6 Ways Brands Can Avoid Gift Card Fraud

Many brands launch gift card programs for all the right reasons: to increase sales, acquire new customers, brand recognition, customer loyalty, etc. Additionally, consumers are thriving on promotions, with 80% saying they plan to buy more gift cards in 2022.

However, gift card programs come with risks. Unfortunately, gift cards are an attractive target for criminals because they are difficult to trace and are easily converted into cash. Additionally, people who commit credit card fraud often purchase gift cards multiple times, as these transactions tend to easily pass fraud detection engines (unless the cards are purchased in bulk). Some scammers also steal items from one store and then return them to another location without a receipt, receiving a gift card for the amount of the “return”. Another way fraudsters try to “game” the system is to develop programs that constantly check the balances on random gift card codes, hoping to find a code that has a balance, and quickly use the card to make a purchase that can be easily redeemed. for money. In other rare cases, gift cards can also be stolen by store employees.

While these risks may seem overwhelming for brands, there are ways to protect your business and your customers from gift card fraud. Here are six key steps retailers can take to avoid this fraudulent activity:

1. Build a solid captcha system for your balance checking mechanisms, whether online or through Interactive Voice Response (IVR) systems.

Force a program or script to fill in a captcha, or even use speeds on how many balance checks a single user can complete in a given amount of time to ensure the balance check is completed by a customer human or real, is an excellent way to deter fraud.

2. Require customers to present a valid employee-verified ID when a gift card has been created in a Merchandise Return Credit (MRC).

This will help ensure that the same person who made the return is also using the MRC in-store to acquire new products. CRMs can also be a valuable tool to prevent the gift card provided for merchandise credit from being sold to a third party for profit. Not allowing MRC balance verification in the same way as gift cards can make it very difficult for a fraudster to sell MRC in the same way they would sell a gift card in secondary markets. If the secondary market site is unable to verify the card balance, there is usually no market for the card to be sold.

3. Make sure thieves can’t enter a store, scan gift card numbers (usually magnetic stripes or barcodes), then continually check the balances on those cards until they’re gone. find a card with a balance.

This will prevent thieves from quickly using the gift card and draining the actual purchaser’s balance from the card. To avoid this type of scam, make sure your gift cards are secured with the PIN codes needed to complete a transaction, including security seals for the code itself, which can easily be detected as tampered with. You can also use tamper evident packaging for your gift cards. It is important to note that most gift card printers offer these options to secure the codes, but there may be an additional cost for printing the cards. However, it is well worth the extra cost to protect your customers from a bad experience and your brand from financial loss resulting from fraud.

4. Place guarantees around the sale of gift cards in-store and online with employees.

Treat your gift cards like cash and make sure you have the right checks and balances procedurally with employees to protect your brand from disgruntled employees who may try to activate gift cards for their own use. Monitoring as simple as a detailed inventory and/or management approval of gift card sales is a good method to deter this type of fraud.

5. If you sell gift cards digitally, be sure to use the best anti-fraud merchant processing tools to reduce the risk of stolen credit cards being used to purchase your gift cards.

There are a variety of proven tools on the market that will monitor activity and leverage stolen credit card blacklists to prevent your gift cards from being purchased from fraudulent buyers. Tools like Forte, Riskified, and Cybersource do an exceptional job of limiting these transactions to even take on the financial liability with additional fees.

6. Outsource your gift card program to a company that has the expertise and focus to manage and navigate the fraudulent gift card market.

It is very difficult for a brand, which is focused on its core business, to also properly run a gift card program, which has made gift card program outsourcing so popular. Partnering with a gift card issuing and management provider can not only help brands navigate all aspects of fraud, but also grow programs through distribution and manage regulatory issues.

Gift cards are a great tool for brands to increase sales, retain loyalty, and acquire new customers. To get the best return on investment from your gift card program, your brand should treat gift cards like cash and use the appropriate safeguards to ensure that financial losses don’t outweigh any financial losses. benefits of the program.

David Jones is the CEO and co-founder of TOTUS, a leading company in the issuance and comprehensive management of multi-channel gift card programs for brands in various industries.

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