Winning Strategies to Combat Gift Card Fraud
As we approach another holiday shopping season, merchants are filled with a mix of optimism and dread when they consider gift cards. Although gift cards are extremely popular with consumers, they are also a primary target of fraudsters. How can merchants safeguard and grow their gift card business?
Promise and Potential
A survey conducted by the National Retail Foundation in 2019 found that 54% of consumers planned to give gift cards during the holidays. Convenience, flexibility, and transferability make gift cards universally attractive. In the US market sales are projected to grow from $163B in 2019 to $221B by 2024. Worldwide sales are growing at 10% CAGR and are projected to reach $550B by 2024. eGift cards will contribute the largest share of this growth as ecommerce and mobile commerce continue to surge globally.
Challenges and Concerns
Many of the qualities of gift cards make them prime targets for criminals. Because they are anonymous, hard to trace, transferable, easily liquidated, universal, and not tied to credit card regulations they are vulnerable to attack. Gift card fraud ranges between 1% and 4% of revenue but is higher for digital gift cards. In fact, eGift cards have the highest fraud rate of all products sold by merchants.
The assault on gift cards is multi-faceted and can be either physical or digital in nature. Here are a few of the most common schemes:
- Purchasing gift cards with stolen credit is the most widespread form of gift card fraud
- Account take-over can lead to gift card purchase with a compromised ewallet or in exchange for stolen loyalty point
- Refund fraud occurs when a criminal purchases items with stolen credit and then returns the items for gift card credit
- Gift card number and PIN theft via brute force, malware, phishing, and social engineering attacks
- Card tampering is an in-store attack where criminals harvest card numbers and PINs and then lay in wait until the cards are sold to consumers
Revenue and Reputation
Aside from card tampering, each of these attacks involves a digital threat either in the form of payment fraud or account fraud. Merchants recognize the need to take action, but often find that the tools at their disposal are not only failing to safeguard their customers but also compromising their revenue.
There’s a lot at stake for merchants, not only in the form of lost inventory and revenue, but also in recognizing that compromised security creates a disastrous customer experience that is rarely salvageable. The fear of fraud only serves to amplify the problem. A recent Blackhawk survey found that over the past two years between 27-44% of merchants who sell gift cards acknowledged they had a problem declining legitimate customers. Leaving revenue on the table is unacceptable.
Vesta’s guaranteed fraud protection solutions allows merchants to remove the barriers they have erected to protect themselves from fraud. Instead of turning customers away, they can tear those walls down and let orders flow in, knowing guaranteed fraud protection means they won’t lose out to fraud. Every approved transaction is covered by Vesta’s 100% fraud chargeback guarantee. If we’re wrong, the fraud is on us. We eliminate the fear and, most importantly, the cost of fraud—all with zero risk and zero liability for you and your business.
Backed by our 100% no-chargeback due to fraud promise, Payment Guarantee is a managed service that leverages our best-in-class machine learning, deep link analysis, consortium data, and analytics to pinpoints and isolate fraud while maximizing approved transactions. Techniques such as silent pending, 3D secure, and behavioral monitoring ensure that criminals are frustrated without impacting good customers. Payment Guarantee supports online merchants seeking a proven solution to risk-free revenue growth.
Payment Protect delivers a risk assessment score for all transactions, allowing you to protect payments from fraud and raise approval rates. Powered by our advanced decisioning, Payment Protect empowers you with the insight to accurately filter fraud from your online transaction system and focus on growing revenue. This solution supports e-commerce, telco, and FinTech stakeholders ready to embrace the latest in AI, machine learning, and automated decisioning.
Account Protect uses Vesta’s patented technology to stop fraud at inception and protect new and existing customer accounts from takeover attacks. Compromised accounts are quickly becoming a preferred vector for fraud, so protecting against unauthorized access is crucial. Vesta monitors access using device fingerprints, biometric patterns, keylogger events, and dynamic models to assess user behavior. Vesta secures your user accounts so payment fraud and loyalty program attacks can be stopped before they begin. Account Protect is designed for all sectors of e-commerce where account security is paramount as well as digital banks, challenger banks, e-wallet providers, and digital marketplaces.
Vesta is a fintech pioneer in fraud protection and fully guaranteed payment technologies, helping online merchants, major telcos, payment processors, and acquirers optimize revenue by eliminating the fear of fraud. The company’s flexible, scalable solutions enable companies to grow their businesses by focusing on revenue rather than risk, delivering secure, frictionless transactions that maximize acceptance and improve customer experience – all backed by a zero-fraud-liability guarantee.
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