Considering A Gift Card Program? Make Sure You Get It Right

H&M and Dunkin’ were recently sued for not following proper regulatory and compliance requirements. Here’s how to avoid that fate.

Gift card programs can be great marketing tools for consumer-facing companies. But to do them right, you need to keep in mind a number of compliance and customer service challenges, says Mike Vogus, CRO of Dallas-based gift card program company TOTUS.

Vogus spoke with StrategicCFO360 about staying in-house vs. outsourcing your program, considering different state laws and why it’s critical to have a customer service team in place.

What are the top considerations for CFOs looking to implement or revamp a gift card program?

The first question CFOs need to ask is, “Who will be the legal issuer of our gift card program?” The two most popular options are either to have your company be the legal issuer, or you can partner with a gift card program manager to take on this responsibility. Regardless of the option you choose, it will be critical to have an allocated resource on your team who understands the nuances of the gift card industry.

Ensuring your gift card program is compliant will be critical to ensure success. What many CFOs and business leaders don’t realize before starting a gift card program is that there are many legal, regulatory, consumer protection and compliance requirements, including specific Financial Crimes Enforcement Network requirements, to be considered. These requirements are constantly changing, and it’s mandatory by law that your program is always in compliance and current with consumer protection requirements even as the rules evolve and change overtime.

Customer service is an inevitable part of the job when it comes to managing a gift card program. It will be critical to have a dedicated team of representatives available in real-time as cardholders have questions about their gift cards, when they can be used and how.

This is just the tip of the iceberg when it comes to considerations for gift card programs. CFOs and business leaders alike also need to be prepared to manage gift card regulations, processing, card production, distribution, vendor management, accounting and reconciliation, promotions, marketing, fraud and more. If this list seems daunting and overwhelming, you’re not alone. The good news is there are many different solutions to ensure your gift program is a success and adds value to your business.

What are the benefits of outsourcing a gift card program? What are the benefits of keeping a program in-house?

The solution that is right for your business depends on the level of expertise and knowledge your team has about gift card programs, and the bandwidth of that team to take control and own the product and processes end-to-end.

One of the main benefits of outsourcing your gift card program is that your selected partner can do all the heavy lifting for you—ensuring you reap all the benefits of having a gift card program without the hassle and headaches associated with managing the program. Gift card management partners can also bring a wide breadth and depth of knowledge about the industry, best practices and the latest technology solutions that will help you maximize the reach of your program. If you don’t have the bandwidth to keep your gift card program in house, this is a great solution for your organization. Before selecting a potential partner, there are a few questions you should ask them, including:

  • Does your company simply manage gift card programs for brands, or are you also an issuer of gift cards?
  • How do you manage the legal, regulatory, consumer protection and compliance issues associated with a gift card program?
  • How many gift card programs do you manage and issue today?
  • How do you manage the tactical operations of a gift card program including processing, customer service and distribution?

If you choose to keep your gift-card program in-house, you will have the benefit of ensuring that your program is always top-of-mind and that your team is always working in the best interest of your brand. Some outsourced providers have a difficult time managing multiple clients and allocating the appropriate resources and priority to your brand. Keeping the program in-house will ensure that your resources are focused on nothing but your brand and program, assuming you have the bandwidth to resource the program appropriately.

What happens if a gift card program is not in compliance?

It’s important to note that gift card programs are not as simple as designing cards and selling them to customers. There are many legal requirements, rules and regulations that need to be followed to ensure your gift card program remains compliant, and they vary state-by-state, especially if your business is domiciled in Delaware or New York. For example, should you charge tax on gift card sales? When will your gift cards expire, if ever?  What happens to the funds if a card is never redeemed? Can consumers “cash out” the balance of their card? These are just a few questions CFOs and gift card program managers will need to answer.

Even the most well-established brands struggle to keep up with the complexities of gift card compliance. Just recently, H&M and Dunkin’ have been sued for not following proper regulatory and compliance requirements. The result can include hefty penalties, fines and incredibly bad PR for your business. H&M just recently settled a suit with the state of New York for $36 million for not following the state escheatment and unclaimed property law properly, causing them to fall out of compliance. 

To avoid falling out of compliance, CFOs—or gift card partners, should you choose to outsource—can stay up to date on the latest gift card laws by joining the Retail Gift Card Association and Incentive Gift Card Counsel. 


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