Gift cards are the ultimate gift for any occasion. Not only do they bring various benefits to the business owners, like simplicity, convenience, profit, and customer retention but they are also great for a buyer since they can quickly and without much hassle select a perfect gift for anyone. Gift card recipients are also happy to receive the gift card as they can choose their present themselves and if they are not familiar with the retailer the gift card was purchased from they might even be introduced to a new favorite retailer. Unfortunately, most of the benefits that make digital gift card fraud simple and convenient, make them so popular with fraudsters.
What is gift card fraud?
Gift cards are anonymous, easy to buy, transfer and use, they are not traceable, which is why it comes as no surprise why cybercriminals and fraudsters consider this a perfect way to conduct their malicious actions. There are so many different ways in which SEON Technologies explains, how gift card fraud can be accomplished.
Account takeover – Cybercriminals use stolen credentials to gain access to users’ accounts, either the bank or online shopping ones, which they use to purchase gift cards. Before the account owner even realizes their account was compromised, fraudsters have already sold or spent the purchased gift cards. Similarly, they can gain access to merchant accounts with brute force database hacking, data breaches, malware attacks, or even by using phishing techniques to trick employees to give them access. Not surprisingly, reports have shown that about 81% of data breaches happened due to poor password hygiene which is why it is essential to implement a detailed password security policy and educate your employees about its importance.
Using stolen card data – Using stolen credit card data to buy gift cards and using or reselling them before the original credit card owner discovers the fraud is more convenient for fraudsters than just transferring money or buying something else online as it is almost impossible to trace.
Return or refund fraud – A fraudster will use stolen credit card details to make an online purchase from your store but they will cancel it after it is processed. They will ask to receive their refund in the form of a gift card as they are anonymous and untraceable. This way they have stolen the money from the original card owner who disputes the charge with their card provider financially damaging the merchant.
How to protect your business from gift card fraud?
It is imperative that every business that offers gift cards learns the best ways of defending itself against fraud threats. Here are a few steps explaining how you can prevent gift card fraud.
Conducting a regular risk assessment
By conducting regular risk assessment, not only you will be aware of all the risks your company might face, learn where your weak sides are and what can you do to patch up any vulnerabilities you find. Use your findings to create an efficient plan of what you can do to prevent gift card fraud or other types of cyberattacks and to introduce proper security practices but also to create a reaction plan of what to do in case you fall victim of a fraud or an attack.
Introduce better security protection
According to the Federal Trade Commission in the first nine months of 2021, they have seen more losses from gift card scams than they did in all of 2020. This is why every business needs to implement proper cyber security protocol that will allow them to protect themselves from gift card fraud, but also other types of cyberattacks.
Keep a track of gift card data
By monitoring and keeping track of the gift card data that goes through your system, you will be able to identify patterns that indicate the legitimate purchase, and the ones that might indicate the gift card is being used by fraudsters. If the merchants know what red flags to keep an eye on like a gift card being activated shortly after it was purchased, they will have a better chance of preventing the gift card fraud from affecting their business.
Gift card fraud is becoming more and more popular. By monitoring your gift card program, implementing proper security measures, and using common sense, you will be able to significantly reduce the chances of your business falling victim to fraud.
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