Fraud in Retail Settings: Gift Cards and Returns Schemes

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Fraud in Retail Settings: Gift Cards and Returns Schemes

While it may seem like a lower-level scam, gift card fraud has real consequences for retailers. An analysis of data drawn from the Federal Trade Commission’s Consumer Sentinel database found that gift card scams have led to a consumer loss of $148 million. Both the Federal Trade Commission and the 2023 National Retail Security Survey have reported increases in gift card scams in recent years. More specifically, 57% of the 177 retail brands responding to the National Retail Security Survey reported an increase in gift card scams from 2022 to 2023. 

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Restoring Consumer Confidence: The case for a collaborative coalition in the fight against fraud

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GUEST BLOGGER

Jackie Barwell
Head of Product at ReD

High-profile, large-scale data breaches at major retailers, as well as the increasing ingenuity of fraudsters, continue to shake consumer confidence in retailers and financial institutions. A recent study conducted by ACI Worldwide and Aite Group, which surveyed 6,100 consumers across 20 countries, demonstrates the challenge that these organisations have ahead of them in re-building consumer confidence.

The survey found that:

  • 29% of global consumers do not trust merchants to protect stored personal and financial data against hacking attempts and data breaches.
  • 45% of consumers feel that stores do not use security systems that adequately protect their financial data against hackers and data breaches; and 38% believe that online shopping websites do not adequately protect this information.
  • 23% of consumers have changed financial institutions due to dissatisfaction after experiencing fraud.
  • 43% who received replacement cards as a result of a data breach or fraudulent activity use their new cards less than they used the originals.

This lack of consumer confidence threatens an immediate and long-term impact on customer loyalty, revenue and fee income.

To address these concerns and make real progress in combating fraud, financial institutions and retailers must take a more proactive role, not only by investing in fraud prevention and educating consumers about preventative measures, but also by working together as a collaborative coalition in the battle against fraud.

The data elements of a transaction — things like IP address, device ID, telephone number, card number, delivery, shipping and billing addresses — are not all held by any one party in the payments chain. An individual retailer or bank does not have a holistic view of the transaction, making it difficult for them, individually, to determine whether that transaction is genuine or suspicious. By sharing data — between retailers, or between retailers and banks — through initiatives such as the ReD Fraud Xchange and RFX Club, we can have a real impact on the effectiveness of fraud prevention. We can help each other to identify fraud attacks more quickly, highlight fraud trends and take fast, effective preventative measures.

In this way, we can reduce fraud losses and, most importantly, regain the trust, loyalty and confidence of consumers, ensuring that the only loser is the fraudster.

In the spirit of International Fraud Awareness Week we would encourage every retailer and financial institution to look at ways to support collaboration across the payments chain to share intelligence and work together in shutting down fraud.