Today customers want speed, ease and convenience— and digital gift cards are one way to ensure you gift your loved ones without having to offer a physical item on holiday season. E-gift cards are the present day trend. They record a 200-percent growth rate per year which makes them the fastest growing sector in the $127 billion gift card space— but also places them at the top of the fraudster’s list.
Digital gift cards offer numerous loopholes for cybercriminals to rip-off innocent victims. For merchants, the challenge is to provide digital gift cards without exposing their customers or becoming easy targets for fraud.
Stay ahead of fraudsters by learning six ways they may attempt to exploit your digital gift cards this festive season:
Stealing gift card information from resellers
A fake shopper requests the seller to make a three-way phone call with the merchant to confirm the gift card balance. The phony buyer eavesdrops on the phone and listens to the seller enter the gift card number, the fraudster records the sound of the touch tone and later listens to it to decode the gift card number.
Luring buyers with free gift cards
Cyber-thieves know that businesses give away free gift cards online to customers who agree to respond to a survey. In one case, a victim was requested to pick one gift card, but instead of filling a questionnaire, he was asked to share his email address.
Benefiting from stolen credit cards
In this trick, a fraudster posts an ad for a costly item on a P2P (peer-to-peer) market, offering a lower price than retail. As soon as a buyer shows interest on the deal, the scammer buys a gift card with stolen credit card info, purchases the product online, and ships it to the shopper.
Redeeming looted rewards points for gift cards
Cybercriminals loot reward points from loyalty rewards programs or stolen credit cards which they can redeem for gift cards and eventually exchange the cards for cash.
The Office of Terrorist Financing & Financial Crime recently raised concerns about the increasing migration of more and more money launderers and terrorists to online payment services, and gift cards. There is a rapid shift to online platforms because they allow criminals move their illicit funds anonymously.
Asking gift cards as payment
Last year, the FBI warned against tricksters that request gift cards as payment for services or items bought. Fraudsters use all sorts of seller sympathies to convince buyers claiming that they’ve been hurt in the past with practices like chargebacks. As soon as the victim gives away the gift card details, all funds are withdrawn from the card, and the buyer never receives their goods.
Merchants should first prepare a strong fraud prevention system before they start offering gift cards the way they get chargeback insurance to counter chargeback fraud.
Author Bio: Electronic payments expert Blair Thomas is the co-founder of high risk payment processing company eMerchantBroker. He’s just as passionate about his business as he is with traveling and spending time with his dog Cooper.