Gift Card Verification Glitch Hits Wal-Mart, Others

As shoppers at Wal-Mart and other chains found themselves unable to use their giftcards much of Wednesday, Wal-Mart took the unusual step of apologizing and also the usual step of blaming its technology partner.

On Thursday, Wal-Mart issued this unattributed statement: "Early yesterday afternoon, we discovered that several retailers, including Wal-Mart, were experiencing sporadic issues with gift card verifications due to processing errors with our third-party verifier's systems.This delayed the processing of a small percentage of our gift card transactions, and the issue was resolved yesterday afternoon. We apologize for this inconvenience to our customers."

Wal-Mart did not identify the supplier in its statement, but First Data issued its own statement, claiming responsibility.

"We have identified a sporadic system occurrence that caused some consumers to experience delays in gift card verifications on December 26, 2007," said a statement attributed to First Data VP Jody Soper. "The problem has been isolated and we are working closely with our customers to prevent this situation from occurring in the future. The system is performing normally and we regret any inconvenience this has caused."

First Data handles gift card verifications for many retailers and recently reported that Michigan-based supercenter chain Meijer and Canadian QSR chain Tim Hortons had agreed to use their verification services.

Although the details of the glitch are not yet clear, it is clear that the timing of this nation-wide hiccup couldn't have come at a worse time for retailers.

That timing problem is twofold. In a calendar sense, retailers and giftcard exchange sites have been pushing giftcard convenience more aggressively this year than ever, positioning it as the ultimate hassle-free gift. To have that network crash on Dec. 26—one of the busiest days for gift returns and gift card redemptions—is certainly not well-timed.

But the bigger-picture timing issue is that 2008 has been shaping up as a crucial one for gift card growth. That growth was not merely an effort to get retailers to push gift cards more but it involved using gift cards as a way to boost CRM data on customers and prospects and to sharply boost upsell opportunities as well as gain more new customers.

Two significant startups in the gift card space—PlasticJungle and Leverage--have competing plans to significantly expand their operations over the next few months.

That all said, one multi-hour gift card glitch is unlikely to have any lasting impact. But for the retailers involved, it would have been nice had the glitch waited for the weekend.