According to our own research, holiday gift card fraud has increased 60% year-over-year (YOY) – a result of gift card payments across various countries rising 20-40% during the 2021 holiday period. As alternative payment methods (APMs) like digital gift cards pave the way for simpler digital commerce purchases, fraud will surely follow, leaving it up to retailers to find solutions and policies that mitigate the net losses it causes.
The holiday season is a peak shopping period, and 2021 saw a 15% higher trading volume than 2020, according to Forter. As issuers become more attuned to regulations such as the European Union’s Payment Services Directive Two (PSD2) with added authentication, fraud via traditional credit card transactions becomes more difficult.
In addition to gift cards, Forter research revealed increased usage of APMs during the 2021 holiday period. This includes a 30% increase YOY in buy now, pay later (BNPL) plans and a 30%-50% increase in mobile payment transactions, through platforms like Google Pay, Alipay, Swish and Apple Pay.
Fraudsters are in constant motion — as merchants clamp down on credit card fraud, they need new outlets. Alternative payments methods, BNPL, and gift cards represent new surface areas to explore. Merchants cannot afford to remain reactive — they need advanced technology that pinpoints the identity of fraudsters and blocks them regardless of payment method.
Fighting fraud in this new frontier requires a proactive, data-driven approach. The effort to distinguish customers from fraudsters must go beyond a company’s internal data. Merchants benefit from fighting fraud as a coalition. For example, Forter’s Identity Graph ensures that a fraudster known to one merchant is known to all merchants. Since fraudsters are clever about spoofing their IP and hiding their identities, fraud prevention teams must look beyond basic attributes, identifying patterns with less conventional characteristics. Surfacing those patterns takes sophisticated technology and making decisions on transactions accurately and instantly—especially at scale.
And so the most effective way to combat gift card fraud is not to focus on the transaction but instead the identity behind the transaction. Merchants must block bad actors across the digital commerce funnel and across channels to protect their consumers and their profits.