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Fraud prevention for your gift card program
December 27, 2021

Fraud prevention for your gift card program

5 Things to Know About Gift Card Fraud Prevention


Gift card fraud isn’t just a financial issue. It’s a matter of trust and confidence between retailers and their customers. Because consumers continue to prefer gift cards as a favorite way to give and receive, it falls on retailers to ensure a safe and seamless customer experience. That means confronting fraud realistically, intelligently, and diligently.


While gift card fraud is a shadowy business, there’s a lot we do know about it. And there are many things we can do to help prevent fraud from becoming a problem for your customers and your bottom line. Here are five things we know.


1. Gift card fraud is a worldwide mega-business.


The Internal Revenue Service calls gift card fraud “the currency of criminals,” because it is a relatively low-risk way of stealing large sums of money, in small increments, from companies and their customers. A conservative estimate has gift card fraudsters raking in up to $3 billion every year in the United States alone. This makes fraud prevention worth your investment.


2. Fraudsters make their money on low-hanging fruit.


If you know the old story about the two hunters who are confronted by the grizzly bear, you already understand the first step to avoiding gift card fraud. One hunter says to the other, “I don’t have to be faster than the bear; I just have to be faster than you!” The same goes with fraud. The harder and more expensive it is to crack your fraud prevention measures, the more likely it is the fraudsters will pick on somebody else.


3. The burglars are bots.


Far from being geeky losers in their mom’s basement, the vast majority of “hackers” are malicious bots – software applications programmed to attempt and execute fraudulent transactions. Attacks may range from a few transactions per minute up to over 30,000. One recently documented attack lasted more than 24 hours, resulting in 19 million bad transactions in one day.


4. Technology is getting ahead.


The best way to defend against bot attacks is adaptive bot protection, usually in the form of a purchased solution, which identifies and stops malicious automation. Other effective anti-fraud technology solutions include velocity monitoring, PIN velocity locks, and heuristic and AI algorithms that recognize, learn, and respond to suspicious activity. Your giftcard provider/partner should be able to offer a robust and comprehensive fraud prevention strategy as part of their core offering.


5. Don’t forget the basics.


Fraud won’t go away until it’s no longer lucrative for the perpetrators. The best way to protect yourself and your customers is to practice all the proven basics that make it more expensive and more time consuming – and thereby less profitable – for the fraudsters to operate in your space. There are lots of them, but here are the top three:


PIN Diligence

Require a PIN on all forms of gift cards; Require the PIN for all in-store transactions where a mag stripe or SSC is not present; Require the PIN on all online, mobile, wallet transactions.


Secure Balance Inquiries

Require a PIN for all balance inquiries; use PIN velocity locks; block cards with balance inquiry before first time credit; use velocity monitoring and limiting.


Redemption Protocols

Create redemption protocols that require all security measures are followed, and ensure that in store employees are fully trained; implement PIN protocols for online and mobile transactions.


The Bottom Line of Defense


Providing an extraordinary customer experience includes keeping your customers’ gift cards secure and transactions seamless and safe. SVS is eager to talk to you about ways we can help you protect your consumers with our products, programs, and best practices.