Work with retailers to combat gift card fraud

Gift card fraud affects people of all ages, costing the average victim $1,000. Young victims are twice as likely as older adults to lose money, but adults aged 70 and over tend to lose larger sums. Although losses from gift card fraud may be lower than other payment mechanisms, the loss of $1,000 would be potentially debilitating for about one in three US households who report having difficulty covering even- what a $400 emergency expense. Since the start of the pandemic, gift card fraud has rapidly increased, with reported cases more than doubling in frequency.

This report offers an overview of gift card fraud from different angles before providing an assessment of the industry’s role in the response, both currently and in terms of future opportunities. This assessment is based on a series of 1:1 interviews and surveys with more than 30 industry representatives, as well as a comprehensive review of research and data from the Federal Trade Commission, non-profit organizations lucrative, AARP and industry associations.

Gift card fraud and its victims

This type of scam can take many forms. Most often, a scammer contacts a person with a phone call, email, text, or social media post claiming to represent a company the person may do business with, such as a bank or electric utility local, or claims to be an IRS investigator. They use an urgent message, such as “Your bill is overdue” or “You owe additional taxes”, to convince the person to make an immediate payment by wire transfer or gift card. In other scenarios, the scammers claim to be from “tech support” or a dating site, or a relative.

While anyone can fall victim to a scam, AARP’s research identified some specific environmental and emotional factors that were more common among fraud victims in general, factors that have been more prevalent during the pandemic: stressful life events; less family support, connection; stronger emotions; several attempts; financial stress.

Behavioral Intervention: The BankSafe Link

A major study of victims of scams and fraud found that more than half of people who reported a third party intervention could avoid losing money. This encouraging discovery is why AARP created the BankSafe Training Program, an interactive online platform with response resources that provides tools and training to frontline employees to detect potentially fraudulent situations, especially with older clients, before their money leaves their account.

Based on the effectiveness of BankSafe training, AARP has launched two new training and other response resources aimed at equipping key U.S. retail employees with the tools to spot and stop the exploitation of gift cards and bank transfers. The Gift Card and Wire Transfer iterations of the training are 15-minute courses featuring 11 activities that include interactive videos, game elements, a resource library full of tools and assets, and much more.

Keys to Fighting Gift Card Fraud

Given the complexity and dynamics of how gift card fraud operates, stopping it will require the commitment of all key players – consumers, retailers, non-profit organizations, industry, regulators and law enforcement. The research focuses on three key strategies: consumer education, retail employee training, and point-of-sale improvement.

Point of sale (POS) enhancements

As mega-retailers who have invested in technology know, point-of-sale enhancements based on artificial intelligence and other technology tools that alert employees to suspicious transactions are highly effective in thwarting gift card fraud. . Not only do these tools prompt an employee to remember their education and training, but they also show a level of company concern that the employee can signal when engaging with the potential victim, allowing the situation to illustrate customer service – not bad customer service.

Employee training and policy for refusing suspicious gift card transactions

Retailers could provide a critical safety net for consumers attempting to purchase gift cards in fraudulent situations. The two most powerful tools for a retail employee to prevent a consumer from being scammed are:

  • What behaviors to look out for (eg, buying multiple cards from the same brand, being on the phone throughout the transaction attempt, appearing anxious or agitated).
  • What to tell the consumer when they see red flags of gift card fraud.

Alongside employee training, the establishment of a policy that allows employees to decline a suspicious gift card purchase is critical.

Consumer Education

The more educated consumers are about gift card scams, the better able they will be to evade engagement with the perpetrators and avoid the problem before it even starts. The objectives of consumer education efforts by all stakeholders should be to teach consumers:

  • Not engaging with an abuser when contacted.
  • How to identify the scam if engaging before buying gift cards.
  • To listen to a friend, family member or retail employee when they intervene to prevent fraud.

Many thanks to those who participated in this research, including the Defined Contributions Institutional Investment Association, GBSM, representatives from major retailers and industry associations.

Suggested quote:

Gunther, Jilenne and Debra Bailey Whitman. Work with retailers to combat gift card fraud. Washington, DC: AARP Public Policy Institute. March 2022.

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