Gift Card Fraud: Is Your Business at Risk?
If you’re like many business owners, you love the idea of gift cards. They’re easy to sell, make great impulse buys, and you get to pocket the money upfront without having to part with any inventory. In many cases the recipient will never use their gift card, letting it expire while you keep the cash AND the inventory. Plus, even when cards do get used, most aren’t spent down to the last penny. That extra revenue adds up over time! However, with the rising popularity of gift cards comes a spike in fraud concerns. Here’s how to safeguard your business.
Why Is This Such a Big Deal?
To put it simply, gift card fraud is on the rise due to the proliferation of electronic options. When a physical card is stolen or compromised, the damage is contained to that one customer. Plus, since the card was purchased legitimately, you get to keep the revenue. Good customer service practices might suggest providing some sort of compensation for the customer, but you will still likely come out ahead. E-gift cards are another issue entirely. If a thief is able to hack into your gift card database, they can nab the card details for all of your cards – including ones that haven’t been issued yet! They can then redeem the cards for products and services, which you will essentially be giving away for free. On top of all this, there are refund and chargeback headaches to deal with once the fraud is uncovered. It’s far better to prevent fraud in the first place.
How Do I Know If My Gift Cards Have Been Stolen?
The smartest business practice is to keep an eagle eye on the names and email addresses used when customers redeem electronic gift cards. Criminals are counting on you not noticing when their names and email addresses are basically just gibberish – if you see a red flag, put the purchase on hold until you’ve had a chance to dig into it more deeply. Secondly, if you see several purchases in rapid succession with the same card, pay attention. Don’t be fooled if the transaction amounts are small. Criminals are testing you to see whether you will catch them. Finally, unused gift cards are often bought and sold with alarming frequency, through both legitimate and illegitimate means. This makes it difficult for business owners to keep track of who is the rightful redeemer of a gift card. You can stay ahead of the game, however, by keeping a good log of gift card purchasers. When a card is redeemed with a name or email that doesn’t match what you have on file, take a bit of time to investigate before allowing the transaction to be approved.
How Can I Keep This from Happening?
Stopping gift card fraud once it starts is a very tall order. It’s much simper to prevent it in the first place through strong security practices. Make sure that you’re following the most up-to-date PCT compliance standards and that your credit card processor is doing the same. Keep your computers, networks, shopping carts, and gateways updated with the latest security patches and virus protection software. Criminals can use viruses to probe deep into your network and find your e-gift card database if given the chance. Make sure your employees are using strong passwords that are changed regularly and stored securely. One lame password and your entire gift card operation is at risk! Finally, upgrade your encryption services so that your gift card (and credit card) information is hard to find and even harder to steal. If you lack the necessary technical savvy, consider hiring an outside firm that specializes in data security to help you with this.
You Don’t Have to Do It Alone
These changes will almost certainly result in higher costs to your organization as you implement stronger security practices. If you’re feeling overwhelmed, remember that you have a partner in all of this. Your credit card processor can explain potential risk factors and help you put best practices in place. If your processor seems ill-equipped to help or uninterested in doing so, it might be time to start shopping around. 360 Payments offers a different approach to credit card processing, one that starts with education and proactive problem solving. Give us a call at 1-855-360-0360 or drop us a line on our website. We’d love to show you why our customers love us!
PS – Here are some other ways to protect your business from online fraud.
PPS – So your PCI compliance scan failed, huh? Here’s why that might have happened.