Shoppers plan to buy a lot of gift cards this holiday season. And that means retailers will need to watch for more fraudulent transactions.

Gift card sales—both physical and digital cards—typically spike during the holiday season. In Deloitte’s annual holiday survey of 4,012 consumers released in October 2020, 48% of consumers (the No. 1 response) plan to buy a gift card—physical or digital—as a gift for the 2020 holiday shopping season. Amitai Sasson, vice present of ecommerce at online retailer overstockArt.com can attest to this first hand. Gift cards purchased through its website generate roughly 10% of sales during the holiday season, compared with 5% during any other season of the year, Sasson says.

And the reason for the increase in gift cards during the holiday season is clear: gift cards make easy gifts for hard-to-shop-for family members. But that also makes them a target for fraud. Gift cards are attractive to criminals for the same reason they are attractive to gift-givers: they’re easy. Criminals committing online fraud want to easily turn merchandise into money. This is also why electronics and not apparel is a common product category for fraud. Electronics are often high-value goods that have mass appeal, whereas apparel has to fit and is tailored to consumers with different preferences. Gift cards are the same.

An estimated 10-25% of fraud attempts on an online retailer’s website are to fraudulently purchase a gift card, says Rafael Lourenco, executive vice president, ClearSale. Nearly half of online retailers in the Digital Commerce 360 Top 1000—48.5%—accept gift cards as an online payment method. Retailers have already noticed a spike in gift card sales during the coronavirus pandemic, the holiday season is only going to make gift card sales grow even more. Merchants should be aware of the fraud associated with selling and accepting digital gift cards, and how to prevent it during these high-volumes times.

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