The gift card fraud phenomenon

Gift cards are a convenient and flexible way for shoppers to buy gifts for others, allowing recipients to purchase items of their own choice. A recent Research and Markets report revealed gift cards to be a $764 billion global industry that is projected to reach $1.6 trillion in the next three years. As consumers are starting to use gift cards they received during the holidays, unfortunately, the fraud fallout has only just begun.

The popularity of gift cards, along with the sheer volume purchased, makes them magnets for bad actors looking to exploit the cards for profit. The growing amount of fraud committed against gift cards of all types corresponds to the rapid increase in gift card sales. Perhaps most troubling is that gift card fraud is a largely invisible crime, with unsuspecting gift card recipients having no idea about the fraud until they try to spend the funds. Because of this, it is important for credit unions to stay mindful and educate members on best practices when giving and receiving gift cards to help reduce their fraud risk.

Birthday Fraud Follies

Last year, the risk management team that I manage thoughtfully gave me a birthday gift card. Ironically, the gift card given to me by a group of fraud professionals had a zero balance because it had been defrauded.

 

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