[Editor’s Note: September is E-Gift Card Fraud Month at Card Not Present (sponsored by Kount). Gift cards have become a popular go-to gift all year long and digital versions are growing especially quickly. But, as is the case with just about every kind of online transaction, the more they grow, the more opportunities criminals have to leverage them fraudulently.]
The Internet has created new markets, spurred technology innovation and acted as a catalyst to the digital economy we live in today. A form of payment embraced by consumers is e-gift cards, the digital form of a standard gift card. Digital gift cards are easily purchased and shared from one consumer to another and have resulted in a significant online financial boom. This is not a small market—most anticipate that gift cards will reach $160 billion in 2018.
E-gift cards are one of the most targeted entry points that fraudsters probe for weaknesses and they take full advantage. With the holidays quickly approaching, it is important that online businesses plan ahead now to prevent fraud. Cyber-criminals that defraud merchants today use advanced technology, openly share best practices, and often leverage secondary online marketplaces that are readily accessible to turn stolen goods into quick cash.
Secondary marketplaces are a hotbed of activity for fraudsters. Fraudsters to use stolen credit card details to purchase e-gift cards and then resell them at discounted rates to innocent shoppers on secondary marketplaces. This has a compound effect as credit card holders are defrauded, shoppers are defrauded, merchants are defrauded, and the e-gift card recipient is defrauded.
With innovations continually introduced into digital channels, fraudsters are lurking to test a merchant’s fraud prevention solution, policies, and processes. Online businesses need to be aware that cyber-criminals are not typically individuals, but rather crime rings whose combined actions are focused on defrauding individual brands and sectors as part of a well-orchestrated larger criminal intent.
Another form of fraud that plagues online merchants is card testing. Card testing is a common tactic used by cybercrime rings that target digital gift cards. Fraudsters buy stolen credit card details on the dark web and then test these details with small e-gift card purchases. The collective costs of these small purchases can add up. If not stopped, card testing results in repeat attacks, bot attacks, or simply word of mouth in the underground community that fraudulent purchases are getting approved.
Online businesses need to put e-gift cards through the same process as all other card not present transactions. Retailers need to be able to apply separate business rules that allow e-gift cards to be better prioritized and reviewed. An example of introducing a rule would be a retailer suspending e-gift card codes from being delivered if the order is flagged for manual review. A retailer should be able to track the entire lifecycle of the digital gift card from purchase to redemption.
The best fraud prevention involves a multi-faceted approach that deters fraudsters at every point of entry. Learn how New Balance prevents e-gift card fraud by attending the “7 Little Known Ways to Prevent e-Gift Card Fraud” webinar.