When we think of gift cards, our closest association to this item is probably a gift. But for thieves, the gift card industry really is a gift that keeps on giving. Every year, criminals use gift cards to make millions of dollars of ill-gotten gains.
Just recently, eight traveling gang members stole millions of dollars by using cloned credit cards at Walmart stores across the US to buy gift cards, sometimes reaching more than $100,000 in cards in a single day and then reselling them in Michigan, according to authorities, reports Freep. This is just one example. According to Pymnts, thieves often begin preparing early for the most wonderful time of the year to commit gift card fraud, Christmas. And they have already begun.
Gift cards and loyalty programs are excellent ways for criminals to make money. Thanks to the competitive nature of retail, merchants and brands often increase their loyalty programs, making transfers and use of points easier, which can add up to large amounts and make the return on investment a goldmine for fraudsters. What’s more, stolen gift cards can be resold online, via Craigslist or other channels. To combat this, innovative startups are using new methods and technology to enable businesses to utilize gift cards, while reducing rates of fraud.
For example, Jifiti, a leading branded gifting solution for retailers and brands utilized by companies such as IKEA, NIKE and American Greetings, uses state-of-the-art technology which allows for the most accurate detection of fraud, reducing the number of declined transactions to only 2%. The startup’s impressive methodology boasts an impressive success rate, achieving 98.14% overall approval rate, 98.71% approval on mobile and only 0.2% chargebacks. Gift cards have constantly played a back and forth between serving customers and fighting fraud as Shaul Weisband, Co-Founder, and CMO of Jifiti states.
“Gift cards went from paper certificates (started by Neiman Marcus and Blockbuster, but was destroyed by fraud when color printers became widespread), to plastic to digital. As of 2018, retail gift cards has grown to a $160B market annually in the US. The explosion in gift card growth is due to the challenges in gifting – knowing what a person wants, product details such as size/color/style, and knowing a shipping address. These barriers made gift cards the most convenient and easy gift. Gift cards have also become the most requested gift during the holiday season – due to the flexibility they offer and recipients not needing to get stuck with something they don’t want or need to return. Our surveys and focus groups have shown that while 86% of consumers prefer to send a real and thoughtful gift, they still prefer to receive a gift card,” states Weisband, according to The Sociable.
Clearly, gift cards have faced fraud since the dawn of their inceptions, and thanks to evolving technology, stores can stay one step ahead and counter the attacks of fraudsters around the world.