January 6, 2005, 12:00 AM

Fraud hits half of attempts to purchase gift cards online, survey finds

Because they act as cash that can be easily re-sold or used to make purchases, online gift cards have become a favorite target of criminals, says Jeff Foster, executive vice president of Retail Decisions.

 

Because they act as cash that can be easily re-sold or used to make purchases, online gift cards have become a favorite target of criminals, says Jeff Foster, executive vice president of Retail Decisions. “Gift cards are like buying cash on the Internet, and fraudsters this holiday season really focused on them as opposed to trying to buy a Sony PlayStation,” he says.

Foster notes that almost half of attempts to buy gift cards are fraudulent, as some criminals will make thousands of attempts per day using stolen credit card data. Foster bases those figures on the activity Retail Decisions monitors for its clientele of online retailers. “The thing about gift cards is that fraudsters don’t have to go through the trouble of selecting products they know they can re-sell,” Foster says.

The good news, he adds, is that few attempts to steal gift cards succeed due to fraud-prevention techniques such as matching the geographic location of the IP address used in attempts to purchase gift cards with the home address of the credit card account’s authentic cardholder.

But though Retail Decisions notes that actual overall fraud accounts for only 2-5% of online payments, the rate of attempted fraud has been rising slightly faster than the corresponding rise in the number of online payment transactions. Retail Decisions tracked a 44% year-to-year increase in online sales for the period Nov. 15–Dec. 16, but the number of attempted fraudulent payment transactions rose 46% for the same period, Foster says.

He adds that other items that tend to be popular targets of online payment fraud are MP3 digital music players, digital cameras and footwear, because they are all in high demand and easy to re-sell.

 

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