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Working Collaboratively with Retailers to Fight Gift Card Fraud

Gift card fraud affects people of all ages, causing the average victim to lose $1,000. Younger victims are twice as likely as older adults to lose money, but adults ages 70 and up generally lose larger amounts. Although losses may be lower on gift card fraud than other payment mechanisms, the loss of $1,000 would be potentially debilitating for the roughly one in three U.S. households who report they would have difficulty covering even a $400 emergency expense. Since the start of the pandemic, gift card fraud has rapidly increased, with reported cases more than doubling in frequency.

spinner image Banksafe Report Image- fighting gift card fraud
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This report offers a look at gift card fraud from various angles before providing an assessment of industry’s role in intervention, both currently and in terms of future opportunities. This assessment is informed by a series of 1:1 interviews and surveys with more than 30 industry representatives as well as a comprehensive review of research and data from the Federal Trade Commission, non-profits, AARP and industry associations.

Gift Card Fraud and Its Victims

This type of scam can take many forms. Most commonly, a scammer contacts a person with a phone call, email, text or social media message pretending to represent a company that the person may do business with, such as a bank or local power utility, or claims to be an IRS investigator. They use an urgent message—such as, “Your bill is overdue,” or, “You owe additional taxes”—to convince the person to make an immediate payment by wire transfer or gift card. In other scenarios, the scammers claim to be from “tech support” or a dating site, or a relative.

Though anyone can be the victim of a scam, AARP research has identified some specific environmental and emotional factors that were more common among fraud victims in general, factors that have been more widespread during the pandemic: stressful life events; less family support, connection; stronger emotions; multiple attempts; financial stress.

Behavioral Intervention: The BankSafe Link

One important study on victims of scams and fraud found that more than half of people who reported a third-party intervention were able to avoid losing money. That encouraging finding is the reason AARP created the BankSafe training program, an interactive online platform with intervention resources that provide the tools and training to frontline employees to spot potentially fraudulent situations, particularly with older customers, before their money leaves their account.

Based on the effectiveness of the BankSafe training, AARP has launched two new training courses and other intervention resources aimed at equipping major U.S. retail employees with the tools needed to spot and stop gift card and wire-transfer exploitation. The gift card and wire transfer iterations of the training are 15-minute courses comprised of 11 activities that include interactive videos, gamified elements, a resource library full of tools and assets, and much more.

Keys to Addressing Gift Card Fraud

Given the complexity and dynamics of how gift-card fraud works, stopping it will require the engagement of all key players – consumers, retailers, nonprofits, industry players, regulators and law enforcement. The research points to three key strategies: consumer education, retail employee training, point-of-sale enhancements.

Point of Sale (POS) Enhancements

As mega-retailers who have invested in the technology know, artificial intelligence-based POS enhancements and other tech tools that alert employees to suspicious transactions are highly effective in thwarting gift card fraud. Not only do such tools provide a prompt for an employee to recall their education and training, they also show a level of corporate concern that the employee can point to as they engage with the potential victim, thus allowing the situation to illustrate customer care—and not poor customer service.

Employee Training and Policy Allowing Refusal of Suspicious Gift Card Transactions

Retailers could provide a critical safety net to consumers who are attempting to purchase gift cards in fraudulent situations. The two most powerful tools for a retail employee to keep a consumer from being scammed are knowing:

  • What behaviors to be on the lookout for (e.g., buying multiple cards of the same brand, being on the phone throughout the attempted transaction, seeming anxious or agitated).
  • What to say to the consumer when they see red flags of gift card fraud.

In conjunction with employee training, putting in place a policy that allows employees to refuse a suspicious gift card purchase is critical.

Consumer Education

The more educated consumers can become about gift card scams, the more likely they will be able to elude engagement with perpetrators and avoid the problem before it even gets started. The goals of consumer education efforts by all stakeholders should be to teach consumers:

  • Not to engage with a perpetrator when they are contacted.
  • How to identify the scam if they do engage before purchasing gift cards.
  • To listen to a friend, family member, or retail employee when they intervene to prevent the fraud.

Many thanks to those that were involved in this research, including the Defined Contributions Institutional Investment Association, GBSM, representatives from major retailers, and industry associations.