At one point in our lives, each of us has probably received a gift card. Whether for a birthday, a wedding, or other special occasion, gift cards are perfect for virtually everyone—gift-givers, recipients, and for the retailers involved. But despite the utility and convenience of the same-as-cash gift ideas, they still have a pretty significant downside: fraud.
Every year, gift card fraud costs the retail industry—department stores, restaurants, and convenience stores—billions of dollars in lost revenues. Like most loss occurrences, gift card fraud is a crime of opportunity and business owners hoping to stem the tide are beginning to fight back with an obvious, but underutilized weapon: video surveillance.
Gift card fraud is a multi-phase attack
For many retailers, gift card fraud is among the most challenging loss incidents to prevent because of the sheer number of opportunities for it to occur and many different ways thieves carry it out.
Like many other losses, the biggest threat of gift card fraud comes from internal sources, namely employees. In many cases, the fraud can be as simple as an employee stealing a card number and then copying the gift card magnetic strips with duplicate numbers to a new card that they can then redeem themselves.
But copying stolen numbers is a time-consuming and intensive way to commit gift card fraud. For many fraudsters, it’s far easier and faster to use a switch tactic to gain access to a gift card. In this method, a customer pays for an activated gift card and the employee gives them an empty card while keeping the card with a balance for themselves.
The customer doesn’t know they’ve been duped until they try to make a purchase with the empty card. This also happens when a customer pays with a gift card but doesn’t use the entire balance. Instead of returning the used gift card to the customer, the employee keeps it for themselves and gives the unknowing customer a blank card.
Beyond copying cards or swapping empty cards for full ones, gift cards can also be laundered. In this method, an employee purchases a card on one register without putting any money in the till, then goes to another register to purchase gift cards totaling the same amount and uses the first gift card as tender, returning to the first register and voiding the original transaction. Alternatively, employees can also ring up gift cards and then shut off the register before the transaction is complete, leaving them with an active gift card and no record of the purchase.
Video reconciliation: the secret weapon in preventing gift card fraud
Retailers have caught onto the emerging gift card fraud trend and have been scrambling to find ways to prevent it. Common sense efforts include strategically locating gift card displays where employees can keep an eye on them, such as next to the cash register. Of course, when employees are the ones committing the fraud, that’s not much of a solution.
Operators are realizing that loopholes in outdated or incomplete point-of-sale (POS) systems make it easy for employees and thieves to activate gift cards without actually paying for them and completing the transaction. The fraudulent activity is only noticeable to someone paying direct attention to the register—which is where video comes in.
As the “eye in the sky,” video surveillance has always been a core part of loss prevention strategies. Though most of us—business owners included—tend to think of video only as a deterrent to cash or merchandise theft, it can also be a significant deterrent to gift card fraud. Unlike the stand alone closed circuit systems of the past, today’s video platforms are fully integrated, marrying exception and other data-based reports from POS systems with time-stamped video for comprehensive visibility that substantially enhance loss prevention efforts, including preventing gift card fraud.
With intelligent managed video solutions like DTT POS integration, business managers and operators efficiently review transactions without searching through hours of video to pinpoint suspicious activity and monitor employees to ensure gift cards are being purchased and paid for honestly.
“Our business is fast-paced with lots of activity. As a high-volume, transactional operation, there are many opportunities for attempted theft or fraud,” says Shirley Davis, Senior Manager, Risk, at The Krystal Company. “Video intelligence solutions like DTT are our best weapon in fighting fraud and helping us stay on top of threats without impacting the customer experience or efficiency of our employees.”
With integrated platforms like DTT, store owners can capture POS transaction data and lay the text directly on surveillance video to easily corroborate POS line items with the behavior of each cash handler at the register. They no longer have to pore over hours of footage to identify and address fraudulent activities. Now, if employees are switching out cards, unplugging registers during transactions, or copying numbers and creating fraudulent cards, store leaders will have multiple angles (literally and figuratively) to uncover and verify fraudulent activity and take quick, decisive action.
For most consumers, gift cards are easy, convenient, and valuable tokens of appreciation. For retailers, they’re a great way to drive sales and attract new customers, but are highly susceptible to fraudulent activity ranging from simple swaps to more sophisticated schemes. Incorporating video intelligence into your gift card fraud prevention strategies is a surefire way to simultaneously minimize loss from fraud while increasing revenues and providing additional value to your customers.
Contact us at 800.933.8388 to learn more about how video solutions from DTT can help you gain critical operational visibility and business insights to strengthen your loss prevention efforts and boost your bottom line.