More than $127 billion is spent on gift cards each year — and you know what that means — fraudsters are paying attention.
Gift card fraud isn’t quite as sexy as credit card fraud or data breeches because gift cards don’t involve personal identification, but it is a growing fraud industry nonetheless.
It is growing in popularity for a few reasons, including low dollar amounts mean a lower chance of prosecution, the simplicity of the crime and it’s easy to convert gift cards values into cash and merchandise.
There are three main ways that gift card fraud happens according to CardCash.com: Hacking gift card issuers, stealing card numbers, and using stolen credit cards to buy gift cards in bulk.
With electronic data fraud at an all-time high, fraudsters are working overtime to turn their stolen data into cash, and fast, and gift card fraud is an easy way to launder that ill-gotten money.
One scheme out of Florida saw a criminal purchase up to 45,000 gift cards in person and online and then sell those cards on gift card exchange websites. In all, the criminal racked up $7.5 million in profits.
With digital gift cards expected to comprise of more than 10% of the entire gift card market by the end of this year, it’s a hot market on the rise.
Merchants who haven’t completed the liability switch to EMV transaction processing are specifically susceptible to and liable for gift card fraud — twice over.
First, a fraudster walks into a store and uses stolen credit card data to buy gift cards, and since the merchant isn’t EMV compliant, that transaction is fraudulent and the merchant is liable. Then the gift card — for which the merchant was never paid for in the first place — makes its way back into the merchant’s store and is redeemed.
To make matters worse, according to Vantiv, 62% of gift card fraud is actually committed by employees. Implementing comprehensive standards and practices for employees that sell gift cards can go a long way to preventing theft.
Gift card fraud — called “the currency of criminals” by the Internal Revenue Service — can hit any size business pretty hard, but businesses with a strong, protected gift card program can manage the threat.
Contact National Merchants Association today to add a gift card program to your business that fights fraud while helping increase customer loyalty and positively affect your bottom line.
Call (866) 509-7199 today.