Understanding and Avoiding Gift Card Fraud in 2018

credit card payment

There are a number of reasons why gift cards are such an appealing option for not only customers, but retailers alike. When a gift card is purchased, a retailer gets that revenue upfront. This arrangement is very beneficial for cash flow. Gift cards also encourage purchases from people who otherwise may have never considered a particular retailer. Even if you don’t know what a friend or family member wants, they can get a gift card and then let that person choose.

Gift cards are also a great way to encourage customer loyalty and repeat buying. For example, if someone makes a purchase but doesn’t use their entire card, chances are high they’ll return later to finish using it. That experience can include paying extra to cover any difference between the gift card balance and the price of what is bought.

While we could keep going about the benefits of gift cards, we’d also like to focus on a potential downside: card fraud. Card fraud has become more prevalent due to the rise of electronic gift cards. Since electronic gift cards are appealing for both retailers and consumers, we want to cover three things you need to know to protect your business while still offering your customers online gift cards.

Understand How It Happens

Statistics show that over a billion dollars are lost each year through gift card fraud. This huge number comes from criminals targeting digital assets instead of stealing physical cards. While cards that work at multiple retailers are popular targets, individual cards for smaller merchants are even bigger targets due to their often lower levels of security.

Detect Gift Card Fraud

Because electronic gift cards are usually registered to a name and email address, a good starting point for detecting fraud is to watch out for names and addresses that seem nonsensical. These are often generated by automated programs and are easy to spot. Also keep an eye on multiple purchases in succession. A thief may do an initial purchase to test a card and then make subsequent ones if the first goes through.

Prevent Fraud with Gift Cards

Like standard credit card fraud, the best starting point for preventing gift card fraud during January and beyond is to ensure you are up to date with the latest PCI-compliance security standards. Then, be sure that your offline and online point of sale system utilizes a system of checks and balances to verify gift card transactions. Finally, you’ll want to require receipts for any returns purchased on a gift card. This will ensure thieves aren’t able to steal by spoofing gift card information.

If you have any concerns about the ability of your current equipment or processor to securely handle gift card transactions, we recommend taking a look at what’s available from the industry’s leading processors.



Posted on Tuesday, January 2nd, 2018