A Fintech CEO Explains Why Gift Cards Are More Important Than Ever For Businesses

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If you loved last week's Fintech Focus episode with Ibotta's CEO and founder Bryan Leach, get ready for another deep dive into the world of mobile payments.

Jay Klauminzer is the CEO of Raise, a Chicago-based gift card buyback company. Users can simply sell unwanted gift cards to Raise for cash or buy discounted gift cards for their favorite brands. The company has already raised more than $150 million and has 2.5 million users and access to gift cards for over 5,000 brands.

Klauminzer previously worked at Doordash and Groupon Inc GRPN, so he's familiar with the world of e-commerce. He discovered his passion for consumer and customer journeys after spending ten years at McKinsey upon graduating from college. Then he took a leap of faith: running a business instead of consulting.  

"I had a variety of roles [at Groupon] with increasing P&L responsibility. Towards the end, I sort of hit the cap of my potential there and it was time to take what I had learned and help scale another company," Klauminzer told Benzinga. 

He saw potential at Doordash, helping the company scale to over 3,000 cities, before joining Raise in November.

Raise's Business 

Raise has a primary marketplace where the company works directly with retailers to sell their gift cards on the website.

The company's new Pay product allows users to pull up the exact amount needed at a store and receive cash back. The idea came about from customers having to purchase multiple gift cards to complete a transaction at a store, the CEO said. 

"That's really what we've been focusing on over the last, call it three or four quarters, is doubling down on that product and solving the friction of maybe having to buy two or three gift cards to fill your whole purchase," Klauminzer said. "Now you can just buy one and get rewarded by doing that."

Raise is different from other discount gift card marketplaces such as CardHub and Gift Card Granny on the basis of the Pay product and its inventory — 500 brands are direct sellers, the CEO said. 

'Gift Cards Are The Currency'

The mobile payments market is growing as customers move toward a more secure and rewarding means of payment, Klauminzer said. 

"What you're seeing is a drive towards making mobile your primary source of payments, doing it extremely secure, and adding rewards to that," he said.

The CEO used the example of the Apple Inc. AAPL card announced about a quarter ago.

"Some people say, ‘Well, that's just Apple being Apple.' That's exactly what it is. They're focused on a seamless experience for consumers and they know that mobile is where the puck is going. They give you a card just in case, but it's really a 99-percent mobile-first product. They give you instant cash back for doing it."

Some retailers were hesitant at first, but Klauminzer said many have taken advantage of mobile payments, as customers prefer easier means of finishing purchases.

"What you're seeing now is retailers looking at the Starbucks Corporation SBUX of the world, where 40 percent of the transactions in a Starbucks are using their mobile app and they're doing it because it's quick, they don't have to fumble with their cards or cash and they're getting rewarded to do it," he said. 

Gift card marketplaces are now seen as an extension of marketing because the lower prices attract new customers, the CEO said. In his view, this creates more competition within companies to offer customers the best rewards.

"Gift cards are the currency," Klauminzer said. "Credit cards are also the currency. So in that sense, yes, we are competing. But because, as the rewards keep trying to push up and up, now you see some 3- and 4-percent cash back offers at certain types of retailers; they're passing the fees right along to the merchants as well."

The industry could help smaller or local brands meet new consumer preferences, he said. 

"Even the little convenience store down the street from me recently just added a credit card terminal that takes Apple Pay, and they were cash only before that," Klauminzer said.

"I think what they're seeing is consumers and consumer adoption driving their behaviors to, a few years from now, having a cash-only sign outside your door is going to drive down consumers because they just won't have cash in their wallet. So I think what you'll see is adoption driven by consumer demand."

Listen to the podcast below to hear more about how mobile payments are changing the way we shop.