are needed.

“One or two years ago, 90 plus percent of gift cards were sent as physical product,” David Leeds, CEO of Tango Card, Seattle.

“As soon as email product became generally available at the end of the last year and into this year, people immediately moved to how I get it on my phone so I can use it on the go,” he said.

“This is a massive shift from last Christmas to this year when this functionality did not exist. Not only are consumers using it, but it is the No. 1 thing that they are asking for.”

Storage made easy
As digital gift cards have quickly grown from being practically non-existent five years to accounting for between 35 and 45 percent of all gift cards, mobile’s role in digital gift cards is rapidly evolving.

At the beginning of 2012, the biggest mobile feature consumers were looking for related to digital gift cards was the ability to check balances.

Today, the No. 1 request Tango Card hears from digital gift card recipients is how to instantly add it to their mobile device.

Tango Card offers a mobile application that instantly deposits digital gift cards into a special section of the app.

Once the card is in the app, it can be pulled up and used at retailers such as Starbucks, Target and REI. The app generates a 2D bar code and a special code to authenticate the payment at checkout.

Digital gift cards can also be added to Apple’s new Passbook app and then easily pulled up and used at retail.

One factor expected to drive the growth in digital gift cards is that businesses are embracing them as a gifts for employees and clients. Per Tango Card, the amount being spent by companies on digital gift cards in December is expected to be between $10 and $15 billion dollars.

The growth in the number of employees at many corporations who are Generation X, Y or Millennials is contributing to the trend toward digital gift cards.

More than half of employees at any major company are typically from a younger generation, per Tango Card.  These employees expect digital experiences as they have already integrated mobile and social into their lives.

Redemption and beyond
Mr. Leeds expects mobile’s role in digital cards to continue to grow next year when consumers start to redeem the cards they received over the holidays.

One of the issues with gift cards has been that typically a large number of them go unredeemed. Often, this is because consumers forget to bring the cards with them.

Mobile addresses redemption issues by making it easier for consumers to always have the cards with them.

“Now that people can put these cards on their mobile device, you have it with you when you need it,” Mr. Leeds said.

Mobile’s potential role goes beyond simple redemption and enables merchants a way to send users a notification that they have a gift card that can be used when they check-in.

“When consumers use a gift card, they typically spend 30 percent to 40 percent more,” Mr. Leeds said. “For retailers, there is a lot of desire to drive that spend into a store at a specific time.”

“Now that the information is in a mobile phone, there is information there you can act on,” he said.

“The range of technology enabled services you can provide as soon as a gift card is on a mobile device is fantastic – I think that will be a big trend for 2013.”

Final Take
Chantal Tode is associate editor on Mobile Commerce Daily, New York