Gift Card Security: Staying One Step Ahead of the Fraudsters

Key Takeaway: Gift card fraud costs restaurants millions. That's why you need trusted security processes. 

Gift cards are popular. This popularity has increased fraud. In 2022, nearly 49,000 instances of gift-card fraud were reported ($228 million lost).

Scammers like gift cards for many reasons. Unlike credit cards or bank accounts, gift cards have fewer protections. Once a gift card is used, the fraud is harder to reverse or track.

Fraudsters are stealing millions of gift card dollars from businesses and people. They are easy to sell, and there is a lower chance of getting caught. 

As more people use gift cards, restaurants want to balance customer satisfaction with security. 

In this article, we’ll examine gift card issues and show you how to protect yourself.

Stopping Physical Gift Card Tampering 

As restaurant operators display physical gift cards for easy purchase, they provide access to fraudsters. This happens due to package tampering.  
 
Thieves: 

• Slice open card carriers 

• Get hidden info  

• Reseal the packages

These compromised cards wait for customers to buy them. Once activated, a fraudster can drain a gift card’s value.

To stop this stealing, keep physical gift cards out of public reach. Some operators use card carriers that show signs of tampering. Scratch-off surfaces covering gift card ID numbers are now common. 

Operators can use inventory management systems that track each gift card. These systems flag weird patterns, such as cards being handled without purchase. Some retailers have security cameras near gift card displays.

Cashier training must include protocols for gift cards. Employees should look at cards for signs of tampering before activation. They should note large purchases that could be criminal activity. 

Some places are taking legal action to protect buyers. New York passed legislation in 2022 requiring businesses that sell gift cards to educate buyers about fraud.

These efforts form a defense against physical gift card fraud. 

The Dark Side of Digital Gift Cards 

A popular form of digital gift card fraud involves account takeover attacks. 

Criminals get access to gift card accounts through bots that test thousands of card numbers and PIN combinations. Once successful, these attackers can drain card balances or resell info. 

Another tactic involves using auto-load features, allowing criminals to take funds. Some criminals use click farms to check gift card balances and redeem them as soon as they’re loaded. 

Criminals also steal from restaurant loyalty programs. By getting access to customer accounts, attackers can claim points for gift cards, which are changed to cash or resold. 

Many people don't check their loyalty points, giving attackers more chances. This shows the importance of securing your: 

• Loyalty programs

• Online ordering accounts 

• Payment systems 

Criminals also use direct scams. Phishing and social engineering are the most popular.

Scammers may target restaurant customers or employees by posing as:

• Managers

• Corporate representatives 

• IT support staff

They say there’s an urgent issue with the gift card or comp card system that needs action. This gets your staff to tell them the gift card info. 

While social engineering targets people, criminals also attack the financial systems supporting gift cards. Criminals may use stolen credit card info to buy gift cards online from restaurant websites, quickly using their value. When the cardholder finds charges and disputes them with their bank, the bank often requires the restaurant to refund the amount. This fraud is damaging because it is a double loss for the restaurant.

Solutions for Digital Gift Card Security 

To reduce the risk of fraud, operators must have security measures. Use encryption, such as the Advanced Encryption Standard (AES), for all gift cards. This makes sensitive info a complex code that criminals can't hack.

Secure file transfer protocols (SFTP) should also be used for financial transactions related to gift cards. Two-factor authentication (2FA) for account access adds more security. 

Learn more about the Payment Card Industry Data Security Standard (PCI DSS). These standards help you: 

• Secure the network 

• Protect cardholders  

• Update security

Avoid sequential numbers for gift cards. Using random numbers makes it harder for criminals to guess card numbers. Many companies are also using PINs as a security measure. 

Use advanced monitoring systems. They check gift card use patterns, flagging weird behavior such as unexpected geographic locations. 

Blockchain technology will improve gift card security. While still in its early stages, blockchain can stop counterfeiting and unauthorized transactions by creating a record of each card’s history.

FAQs About Gift Card Security 

Why are gift cards a target for fraud? 

Because they don't have the same protections as credit or debit cards. Once funds are spent, the transaction cannot be reversed or traced. 

The ability to turn stolen gift cards into cash or resell them makes them popular for criminals.  

How can restaurants stop physical gift card tampering? 

Here are five suggestions: 

1. Secure Display: Keep gift cards behind counters or locked. 
2. Tamper-Evident Features: Use scratch-off PIN covers, materials that show when cut, and non-resealable packaging. 
3. Staff Training: Train cashiers to inspect cards for damage and flag large purchases. 
4. Surveillance Systems: Install cameras near gift cards.
5. Inventory Tracking: Use systems to track the gift cards. 

What can stop digital gift card fraud? 

Stopping digital gift card fraud needs advanced security measures: 

• Encryption
• Random Card Numbers
• PIN Codes
• 2FA
• Fraud Monitoring

These tools help your business stay ahead of fraud. 

How does blockchain improve gift card security? 

It does it in three ways:

• Transparency

• Traceability 

• Immutability 

Each gift card transaction is recorded on a decentralized ledger, making it impossible for criminals to change card data. Benefits include: 

• Fraud Prevention
• Traceability
• Consumer Trust

Blockchain for gift cards is still in its early stages. But it shows promise in reducing gift card stealing.

How do you secure a gift card? 

Buy it from trusted retailers or authorized online platforms. Avoid buying gift cards from secondary sellers or auction websites. 

For physical gift cards, inspect them for signs of tampering and choose cards with tamper-proof features.

For digital gift cards: 

• Ask if the platform uses secure encryption 

• Use 2FA 

• Register the card 

How do I protect my gift card from theft? 

Treat it like cash. Once stolen, it's impossible to get the funds back. Keep physical gift cards in a secure spot. Keep the receipt as proof of purchase, which helps fix issues if the card is stolen. 

For digital gift cards, use strong passwords and set up 2FA. Don't share your gift card number or PIN with anyone. Check the card balance to watch for fraud. 

Before buying a gift card, look for tampering, such as: 

• Torn or scratched areas
• Packaging that appears resealed

Choose gift cards behind counters or locked cases. Some stores also offer cards with tamper-evident packaging.

For digital gift cards, buy only from trusted sources. Avoid clicking on unsolicited emails or links claiming special offers. If you’re unsure if a website is real, check its secure socket layer (SSL) certificate (look for "https://" in the URL) and customer reviews.

Do gift cards get tracked? 

Yes. Each gift card has a serial number or barcode that allows the issuing company to monitor its status, including:

• Activation 
• Purchase history 
• Redemption dates and locations 
• Current balance
• Transactions 

This tracking is needed for spotting fraud. Registering your gift card with the retailer provides stronger protection. It helps the company to flag and replace stolen cards.

Do gift cards have CVV? 

Most gift cards do not include a CVV. But some digital gift cards may have security codes or PINs. 

Some let users add a PIN during registration. If you purchase a gift card for online use, never share the PIN or security code. 

Industry Tips for Gift Card Security 

Paytronix is an industry leader in:

• Online ordering 

• Loyalty 

• Gift card solutions  

Paytronix is committed to protecting customer info by using industry standards. We also follow PCI DSS compliance requirements.

Paytronix keeps sensitive information confidential. And our 24/7 commitment to data privacy and security changes to address new threats. 

As gift card fraud continues to change, operators must have the latest info to prevent theft. 

Contact us today for a personalized demo. Together, we can secure your gift cards.