The Best Gifts are Fraud-Free

You should already know this: consumers love gift cards. Although they have been around since 1994, gift cards have enjoyed a surge in popularity over time. The global gift cards market is expected to hit a whopping $750 billion by 2026; the profitability of eGift cards is growing at an annual rate of 200%. Unarguably, eGift cards offer a huge potential to boost your sales and build brand loyalty. Unfortunately, fraudsters love eGift cards too, making eGift card fraud a major problem worldwide.

According to ACI Worldwide, eGift cards have the highest fraud attempt rates of all products sold by their merchants. This is unsurprising news. eGift cards are delivered instantly and no shipping address is needed. In addition, they are easily transferable and untraceable, resulting in a high demand in the black market. As a result, eGift cards are the perfect target for fraudsters. For retailers, the fear of eGift card fraud can overwhelm their desire to tap on the opportunities eGift cards present.

While all fraud detection solutions boast fraud reduction, one size does not fit all. Choosing a solution that fits well with your business operations is optimal for dealing with fraud efficiently.

Minimizing eGift card fraud: finding the best fit

To make an informed decision, you must first review and assess your business goals. We identified four main priorities most businesses wish to achieve: market expansion, cost efficiency, revenue growth and fraud reduction.

Based on your ranking of the priorities, you would be at different stages as your peers. And for each stage that you are in, different fraud management goals may be recommended.

 

1. The Voyager

voyager revenue growth fraud management

Congratulations! As a voyager, you are now crossing borders and establishing your foothold across regions. Your goals, ranked from the highest to the lowest priority:

  1. MARKET EXPANSION
  2. Revenue growth
  3. Cost efficiency
  4. Fraud reduction

Voyagers are eGift cards retailers who are preoccupied with growing their market share and conquering regions first and foremost. In contrast, cost and fraud reduction can wait – or come in second – momentarily. 

However, while the growth potential of market expansion is immense, cross-border fraud and larger order volumes pose as a source of concern. Are you able to scale the fraud review process together with the business growth? 

 

Your best fit: a no frills, fast adapting solution

Venturing into new markets is daunting, and you are already occupied with setting up new offices and eGift card kiosks. That’s why you need a fraud solution that adapts fast – so you can expand into new markets without overstretching your team and your budget.

Imagine you are expanding into Australia, where consumers are increasingly purchasing eGift cards. An adaptive solution can scale to handle larger order volumes immediately without rocketing costs. This can be achieved by fully automating the review process. With the machine doing the heavy lifting, you can channel your manual reviewers to more productive aspects of the business, such as analyzing the new fraud landscape. Additionally, an adaptive solution self-learns in real-time – it can accurately and instantly identify new, unknown fraud attacks even in unfamiliar territories.

By having a highly adaptive fraud solution, you can expand into new markets at the lowest cost possible.

 

2. The Gatherer

gatherer revenue growth fraud management

eGift cards are a great way to generate revenue. In fact, 75% of customers who enter a store with a gift card overspend the value of their gift cards. As an established brand – likely with several brick-and-mortar stores – you want to further propel growth with eGift cards as a channel.

Your goals, ranked from the highest to the lowest priority:

  1. REVENUE GROWTH
  2. Cost efficiency
  3. Fraud reduction
  4. Market expansion

Gatherers have been around, achieved stable growth, especially in markets they are present in. Growth is still at the top of the mind, for sure. However, your risk appetite has reduced and cost control has increased in priority. Closed loop eGfit cards represent an opportunity to diversify your revenue streams, you hope that they can drive your sales and increase your customer baseHow do you continue to grow without losing too much?

 

Your best fit: a frictionless, active surveillance system

If you have already implemented some rules to automatically filter suspicious orders, check in with your customer support team to make sure you do not have high rejection rates. While you no longer have the risk appetite like before, risk-averse fraud management could cause you to lose more. Overly strict rules turn away genuine customers and increases cart abandonment rates, which restricts your growth potential.

Rather, consider switching to a frictionless solution that can monitor and passively analyze transactions in real-time. Rely on behavior analysis to differentiate between genuine user behavior and fraudulent behavior instead of adding on strict rules to block out fraud. With greater user experience, you can keep your customers happy and increase your acceptance rates. For gatherers worried about chargebacks, look out for solutions that offer a chargeback guarantee to reduce your risk of fraud.

 

3. The Trailblazer

trailblazer revenue growth fraud management

The risk of fraud for digital goods is much greater than it is for physical goods, and that is not news to you. eGift cards are one of your best selling items – or could be the only item you are selling.

Your goals, ranked from the highest to the lowest priority:

  1. FRAUD REDUCTION
  2. Revenue growth
  3. Cost efficiency
  4. Market expansion

You have been through the exponential growth that selling digital goods brings. At the same time, you have also gotten burnt by the fraud badly at least once since starting out. As a result, you have a dedicated fraud team, but you still struggle to keep fraud under control at times. You want to do more to stop fraud, but you want to keep the team lean. In such a harsh environment, how do you continue to rise above the risks to blaze new trails?

 

Your best fit: a real-time, fully automated solution

The weapon you need in this uphill battle is a solution that can accelerate order fulfillment while accurately detecting fraud. With the rise of machine learning, you can achieve increased automation – or even full automation for instant results. Real-time machine learning can get you an advantage in spotting syndicated attacks by fraudsters as well to reduce your chargeback rates. Consequently, your customers can receive their eGift cards immediately, without unnecessary waiting time. In turn, you can reduce your fraud without taking a toll on your team, while keeping your customers satisfied.

Here’s a tip: choosing a solution that has a proven track record with digital products will allow you to benefit from the specialized knowledge and advanced strategies.

 

4. The Hunter

hunter fraud management revenue growth

If you are one of the 8 out of 10 e-commerce retailers that offer eGift cards, you are experiencing fraud in both your online transactions and eGift cards.

Your goals, ranked from the highest to the lowest priority:

  1. REVENUE GROWTH
  2. Market expansion
  3. Fraud reduction
  4. Cost efficiency

To make matters worse, hybrid orders which include eGift cards will also carry a significantly higher risk of fraud. Many businesses react by being more cautious and over-tightening their security. However, when you start to place limits on the eGift card value, or decline genuine customers, your customers will be left unsatisfied. Unhappy customers might leave bad reviews, or shop with your competitor instead. Fortunately, as a hunter in a competitive e-commerce industry, you are fearless and have a strong appetite for risk. With revenue growth as your top priority, you are determined to keep your business competitive by retaining your customers and increasing acceptance rates.

 

Your best fit: a risk optimizing, revenue maximizing solution

Overcome your risk-averse attitude. A good fraud management solution should not only focus on reducing your chargebacks, but also maximizing your revenue by optimizing your risks.

For instance, the system should provide an “approve” or “decline” decision on transactions that will maximize your returns, instead of simply rejecting seemingly risky ones. The key here is to combine machine learning with financial algorithms – by determining the optimal risk level to maximize your revenue potential, the system can accept a riskier transaction that has high potential returns. Optimizing fraud risk will thus allow you to accept more transactions, increasing your approval rates and driving your overall performance. A system that gives instant decisions can also eliminate hard rules, growing your customer base through a frictionless user experience.

 

5. The Genie

genie fraud management revenue growth

As a white-label eGift card solution provider, you provide a comprehensive set of services for retailers to engage their customers and maximize their sales potential.

Your goals, ranked from the highest to the lowest priority:

  1. COST EFFICIENCY
  2. Revenue growth
  3. Market expansion
  4. Fraud reduction

As a genie, you instantly grant the retailers their wishes with a one stop shop. However, there’s a problem: you do not have a dedicated fraud team to customize fraud solutions for your clients. Every retailer, especially the big brands, has a unique risk profile. Therefore, your fraud solution must be comprehensive enough to address their needs properly. Otherwise, false positives and low acceptance rates may compel them to switch to another provider. Furthermore, customizing rules for different clients takes a long time and amounts to high costs. You want to achieve cost efficiency so that you can serve your clients at the lowest costs possible.

 

Your best fit: a customizable, scalable solution

Ditch the standardized, global templates that you implement for all your retailers. You need a solution that can optimize to your clients’ risk profile, and one that can do it fast. A solution that does not rely on historical data can be implemented and integrated within a matter of days. This can be done with automation and real-time machine learning, which bypasses the need to train the system with historical data. This ensures that you can easily customize to the needs of your clients, swiftly and seamlessly, with no additional costs.

 

Receive the most out of your eGift

With the variety of fraud solutions available, it is unsurprising if you are spoiled for choice. When committing to a set of fraud tools, ensure that these tools are in line with your business goals. Fraud solutions should serve as a complement to propel your growth, rather than slow you down. With the promising potential the eGift cards market brings, you should make the best of it.

Of course, your business goals may change from time to time. When that happens, refer back to the guide, and ask yourself the same questions about what your priorities are. Also, remember that a great fraud management solution should not only address your fraud problem; it should also contribute to your business growth.