Gift cards are prepaid debit cards that have a certain amount of money loaded on them, which users can spend at their own convenience. There are many reasons that are driving the increasing popularity of gift cards. First, in addition to the physical cards, ecards or digital gift cards are also available, which makes it easy to purchase and use them. They are a convenient gifting option and you don’t need to spend an enormous amount of time searching for an appropriate gift for a recipient. Further, gift cards step in as a last-minute gift choice and you can choose the amount you want to load on the cards. For the recipients, too, the cards come with the flexibility to buy an item of their own choice.
Gift cards are categorized into two groups – open-loop cards and closed loop cards. The open-loop cards can be used anywhere, as they are not tied to any particular brand or outlet. Closed-loop cards, on the other hand, are tied to specific brands and, therefore, can be used only for a family of brands or specified outlets.
High-growth revenue stream
The gift cards’ market is growing in leaps and bounds. Research and Market in its report estimates that the gift cards industry will grow to about $750 billion by the year 2026. And, with digital becoming the new normal, digital gift cards are registering an impressive growth rate. A CardCash study has revealed that digital gift cards are registering an annual growth rate of 200% compared with 6% growth in the physical cards category.
With this exponential growth and popularity, gift cards are also becoming an attractive target for fraud.
Equally attractive fraud opportunity
What makes them attractive when the amounts loaded on them are low? The answer is the low amounts of money, as low amounts of money on the cards reduces their chances of persecution. In addition, since digital gift cards generally do not need any delivery address, the location of the cyber criminals cannot be traced.
Cybercriminals steal/hack thousands of cards – either by writing down the card numbers in a store, scratching the decals to steal security codes, skimming the numbers either physically or automatically by using bots or IoT devices, phishing, or SQL injection. When customers load these manipulated cards with money, cyber criminals get alerts through software that tracks when the card is activated. Monetization of these cards at scale allows cyber criminals to make massive financial gains.
Minimize your risk
Gift cards help businesses create an additional revenue stream and provide consumers with the flexibility to gift and shop on their own will. However, with the rising instances of fraud, there are a few ways that can help you lower your risk of getting defrauded:
- Prefer buying gift cards online as the ones in physical stores are more prone to tampering.
- Look for signs of tampering, if you are buying a gift card from a store.
- Ask the card to be scanned to verify it has the full value.
- Do not buy discounted cards online as they may be fake and already exhausted.
- On receipt of a gift card, change the password immediately.
- Do not use gift cards for payment purposes (example utilities, penalties, taxes, etc as these methods are often used to scam people).
- Report a scam as early as possible.
The article has been written by Neetu Katyal, Content and Marketing Consultant
She can be reached on LinkedIn.
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