Protect your customers against gift card scams

Gift cards and points-based loyalty programs are a great way to keep customers coming back time and time again, but a new scam is emerging that could jeopardize your customers' trust in your business. This means you need to be proactive and take effective measures to protect your customers.

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What is the problem?

Gift cards are preloaded with cash during the checkout process, allowing customers to gift them to others or to return at a later date to spend them. Unfortunately, they lack the security of a bank card as they are typically displayed in high-traffic areas where fraudsters can easily copy the barcode numbers, security numbers and PINs without shoplifting a physical card. This means they can simply wait for the card to be loaded before spending its value themselves.

There is currently no fraud protection in place for customers who try to use their gift card and find it empty as they cannot prove that they did not spend the money on the card themselves. Authorities in the U.S. believe that gift card fraud is linked in part to Chinese crime groups and are investigating under Project Red Hook.

The link between the gift cards innocently displayed in your stores and organized crime may seem tenuous, but it is believed to be a booming industry. Law enforcement has found that gift cards are being siphoned to purchase high-value items that are later sold in China for cash, which is then used to fund further illegal operations such as human trafficking and drug smuggling.

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What can you do to protect your customers?

You need to strike a balance between making gift cards visible and keeping them protected. A potential solution is to use eye-catching point-of-sale marketing to advertise that gift cards are available, rather than actually having the physical cards on display. This way, customers know that gift cards are available and in which denominations, but a cashier would need to remove them from a secure locker to issue them to the customer.

Staff should also be trained to recognize tampering and flag any potential security breaches, allowing gift cards that may have been tampered with to be removed from sale.

It can be hard to encourage customers to purchase and use gift cards when this type of fraud is prevalent in the headlines. However, by taking swift action to protect them against such scams, you will be able to promote your gift cards as safe and not see this area of your business impacted.