Digital gift card sales grew nearly 30 percent in 2016 and experts predict they will make up 7 percent of the entire gift-card market by the end of this year. Due to the instant delivery that is the hallmark of their value to consumers and the ease with which they can be monetized on the secondary market, e-gift cards have one of the highest fraud attempt rates of any product category. If merchants know what to look for, however, they can offer these very popular products to their customers relatively safely, according to a new report from omnichannel technology provider Radial. In its Annual Holiday Fraud Index, the company looked at historical transactions and found some interesting patterns.
Digital gift card fraud reaches its lowest point of the holiday season on Christmas Day. While fraud attacks on digital gift cards average 10 times greater during the entire holiday season than the rest of the year, on the day after Christmas those rates spike to 25 times the normal year-long rate and stay high until Dec. 30.
“Criminals are very aware of the toll fraud prevention takes on merchants during the holiday season,” Radial wrote in its report. “Merchants typically lighten staff after Christmas. Plus, they are dealing with an influx of returns where many legitimate customers are exchanging merchandise for digital gift cards. It’s the perfect time for criminals to double down on digital gift card attacks and get lost in a sea of authorized transactions.”
The company noted that digital gift card fraud is not, as one might expect, in direct correlation with sales volumes. Attack rates spike on the day before Cyber Monday and Free Shipping Day and plunge on those busy days. The report also looked at what email domains are the most likely to be involved with fraudulent gift card orders. Outlook.com is the riskiest email domain both when it is used as the billing email address (20.36 percent attack rate) and as the billing and shipping address (41.56 percent attack rate). AOL emails are also relatively risky when they are used for both billing and shipping (14.46 percent attack rate).