Beware of gift card fraud
Many retail and food franchises sell gift cards and...
Many retail and food franchises sell gift cards and offer loyalty programs, allowing customers to purchase or earn money or points to spend on future purchases. They are a convenient offering that can make for great gifts for those who are hard to buy for. Indeed, the gift card industry is booming, with an annual net worth of more than $11 billion.
Unfortunately, gift cards are also open to abuse. If you are not careful, your customers could be defrauded.
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How could customers lose out?
Gift cards are typically displayed in high-traffic areas in retail establishments, which means that it is easy for fraudsters to either replace or copy the card's bar code, security number and PIN code. Then, they can simply wait until it is purchased and loaded with funds before embezzling them, purchasing high-value and luxury items and reselling them for a profit.
The Retail Council of Canada reported that in 2021, gift card fraud cost the nation at least $3.8 million. This means there is a serious incentive here for businesses and their customers to take care when purchasing gift cards.
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What can businesses do?
The biggest issue with gift card fraud is that it is impossible to determine whether a customer is telling the truth if they report that their gift card has been emptied of funds by somebody other than themselves. A business wants to believe that all of their customers are genuine, but refunding or replacing supposedly lost balances can have a significant impact on their cash flow. At the same time, however, refusing to do so could harm their reputation.
Therefore, franchises that sell gift cards should consider keeping them under lock and key. To alleviate the concern that customers may be less inclined to purchase a gift card as a result, they can replace their previous gift card display with an eye-catching point-of-sale marketing poster explaining their offering and directing customers to the checkout to purchase a card.
This is by far the simplest and most effective solution to preventing gift cards from being tampered with, customers from being defrauded, and businesses from needing to find a resolution to an unprovable crime.
Another useful tool in a business's counter-fraud arsenal is staff training. By explaining the issue to the workforce, they can be encouraged to monitor gift cards, examining them carefully at the point of sale for any signs of tampering and reporting any suspicious behavior to senior colleagues or security personnel so this crime can be addressed at the source. Proactive monitoring of this type can also reassure genuine customers while dissuading potential criminals.
Businesses should act with integrity in all of their dealings with the public, and accepting the responsibility for protecting customers from gift card fraud is one way in which you can demonstrate your commitment to customer satisfaction.
