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Gift Cards: The perfect gift for some, the perfect theft for others

Posted on 10/13/10 9:34 AM

Gift Card FraudNot sure if gift card fraud is still an issue in today’s retail environment. Take a look at these recent headlines.

Framingham man accused of stealing $20K from Natick Nordstrom.

New Scam: Cloned Gift Cards, spyware that tracks reloading.

The first article is about a cashier who stole over $18K of his total dishonesty through a gift card scheme that included returning false merchandise in exchange for activated gift cards. The second is about an Oregon man who within 2 weeks stole over $7,000 by stealing inactivated gift cards from retailer’s racks, cloning them and using them once they were activated by an unsuspecting customer (See the video courtesy of NorthWest Cable

Gift Card fraud is a major method of theft against the retail industry and one that occurs through both internal (employee) theft and external theft. As gift card annual spend exceeds $50 billion dollars (according to the National Retail Federation), there is no doubt that fraudulent behavior will continue to be part of its existence. The need and the greed are most certainly there.

As the holiday season approaches, gift cards often become the gift of choice, allowing the recipient the opportunity to select their own personalized gift. It is also the time for greater opportunities of gift card fraud across most retail settings. Although the holiday season is not the only time fraudsters steal via various gift card schemes, this is a good time to think about how to best protect your business from gift card fraud during what is the busiest time for most retailers.

Here are four areas where you can double check your card protection to reduce the likelihood of gift card fraud.

  1. Protect the Card: The first point of protection should be the card itself. Take advantage of your card provider's security features to make it more difficult for fraudsters to take card pin numbers or to clone the card without damaging the product packaging. 

  2. Card Activation: When a card is actually activated can reduce the opportunities for fraud to occur. Activating the card post tender or at the end of the transaction will reduce certain fraud schemes from being possible.

  3. Card Display and Handing: Where and how your gift cards are displayed and packaged can reduce the possibilities of both employee and customer gift card fraud. Special packaging can remove the possibility of theft for cloning.

  4. The Inside Factor: Gift card fraud by employees is still a large contributor to loss. Educating your employees on your protection methods, reporting and analysis, and the do’s and don’ts of gift card usage will help to reduce fraud. One of the muddiest areas includes the purchase and use of gift cards within employee sales. Make sure you have clear employee discount policies that are well communicated to your employees.

There are a number of different schemes related to gift card fraud as well as some detailed measures to protect your business from these frauds. To learn more details about protecting your business, read our Preventing Gift Card Fraud Best Practice located on our website.

Gift cards can provide substantial sales revenue to retailers during the holiday season and throughout the whole year. Knowing how to protect your cards will help you protect your profits.

Written by David Johnston, Director of Business Development

Topics: training and awareness, Loss Prevention program and development

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