In an editorial, Computerworld says that retailers who are limiting gift card purchases in the wake of the EMV liability shift are causing problems that could be easily remedied by a change in the way people buy gift cards.
What thieves often do is take advantage of a technology hole with most retailers. That hole is that the specific identifying numbers of gift cards are not always tied to the card that made the purchase. In other words, when a bank shuts down credit or debit card 123456, there is usually not an automatic way to instantly shut down any gift cards recently purchased by payment card 123456. Therefore, thieves like to take stolen cards/stolen card credentials and immediately purchase as many gift cards as they can. In effect, that extends how much time they have to use the gift cards to purchase merchandise that they quickly monetize through pawn shops, eBay or even street sales.
The proper fix for this problem is to close the loop. Make sure that every purchase of a gift card includes the serial number of that card, so that a canceled payment card can almost instantly cancel all recently purchased gift cards.
While this fix might be technically possible, it would require a large amount of data sharing and system integration. Additionally, there may be privacy issues involved. Gift cards are designed to be given to a third party that is separate from the retailer and purchasers. Work would need to be done to prevent a gift card recipient from gaining access the giver’s credit card number. Finally, what would happen to legitimate gift cards under this system? A lost or stolen card might result in a lot of legitimate cards being cancelled.
Retailers already have a number of fraud prevention measures in place, and of course must adhere to laws on money laundering and suspicious activity reporting. Retailers need to make sure that no back doors are open, but at the same time, they want to ensure that customers are having a good experience. Encouraging registration of gift cards, educating customers about fraud policies, and offering ways to accommodate legitimate customers who might otherwise be flagged, are all a part of creating a successful gift card program.
Overview by Ben Jackson, Director, Prepaid Advisory Service at Mercator Advisory Group
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