The holiday season is now upon us. For businesses in the retail space, this time of year can mean an increase in sales, a chance to grow, and the potential for theft. Of the various type of fraud that merchants combat each day, gift cards are quickly rising on the list as one of the biggest threats from fraudsters.
With billions of dollars being spent each year by consumers on the purchase of gift cards, it was only a matter of time before this industry would become one criminals were targeting. Even if the end profit is less than a hack or credit card scheme could bring, it’s still fairly easy to convert the gift cards into cash and other merchandise so criminals have caught on and are already doing serious damage- about $72,000 worth according to reports.
Gift cards are an increasingly popular option for gift giving because it takes the stress away from shoppers on having to decide on the perfect gift and with holidays nearing, now’s a great time to talk about how to protect yourself from potential losses.
How Does Gift Card Fraud Happen?
Some of the ways that gift card fraud happens include the use of a stolen credit card. Once gift cards are purchased in large amounts with that stolen card, the merchant is left liable and then the gift cards end up used again to make purchases in the store. Data theft, skimmers and returned stolen goods are also ways gift card fraud can occur.
There’s also a threat for merchants that comes from the inside as much of gift card fraud that’s happening comes from employees themselves.
Putting better protections in place to keep payments secure is critical. Especially as digital gift cards increase in popularity, having a dedicated way to process these transactions can help save merchants from significant losses.
Here’s What to Do to Protect Your Business
The problem with a lot of these fraudulent transactions is that the merchant wasn’t EMV compliant. Using an EMV chip reader to process payments prevents fraudulent transactions because customers must now insert a chip-enabled card into the slot. This chip contains encrypted cardholder information that’s hard for thieves to steal – eliminating the risk of a fake, duplicated card being used to purchase gift cards.
Making the switch to EMV chip-enabled readers is critical today as gift card fraud rises. For smaller businesses that may still be slow to adopt changes, the risk is even greater as they become a likely target for thieves.
When it comes to internal theft, businesses also have a responsibility to track and set rules on how gift cards are sold by their employees. Together these defenses can help ensure your business remains strong and protected from threats this holiday season while also helping to increase customer loyalty and positively affect your bottom line.