In this blog post we discuss the advantages of tokenizing vouchers and gift cards on Stellar. Stellar is a global distributed ledger system that is designed to record and transfer tokenized assets on the internet.

If you’re running a business and identify the key strategic advantage of selling vouchers to your customers you’re faced with the challenges of opening accounts with aggregators, maintaining integrations, negotiating custom pricing and having access to a large pool of operating funds to load a minimum balance as a reseller. What if you could integrate a simple SDK that supports a global value transfer standard, avoid the requirement of a large operating float and benefit from a fluid marketplace to get the best rates to sell any voucher in the world?

Let’s consider some recent blockchain trends

Between 2015 and 2016 companies like Wyre started using the bitcoin blockchain as an alternative payment rail for remittance. The biggest revenue opportunity is arbitrage trading between crypto exchanges in addition to a money transfer fee.

In 2017 we’ve seen an explosion of tokens being launched on the Ethereum blockchain that was mostly fueled by speculation. The early token models focused on selling some future vision and in most cases started looking like securities. Other than lack of simple UX in crypto it is to be reasoned that the extreme volatility of tokens is crippling adoption.

In 2018 we’ve seen the rise of stablecoins where the face value of the token is directly pegged to a fiat currency. The main advantage of a stablecoin is the ability to move money on a global ledger standard that is open for innovators to more easily build next generation fintech apps. Coinbase, Anchor USD, Stronghold, Gemini and others launched their own USD pegged stablecoins.

where the face value of the token is directly pegged to a fiat currency. The main advantage of a stablecoin is the ability to move money on a global ledger standard that is open for innovators to more easily build next generation fintech apps. Coinbase, Anchor USD, Stronghold, Gemini and others launched their own USD pegged stablecoins. In 2019 we expect to see more stablecoins being launched as well as applications leveraging the advantages of building on a global token standard.

Surprisingly, in between all the hype it seems like the opportunity to tokenize vouchers for e-commerce and retail has been overlooked.

More about vouchers

Buying and selling vouchers is legally far simpler than taking user deposits and facilitating money transfer, for a number of reasons. Prepaid goods such as mobile minutes, data, electricity, vouchers, lottery tickets etc. are traded all over world where the largest distributors are primarily identified by their physical channels. The most friction incurred in distributing vouchers is integrating with legacy voucher systems and the requirement to buy goods upfront in bulk. In Africa the distribution of vouchers has been optimized by using a physical device and leveraging USSD technology in low connectivity areas to print a voucher code on the spot. In USA, stores have a massive display of colorful gift cards.

Left: Typical gift card stand in the USA, Right: Mobile terminal for selling prepaid vouchers in Africa

Tokenizing vouchers

Tokenizing gift cards and vouchers create opportunity for retailers, traders and distributors to reach more end users through a global value transfer standard. The schematic below illustrates the transfer of value between all the potential stakeholders in this model.

Flow of funds between stakeholders when tokenizing vouchers.

Two primary advantages of adopting a tokenized approach include:

Suppliers can reach more customers with less overhead to manage reseller accounts.

Retailers don’t need a massive operating float or unnecessary exposure to foreign currency volatility, while increasing revenue.

Below is a detailed comparison of a tokenized versus a non-tokenzied approach to selling vouchers and gift cards.