Retail Gift Card Association Offers Tips to Prevent Gift Card Fraud

Retail Gift Card Association Offers Tips to Prevent Gift Card Fraud

November 19, 2020

With the busy holiday shopping season coming up in a few days, the Retail Gift Card Association (RGCA) is offering merchants suggestions for mitigation strategies to help prevent fraud and scams that involve gift cards.

According to the National Retail Federation, gift cards have been the most popular gifts in America for 14 years in a row—in addition to being popular incentives and rewards. According to Fiserv, 64 percent of people even buy gift cards just to spend on themselves.

Because of their popularity, gift cards are also a common target of scammers. Without the proper safeguards in place, criminals can abuse gift cards, just as they can abuse debit cards, credit cards, or checks, noted RGCA in a release.

RGCA recommends the following fraud prevention tactics to safeguard their programs and protect shoppers:

Card Data & Technology:

  • Incorporating randomized PIN codes on gift cards.
  • Using technology that flags suspicious activity before, during and after activation and redemption.
  • Using complex algorithms to prevent gift card data replication.
  • Using online service providers to create algorithms that can evaluate whether a purchase is being made by a cardholder or fraudster.
  • Only using supply chain partners that employ strict security protocols for handling card data and inventory.
  • Requiring multi-factor authentication (MFA) that adds an extra login step to ensure the person trying access or use gift cards is the rightful owner of the balance.
  • Using software like CAPTCHA and bot managers during gift card purchase and registration processes. CAPTCHA is a program that distinguishes human from machine input to protect websites from bots that fraudulently extract gift card data.
  • Using packaging techniques to cover and protect card data, magnetic stripes, and gift card PINs.
  • Using print and material techniques that make it hard to counterfeit gift cards.

Training:

  • Educating cashiers about how to inspect gift card packaging for tampering before selling to consumers, watch for suspicious buyer behavior like purchasing gift cards in large quantities, and recognize other cues of fraudulent activities.
  • Ensuring cashiers do not activate or sell gift cards that have exposed PIN numbers.
  • Making sure there are defined escalation steps to respond to fraud quickly when it does occur so retailers can shut it down.

Packaging:

  • Using packaging techniques to cover and protect card data, magnetic stripes, and gift card PINs.
  • Using print and material techniques that make it hard to counterfeit gift cards.

Store Policies:

  • Regularly re-examining and updating return policies to prevent fraudsters from being able to return stolen merchandise for store-issued gift card refunds that can be re-sold to unsuspecting consumers.
  • Continually reviewing cashier training and point-of-sale (POS) processes to implement safeguards and controls at the time of purchase. This includes measures that are intended to keep fraudsters from being able to manipulate checkout systems and new cashiers. For example, limiting or eliminating cashiers’ ability to manually enter card numbers during purchases and turning off gift card purchases at remote registers overnight.
  • Practicing and clearly communicating requirements for lost, stolen, and damaged cards that require proof of ownership.

Cooperation & Partnerships:

  • Cooperating with distribution partners to investigate potential fraud.
  • Working with reputable gift card exchanges and gift card malls as authorized gift card sellers.
  • Cooperatively coordinating with law enforcement to identify and prosecute fraudsters.
  • Sharing best practices with consumers to help them recognize and avoid fraud.
  • Working with your social listening team to monitor key words that may indicate fraudulent activity (e.g., gift cards at 50 percent off).

Distribution:

  • Storing physical gift cards in secure locations before they are activated and distributed to retailers or gift card malls.
  • Vaulting and transferring e-gifts using file-protected and encrypted methods.
  • Mailing inactive cards to their final destinations and activating once the purchaser validates the receipt of the cards.

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Joan Goodchild

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