The popularity of gift cards has been on the rise in recent years. For customers, gifts cards offer an easy way to avoid returns and the hassle of dealing with customer service and many businesses are using them as a way to promote their brand or special deals. However, there is a downside to this popularity.
There has been an increase in gift card fraud in recent years which leads to an alarming increase in the number of people who are falling prey to fraudsters. Although dark web scanning can help to mitigate this fraud and track if any personal information is being sold on the dark web, many people and companies are still not aware of the importance of regularly monitoring the dark web.
Nevertheless, cybercriminals continue to be clever in deceiving everyone into thinking that gift card offers are authentic. Here are some of the most common types of gift card fraud that have risen to prominence in recent years:
- Physical Gift Card Fraud
- Digital Gift Card Fraud
In the case of physical fraud, someone steals a stack of cards from a store or an office and then either uses them or resells them on the dark web. This type of fraud is more difficult to commit because it requires the criminal to have access to the physical card.
Digital gift card fraud is more common and easier to commit. In this type of fraud, the criminal uses a stolen credit card or account information to buy gift cards online. Once they have the codes for the cards, they can either use them themselves or resell them on the dark web.
How Gift Card Fraud is troublesome for Businesses and Customers
1. Businesses lose money
The first way that gift card fraud causes trouble for businesses is that it costs them money. The business loses money when a customer’s credit card information is stolen and used to purchase a gift card.
In addition, if the fraudulent purchase is made using a stolen credit card, the business will also be responsible for the chargeback fees which can range from $20 to $100. Since 2018, gift card fraud has caused $240m in losses across the United States. Furthermore, if the customer’s information is stolen in a data breach, the business could be liable for damages.
Businesses suffer from reputational damage
Another way that gift card fraud can cause trouble for businesses is by damaging their reputation. If a customer’s information is stolen and used to commit fraud, the business will likely suffer from reputational damage.
This is because customers will be less likely to trust the business with their personal information and may take their business elsewhere.
In addition, if a business is the victim of a data breach, it will suffer from reputational damage as well as financial losses.
- Accessible to everyone
Gift card fraud is also troubling businesses and customers alike because it is accessible to everyone. In contrast to credit card fraud, gift card fraud does not require a high level of sophistication.
All a criminal needs is a stolen credit card or account information and they can commit fraud. This means that even novice criminals can commit gift card fraud, which makes it all the more difficult to prevent.
- Forced to change gift card policies
Another way that gift card fraud is causing trouble for businesses is by forcing them to change their gift card policies. In order to prevent fraud, many businesses are now requiring customers to provide identification when they purchase a gift card.
This can be inconvenient for customers and may cause them to take their business elsewhere. In addition, businesses are also starting to limit the amount of money that can be loaded onto a gift card and the number of cards that can be purchased at one time.
These changes can be frustrating for customers and may cause them to shop elsewhere for their gifts.
How to Prevent Gift Card Fraud
While gift card fraud is certainly a cause for concern, there are a few things that businesses and customers can do to prevent it.
- Teach staff members the rules and regulations about the gift cards scams and what could be raised as potential “red flags” and causes for concern.
- Implement fraud prevention measures such as requiring a PIN for online purchases
- Monitor gift card activity for suspicious behaviour
- Delay the delivery of online orders to ensure the customer’s information is valid
Final Thoughts
To prevent gift card fraud, it is important for consumers and businesses alike to be aware of the different ways that gift cards can be compromised. It is also crucial to take steps to protect yourself against such scams.
It’s important to remember that prevention is key. Stay vigilant when purchasing or using gift cards and be sure to keep an eye on your statements for any suspicious activity. If you do suspect fraud, report it immediately. The quicker we can catch these criminals, the less damage they will be able to inflict on consumers and businesses alike.