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A day-after-Christmas processing glitch at First Data Corp.'s ValueLink unit, a processor of prepaid card transactions, delayed gift card authorizations at some stores belonging to Wal-Mart Stores Inc. and other, unnamed merchants. While statements released by both Wal-Mart and First Data indicate the problem was fixed Wednesday, the snafu couldn't have happened at a worse time as customers flocked to stores to use cards received on Christmas. Though the glitch was apparently resolved in a matter of hours, the cause and extent of the problem were not immediately clear. A First Data spokesperson tells Digital Transactions News by e-mail that the issue affected “multiple merchants around the country” but “a very small percentage of the total transactions we processed that day.” A statement issued earlier by Denver-based First Data called the problem a “sporadic system occurrence” that caused delays in gift card verifications. In a statement released Thursday, Bentonville, Ark.-based Wal-Mart said: “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 [Wednesday] afternoon.” With gift cards proliferating, the plastic is taking on an increasingly significant share of merchant sales, especially during the crucial holiday-shopping season. MasterCard Advisors LLC reported earlier this week that overall retail sales increased a tepid 3.6% for the 2007 season (Digital Transactions News, Dec. 26), a rate of increase the tracking service says is a the low end of the expected range. This is leaving merchants with the expectation that customers armed with Christmas gift cards may give a last-minute jolt to sales in the waning days of the year. With prepaid cards, merchants can't record sales until the cards are redeemed. There is plenty of potential spending stored away in these cards. Gift card sales in November and December are expected to total $26.3 billion, up 6% from last year's $24.8 billion, according to the National Retail Federation. The rising popularity of gift cards, however, is inviting increasing scrutiny from state legislators, a trend that may further complicate the efforts of merchants and processors to capitalize on the cards. Eight states in 2007 passed laws regulating expiration dates or fees linked to gift cards, bringing to 37 the number of states with such statutes, according to Stateline.org, a reporting service of the Pew Charitable Trusts. Thirty states have set limits on expiration dates or fees, while seven require that fees and expiration dates be disclosed, the service reports.
