How to limit online fraud over the holidays?
The holidays are the time for presents, long family dinners and hot cocoa. But it is also the greatest rush of the year for brands, who all work hard to satisfy consumers and to finish the year on the right note. For brands offering digital gift cards, the traffic peak never gets higher than on Christmas. Everything is running at full capacity. But there are significant risks during these times as well: online fraud.
In fact, fraud is at its all-time high during the holidays. Since 2017, there has been a 60% increase in suspected e-commerce fraud during the holiday shopping season. And, without surprise, one of fraudsters favorite target is the digital gift card. It represents about 9.5% of all fraud attempts online between Black Friday and Christmas. These figures prove the importance of implementing a fraud protection system to limit the risk of revenue loss on this product.
Fraudsters favor gift cards over the holiday season
Just like consumers, cybercriminals love e-gift cards. Fraudsters even take advantage of peak periods, such as Christmas, to acquire them illegally for free.
E-gift cards, quick to buy and easy to spend
Why such an enthusiasm for digital gift cards? Well, they are very easy to buy on brands’ website, and are directly sent to the given email address. There is no need to provide a shipping address that could expose the fraudster. So he/she can quickly and discreetly buy the card, it only takes a few clicks. Once it in their mailbox, it can immediately be used.
Less than an hour can go by between the card’s purchase – with a stolen credit card or by hacking the website – and its use in online or physical stores. The fraudster will either purchase products and resell them, or sell the gift card for less than its face value. During the Christmas rush, with sales soaring, gift card frauds often go unnoticed, or are identified far too late.
Massive cyber-attacks
That is why it is essential to implement a fraud protection system before the holidays. Especially considering that, if a fraudster succeeds in stealing a digital gift card once, chances are he/she will do it again as many times as possible. These massive cyber-attacks can cause important financial losses that can amount to several thousands of euros, in just a few hours. A fraud protection program is essential in order to minimize the risks linked to e-gift cards, all the while maximizing the benefits and revenue over the holiday season.
Identify and reduce digital gift card fraud during the holidays
Setting up risk control elements
The first step is to set up risk control elements. They will enable the brand to identify potential fraud before it occurs. The different steps of verification will filter malicious activities. Some brands set up a maximum and minimum amount, and have limited the number of gift cards that can be bought by a single source. Since fraudsters often buy dozens or even hundreds of gift cards in just a few hours, this method can be efficient.
There are also brands that have added captchas to prevent robot intrusions. Cybercriminals often use technologies, algorithms and malware to try different websites and multiply their attempts in just a few clicks.
There are many other signs that could indicate if the buyer is a potential fraudster. For example, he/she may use the same address for the buyer and recipient. Or use an unusual email address such as: grfdfs45@gmail.com. The buyer and recipient names can also tip you off, especially random letters (like “Ajhfgkbz”).
In the end, there are several ways brands can improve their protection by setting up risk control and management. However, they must be careful and find the right balance between controlling fraud and complicating the customer journey. It is important not to forget that the success of gift cards lies in the quick and easy purchasing process. Consumers love being able to order a gift card and send it right away. So, do not turn your fraud managing process into an obstacle for well-meaning consumers, or they could go straight to your competition.
Automation and real-time learning
Beyond setting up a verification elements, you need to be able to coordinate them, see which ones should be improved and make changes according to the new technologies used by cybercriminals. They are constantly finding new breaches to step into, and if the brand does not improve its fraud protection system regularly, it can quickly become obsolete.
Therefore, it is always necessary to plan ahead and anticipate, but it is also very time-consuming. Implementing an automated system would save considerable time. The brand could then focus on its core business, and on the development of the gift card program in order to maximize its sales and year-end results.
However, a third factor, specific to e-gift cards, must be taken into account with fraud: time. E-gift cards being a digital product, one of its main specificity is the speed with which they can be ordered and used. Which means that once the fraudster successfully orders a gift card, it is already too late. Brands have a very short period of time to act and must adapt accordingly. That is why it is very important to have a real-time fraud prevention system which will enable them to identify cybercriminals before they even have time to click on “purchase”.
To have a profitable gift card program for the holidays, brands must take into account the risks linked to online fraud, and protect themselves accordingly. With digital gift cards, which require on-the-spot decisions, it is necessary to set up a real-time fraud protection system with machine learning. For those who want to use – or are already using – a third-party provider for their e-gift cards, it is crucial to talk about their fraud prevention strategy. Is it efficient? Do they manage the whole system or are they using a service provider? All these questions must be asked in order for the brand to have a successful and peaceful holiday season.
