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eGift Cards: Tasty Revenue for Online Food & Beverage Businesses, Easy Cash for Fraudsters

posted on: Tue Oct 03 2017

Sales for online food & beverage businesses continue their strong growth, but a trend that’s really pushing online sales is the surge of brick-and-mortars—including restaurants, grocery retailers, QSRs (quick service restaurants), and other traditional food & beverage outlets—hungry to make a name for themselves in the eCommerce channel.Order Food Online

And with overall eCommerce sales expected to increase by 18% to 21% in the coming holiday season, the next few months are sure to be good for food & beverage retailers, too. And just to make certain they have all the bases covered, many food & beverage retailers are looking at eGift cards to enhance sales.

After all, who wouldn’t love an eGift card for curbside pickup from their favorite restaurant on the way home from a long day of holiday shopping? Or to use on a seasonal novelty drink at the coffee shop drive-thru? Or that lets them pick the exact type of champagne they’ll pour on New Year’s Eve (Blanc de Blancs? Bland de Noirs? Mousse? Brut?)?

A word of caution, however, to food & beverage retailers fresh to the online world: you’re entering at a point in time when multiple factors are driving record-breaking increases in card-not-present (CNP) fraud.

  • The October 2015 EMV mandate requiring Chip-and-Pin readers at retail point-of-sale has made card-present fraud much more costly and difficult, driving fraudsters into the online world. In fact, CNP fraud increased 40% in 2016, with 27% of that increase related to the EMV mandate.
  • Billions of records have been compromised by an unprecedented number of data breaches, “weaponizing” consumer data. This fed $15.4 billion in losses due to identity theft and fraud in 2016.
  • The surge in mobile commerce not only means higher sales, but also higher rates of fraud and significant new fraud detection challenges. Why? More than 60% of overall fraud originates on mobile.

eGift cards can be just as worrisome. Yes, it’s true that consumers love giving and receiving eGift cards—3 out of 4 consumers will be giving them this holiday season and half of consumers say they like the freedom of choice that eGift cards provide.

But fraudsters love them for the same reasons…plus one more: the widespread availability of secondary eGift card resale marketplaces. These make it incredibly easy to turn any type of digital gift card into cash. Fast.

How big of a problem is this? Well, between Black Friday and Christmas in 2015, eGift Cards experienced the most fraud attacks of all products sold by merchants of one of the major payment processors. In fact, 9.5% of all online fraud attempts targeted downloadable eGift cards.

As your food and beverage eCommerce operation ramps up for the holiday season, you might forget to pay attention to the risks involved in selling eGift cards. But another word of caution: don’t.

Even if eGift cards don’t represent a huge percentage of sales, they can take a big bite out of your bottom line. With the 45-day lag in chargeback reporting, criminals could be stealing from you almost the entire holiday season, turning hundreds of fraudulently-acquired gift cards into tens of thousands of dollars in losses.

Don’t wake up with a holiday hangover. Download Kount’s new eBook “eGift Card Fraud: The Gift That Keeps On Taking.” Not only will you learn what fraud tactics to keep an eye out for, you’ll also discover best practices that will help you shut fraudsters down cold.