The holidays are now upon us. Of course, against the backdrop of COVID-19, we’re looking at a season unlike anything we’ve ever seen before.
Unsurprisingly, many consumers are opting to do the bulk of their shopping online. But, while skipping out on the crowds and the chaos at the mall doesn’t sound too bad, surging COVID infections mean that big gatherings with family and friends are out of the question for a lot of us, too. And, with many consumers unable to gather in person, they’re likely to look for easy ways to give gifts from a distance.
That’s where gift cards come in.
Gift cards have been a popular option for decades now. They once had had a stigma attached to them, with many viewing gift cards as impersonal. That’s no longer the case, though; in fact, according to the National Retail Federation, 61% of Americans say gift cards are their most desired gift during the holidays. The ease of buying and sending digital gift cards, in particular, may make them the hottest commodity of 2020. After all, if you can’t meet family and friends in person anyway, the convenience of purchasing a digital gift card in seconds and sending it directly to the recipient is very appealing.
Gift Card Fraud a Major Threat for 2020
Unfortunately, many of the attributes that make gift cards appealing to buyers are the same that attract fraudsters. As the days tick down, we could see a surge in gift card fraud unlike anything we’ve ever observed.
Gift card fraud losses in the US totaled $78 million in 2018; a 105% increase over the previous year. 2019 similarly surpassed 2018’s total well before the end of the year, and 2020 looks to be even worse. Fraudsters are more than happy to take advantage of the confusion caused by circumstances related to COVID-19, and there are a number of tactics that criminals can use to conduct gift card fraud. Four of the most common schemes include:
- Buying gift cards with stolen information: A fraudster might steal a consumer’s credit or debit card information, then use it to purchase gift cards which they can either use or resell for cash.
- Account takeover: A fraudster can hack a valid user’s account, then purchase gift cards in the user’s name, cleaning out the account before the user notices.
- Loyalty points fraud: If criminals gain access to a user’s loyalty program account, and gift cards are a method of point redemption, they can convert accrued points into gift cards and vanish.
- “Pre-stolen” cards: A fraudster can walk into a brick-and-mortar outlet, grab a handful of gift cards off a rack, copy the card numbers, then hang them back up. The criminal then waits for someone to buy one and load a balance onto it, then steals the balance.
These are not the only methods criminals can employ; they’re crafty and resourceful, and are constantly looking for new ways to steal from you and your customers. So, while preventing gift card fraud is a complex matter, it’s may determine ultimately whether you have a successful holiday season or not.
Keys to Preventing Gift Card Fraud
You can tackle fraud concerns from multiple angles, including:
Store Policy: impose purchasing limits for individual transactions, as well as velocity limits, to prevent fraudsters from buying cards in bulk using stolen information. You may also impose dollar-value limits on each gift card, as it takes more effort for fraudsters to convert numerous $20 cards than one $500 card. Finally, establish and enforce consistent policies regarding lost, stolen, and damaged cards.
Verification: You can require PIN codes for gift cards, which will make theft a bit more difficult. You may also use technology to spot suspicious activity, both before and after the card purchase, like multiple gift card purchases tied to the same mailing or IP address. You can also use CAPTCHA puzzles to try and block bot attacks, and fraud scoring to automatically flag suspicious transactions.
Storage and Distribution: Store gift card account data securely to prevent hackers from gaining access to users’ information, and only transmit gift card information via secure means. For physical cards, store unloaded cards in a safe place away from customers.
Gift cards could be a great opportunity this holiday season. You need to be aware of the threats connected to gift cards, though, and understand how to counter them. Otherwise, this lucrative source of much-needed revenue could be a total waste.
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