What is gift card fraud?

Gift card fraud happens when fraudsters access the activation codes on gift cards and use them to make purchases with little to no tracking.

The most common tactic fraudsters use is card-not-present fraud, where stolen account data is used to buy gift cards online. Sometimes they even have enough information on the victim to take the grift a step further and ask for a refund or exchange for the gift card, which initiates a chargeback for the business. In some cases, fraudsters hack into loyalty accounts to convert points into digital gift cards.

Fraudsters also use bots to search for keywords in emails and texts that signal the transmission of a gift card. In those cases, the fraudster accesses the gift card information without the user knowing. It’s not until the customer tries to redeem their gift card that they find out the balance is no longer available.

Preventing gift card fraud

Companies can use a few tactics to prevent gift card fraud:

  • Track gift card data from purchase to redemption to flag unusual behavior such as instant activation.
  • Place gift cards in a place where their activation numbers can’t be compromised, such as behind the counter.
  • Cross-check gift card fraud with employee activity to look for fraud flags.
  • Delay card activation to be the very last step.

Gift card fraud happens when fraudsters use a tool that allows them to remove the scratch-off section that hides the unique card number. They can then replace it with a sticker that makes the card look untouched.

From there, the fraudster performs daily checks on the gift card numbers they’ve stolen. Once one of those cards has been purchased and activated at the cash register, it’s only a matter of hours or even minutes before the fraudster realizes they have a valid card in hand – and they waste no time from there.

Gift cards are popular with fraudsters because they are anonymous, untraceable, and act like digital cash. Converting gift cards into merchandise is easy.

Related Topics

Ecommerce Fraud Basics

Chargeback Management

Related Resources

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