Stumped on the best gift for a friend’s birthday? Consumers often go the easy route, choosing a gift card that allows the recipient to purchase anything they like at a given store. $130 billion worth of gift cards are purchased annually, according to advisory company CEB TowerGroup.
But, surprisingly, gift cards haven’t seen an easy transition into the digital world. Retailers have seen a decline in gift card purchasing due to the growth of e-commerce and downward trend in in-store purchases.
Entrepreneur Mike Pinkus, formerly chief architect of gambling services company Scientific Games, saw how gift cards had failed to adapt to the internet age. He studied a related industry — greeting and holiday cards — and observed how today’s consumers communicate congratulatory messages through email, Facebook Messenger, and smartphones.
Pinkus applied these observations to gift cards developing a patented method to encrypt any photo or GIF with store value. These digital gift cards are easily shared, transferable and claimable, without requiring registration. The secure information is embedded directly into the photo’s pixels.
“The process is exactly like what it is in the physical world, but we’ve been able to move it into the digital world,” says Demetree. “The human eye can only detect the picture of the cute dog, but there’s an entire database behind that image with the claim data.”
“If somebody tries to duplicate it, the only thing they’re going to be able to duplicate is the photo. They can’t duplicate the pixels with the store data,” says Demetree.
Instead of a direct-to-consumer approach, Lazlo entered the market through retailers. Using a simple API, Lazlo integrates into a retailer’s mobile app. The technology allows customers to buy a gift card through the app, attach the photo or message that they’ve chosen, and easily send it to the recipient.
Lazlo also allows buyers to record a unique video, pair it with store value, and share over Facebook messenger.
Upon receipt of the image or video, the recipient doesn’t have to complete any extra steps such as registering the code or entering personal information.
“That image they receive is the store of value,” Demetree says. “They’ll play that video and they’re going to see a barcode or a QR code at the end. When they want to use it, they can walk into the retailer and redeem it.”
This technology also helps prevent fraud, claims the team. The current barcode-based gift cards do not operate in real-time, leading to security vulnerabilities and opportunities for theft.
One prominent scam, Demetree explains, is when three people make copies of one gift card and approach different registers to scan and redeem it at the same time.
In this scenario, the fraud is often not realized until a few days later when the store tries to validate the barcodes. But since Lazlo’s technology is connected in real-time, this multi-scan becomes impossible.
The technology can also be used for lottery tickets and coupons.
“We think there are about 20 billion impressions a year that we can monetize as marketing and branding between the consumer and the store,” says Demetree.
The Atlanta-based team has bootstrapped the company thus far, and is currently working with four major national retailers in the big box and convenience space, with a pilot underway. They also have three state lotteries signed on as clients.