Gift cards are a powerful tool for brands as they can help increase customer engagement and generate new revenue streams, which is crucial given that retailers often operate with limited margins. As their popularity continues to grow, particularly during the bustling holiday season, so does the attraction from scammers and fraudsters.
By implementing effective safeguards - from manufacturing of the physical product to redemption of card balances - brands can not only protect their business against fraud but also build trust and confidence amongst their customers.
With £13.5 million lost to gift card scams in the UK in 2023, and 71% of GCVA members noting increasing consumer concerns, addressing fraud proactively is more important than ever.
In this blog, we’ll explore a few key strategies that can reduce the risk of fraud.
Understanding common gift card fraud tactics
Fraudsters employ various tactics to exploit vulnerabilities in gift card systems, with physical tampering being one of the most common methods. In stores, scammers may compromise the packaging exposing redemption information, before placing the gift cards back on the shelves. When unsuspecting customers purchase and activate these cards, the scammers will automatically drain the balance. This scam prays on gift cards that are gifted and so not immediately redeemed, leaving recipients disappointed and embarrassed.
Best practices for prevention:
- Staff training: Educate employees to spot tampered packaging and monitor suspicious activity.
- Tamper-resistant packaging: Use packaging designs that hide the redemption information with scratch or pull tabs which show obvious signs of compromise. This way, it’s immediately visible if a gift card has been tampered with and you can act quickly.
- Customer education: Educate customers to spot the signs of tampered gift cards and kindly ask them to report them.
Digital gift cards: A safer alternative?
Digital gift cards sidestep physical tampering altogether, aligning with the increasing consumer preference for online gift card purchase and redemption. However, these cards aren't immune to fraud. They can be purchased using stolen card information, resulting for instance in chargebacks and gift card data can be compromised. Strategies like deploying two-factor authentication tools, AI technology that detects and prevents brute force attacks, using alphanumeric redemption details and non-sequential data are critical.
Securing the fulfilment process
The fulfilment process is a critical point in the journey of a gift card, and ensuring its security protects both brands and consumers. Processors are a brand best ally when it comes to significantly reduce the risk of data being intercepted - this is because processors implement modern technology to ensure secure data transmission, including Secure file transfer protocols (SFTP). All good processors should also be PCI DSS compliant, meaning they can store, process, or transmit cardholder data securely. Regular audits of fulfilment procedures also play a key role in identifying and addressing potential vulnerabilities, ensuring a seamless and secure experience.
By creating an airtight fulfilment system, brands can minimise the risk of fraud and demonstrate commitment to customer safety.
Want to learn more about protecting your program?
Join our free online course and receive weekly lessons straight to your inbox, packed with practical tips and strategic advice.
Strengthening authorisation and monitoring systems
Fraud prevention doesn't stop at card issuance. Securing gift card activation and redemption processes is equally critical. Validation measures, such as two-factor authentication, add an extra layer of security to these processes. Similarly, using randomised, non-sequential card numbers makes it much harder for fraudsters to exploit gift card systems through brute-force attacks.
Monitoring tools provide further protection by identifying unusual trends, or increased transaction volumes, at both the activation and redemption stages. For example, sudden spikes in activations could indicate fraudsters using stolen credit card details to purchase gift cards. At the redemption stage, a single account quickly redeeming gift cards, or activating and redeeming them from several different locations and sales channels, could signal potential fraud.
Brands can analyse historical data to anticipate and block cards before the fraud escalates. With these measures in place, brands can stop fraud in its tracks, protecting both their revenue and reputation.
Combating phishing and victim-assisted fraud
Gift cards are susceptible to phishing and victim-assisted scams, such as the notorious "CEO scam," where fraudsters impersonate executives to coerce employees into buying gift cards.Let’s take a look at some preventative measures:
- Customer communication: Emphasise treating gift cards like cash and never sharing redemption details.
- Reminders in T&Cs: Include warnings about legitimate gift card uses in all product materials.
- Staff training: Equip store staff to recognise and challenge unusual purchases.
Proactive education helps customers and staff stay alert, creating a first line of defence against fraud.
Supporting customers affected by fraud
Even with robust safeguards, some customers may still fall victim to fraud. Handling these instances with care is crucial to maintaining trust and loyalty.
How brands can support consumers:
- Freeze compromised cards and work on fund recovery efficiently.
- Approach fraud victims with empathy and a focus on positive outcomes.
- Offer straightforward mechanisms for reporting fraud and a clear guidance on next steps.
A supportive response not only helps affected customers but also reinforces a brand's commitment to their security.
Enhancing the gift card experience with Edenred Payment Solutions
In the fast-evolving world of digital gift cards, having a robust technology foundation is essential to delivering seamless and secure experiences. We have been working with brands for over two decades providing the robust processing infrastructure that powers every step of the gift card journey, from initial activation to balance enquiries and mobile wallet integrations.
Our APIs are designed to simplify gift card processing, offering brands the tools they need to ensure efficient transactions and smooth customer experiences. Whether it’s enabling easy redemption, ensuring accurate balance updates, or supporting the addition of gift card codes to mobile wallets, our solutions our built to adapt to the growing demand for digital convenience.
By leveraging reliable technology, brands get to focus on what matters most: delivering a secure gift card program that strengthens customer loyalty and drives revenue.
In conclusion
Fraud is a challenging aspect of gift card programs, but it is possible to tackle it. By understanding common scams, securing every step of the process, and educating both staff and consumers, brands can build a resilient gift card initiative.
A proactive approach ensures that gift cards remain a safe, convenient, and valued payment option for consumers while protecting brand integrity. Investing in fraud prevention today paves the way for secure and successful gifting experiences tomorrow.
Develop a gift card program that's right for your business
Whether you're starting from scratch or refining an existing program, our free online course gives you all the practical and strategic advice to succeed, with weekly lessons, packed with industry contributions and data-backed insights, delivered straight to your inbox.
