An online gift card service that doesn't charge the gift giver until the recipient buys something with the card has been launched by a Victoria, B.C., startup company.

Kiind, which launched in the U.S. Wednesday, aims to address problems with prepaid gift cards — many go unused, some have expiry dates and extra fees, and the gift giver has no way of knowing whether the gift was ever used — that have led consumer advocates such as the Consumers' Association of Canada to recommend giving cash instead

A 2012 survey by Consumer Reports found 15 per cent of respondents said they still had at least one unused gift card from 2011. The Consumers' Assocation of Canada says the rate of unused gift cards is as high as 40 per cent, while Kiind estimates it is roughly nine to 20 per cent. A 2012 report by business consulting firm CEB estimated that $110 billion was loaded on to gift cards in the U.S. in 2012 and that $2 billion worth in cards were lost, expired or went unused, down from $8 billion in 2007.

Leif Baradoy, Kiind's founder and CEO, said that with his company's service, if the gift card is not used by an expiry date specified by the gift giver, he or she will not be charged for it.

On the other hand, the gift giver is charged and notified when the recipient uses the gift — "so that you know that your gesture has been appreciated," Baradoy said. "It sort of closes the loop on the act of giving."

Location-based reminders

The service also reminds the recipient to use the gift card, and special reminders are sent when the recipient travels close to the store or restaurant where they can spend it. Gift givers also have the option of allowing the recipient to donate the gift to charity.

Gift givers are charged anywhere from 19 cents to 49 cents per recipient to use Kiind's service, with higher volume gift givers qualifying for the lower charges.

Baradoy said user feedback suggests they think they're getting good value for the money.

"If you're giving a $100 gift card, spending 49 cents to make sure you're not going to pay unless it's used — it's less than the cost of a stamp."

He added that the fee also provides access to free analytics, so big givers — such as companies rewarding clients, employees or businesses that provide them with referrals — can see which gifts are preferred by the recipients. Such companies may spend thousands of dollars per year on gift cards, which means that unused amounts could add up.

While those corporate clients are being targeted by Kiind, Baradoy said consumers are also welcome to use the service.

Baradoy said he started working on a digital gifting space in 2011. Talking to customers about what they wanted led to the idea of a service where gift givers didn't pay until the card was used.

"It's such a simple concept, but it's something that no one has done before," Baradoy said.

He thinks retailers had no incentive to offer that kind of service because they make a lot of money from unused gift cards.

However, he said legislation introduced in some provinces and in the U.S. in recent years that ban expiry dates for prepaid gift cards mean unused gift cards are now a long-term outstanding liability on a company's books.

That has made retailers more interested in a service like Kiind, he said.

Retailers include Amazon, restaurants

So far, Kiind can be used to buy gift cards for online retailers such as Amazon and Art.com, restaurants and food outlets such as Tony Roma's Steakhouse, and many local retailers in 300 U.S. cities.

It has been available for months to 13,000 users in Calgary and Victoria, including about 4,000 gift givers who have been helping the company test and refine the service. However, Baradoy is negotiating to get some big Canadian brands on board before launching widely and publicly in Canada.

He added, "We do want to get to Canada as quickly as possible."