How to handle gift voucher fraud

3 min read

Published on January 21, 2022

Gift voucher (e.g. gift card or gift certificate) remains a popular gift year-round because it is easy to buy, easy to send and easy to use. In addition to being convenient and flexible, gift vouchers are a bit more personal than cash, which is what makes them appealing to customers. Vouchers are also popular with merchants because they are great for generating sales and creating customer loyalty.

A lot of fraudsters like gift vouchers and gift cards too, because they have fewer security features than more modern credit cards, so they can be abused in a variety of ways. In many cases, these schemes lead to chargebacks, leaving the merchant with no money or even loss due to dispute fee from banks.

We've already discussed above different types of credit card fraud. Today, let's talk about gift voucher frauds and what you can do to keep your business safe.

What is gift voucher fraud?

There are different variants, some examples are:

the fraudsters use stolen credit cards to buy gift vouchers from your business. Then later visit your store and either redeem/use them or request a refund. In some cases, they might want to resell to other people and make money from it.
the fraudsters use legit credit card to buy gift vouchers from your business. Then later visit your store and redeem them. Then they file a dispute to the card issuer (normally the bank) saying they didn't recognise the transaction and request a refund.

What can you do to prevent it?

First of all, it's advisable for merchants to make it clear in the terms and conditions that gift vouchers are non-refundable and non-transferable. Hence, the merchants can reject the refund upon being requested. If the customers fail to prove that they are the original recipient of the voucher, you can also deny the redemption of the voucher.

💡 In VaocherApp, you can set different terms on different gift vouchers, see how to specify T&C on gift vouchers

If you're required to issue a refund, please do insist on reversing funds to the same credit card used for payment. The fact that a customer claims to no longer have the card is often a red flag for possible fraud. No matter what the truth is, the customer can still claim the funds from the card issuer and have them returned to their old card account.

Second of all, it's highly recommended that you collect as much information as you can when someone comes and redeems a gift voucher. For instance:

their identity (e.g. driver license...)
ask for name and verify it against the name on the gift voucher
ask for phone number (this would be helpful during the dispute process)
if possible, create a $0 invoice in your POS system and ask them to scan their credit card so that the system can capture their credit information. This can be used as a proof that person came to your store
CCTV footage will also be a great piece of evidence in case of dispute

✨️ You don't necessarily need to collect and check every customer identity. Instead, you can set up some ground rules like: only check if redeeming amount is greater than $100

How VaocherApp can help?

If the gift voucher purchase happened via VaocherApp checkout form, you can see some payment details such as:

credit card last 4 digits
credit card expiry date
payment reference ID

Discount vouchers — Example of payment details in VaocherApp

You can use this info to verify before accepting the gift voucher.

We hope you find this article helpful, please reach out to us if you need anything.