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The Gift That Doesn’t Keep Giving

Gift card fraud makes clients take security more seriously

By LaShell Stratton

In the old days, the sound familiar to the holiday season was the “ka-ching” of a cash register. Nowadays it’s the silent swipe of a gift card. The International Council of Shopping Centers estimated that nearly $82 billion in gift cards were given during the 2006 holidays. This could mean strong sales for distributors who include these plastic cards among their offerings, especially in the retail and restaurant markets. But more and more customers question the security of these popular products.
“There have been certain retailers hit by gift card fraud,” explains Jake Jacobs, vice president of sales and marketing at Arthur Blank & Company, a plastic card manufacturer in Brockton, Mass.

“In the past, clients didn’t worry about the security, because they really didn’t think it was something they would need,” says Debbie Chadwick, plastics product manager at Bertek Systems Inc., Georgia, Vt. “But now that there are stories about people writing down gift card ID numbers or taking pictures of them with their camera phones, we’ve gotten a lot more requests for security measures.”

These fears have been heightened by warnings from the Better Business Bureau of savvy thieves who wait until gift cards displayed at kiosks are activated and then make purchases online with the help of copied ID numbers. These thieves often wipe out the balance before the people who received the cards get the chance to use them.

To combat these scams, retailers want plastic card manufacturers to implement security measures on their gift cards. And there are plenty to choose from.

Jacobs says Arthur Blank recommends retailers have at least three key elements on their gift cards to protect them from scams. “They should have an encoded magnetic strip,” he says. “With the card’s account number, there should also be a PIN number established through a logarithmic formula. The PIN number should also be protected with a scratch off foil.” Arthur Blank offers a scratch-off in custom shapes for its clients.

Chadwick suggests that retailers also take additional steps to deter gift card fraud. She says they should eliminate human readable numbers on the gift cards, customize the packaging, add special security pantograph panels, and add special warnings on the cards that tell customers to not purchase them if they look like they’ve been tampered with. Customers should also consider adding a watermark to the gift card. Bertek offers SECUREPRINT, which is a watermark embedded within the laminate. “The watermark cannot be copied or reproduced since the image is actually below the surface of the card,” Chadwick says. In addition to the standard CR-80 gift cards and hang-tag point-of-sale cards, Bertek offers SECURELAM where the gift cards are kept under a film laminate shell until purchase.

Ultimately, the security of the gift cards is an end-to-end process that goes from the manufacturer to the retailer. For Bertek, it starts with its production facility which has “closed circuit cameras and state-of-the-art encrypting and decrypting processes,” Chadwick says. This ensures that the data is not compromised during the production of the cards.

Concerns about card security varies from retailer to retailer. “Document security of gift cards does not appear to be a major concern of all clients, and is mainly dependent upon what’s involved with their particular card project,” Chadwick says. “For example, for small run gift card orders, where no variable data would go on the cards, concern is minimal in that the end user would load and activate the card at the point of sale. However, on large card runs, such as prepaid phone cards, where we work with ‘live’ data, there are a lot more concerns. Our clients want assurance that data is accurate, there is no card duplication, that all cards are accounted for, and most importantly, that we have extreme security measures in place to accommodate their needs.”

When selling gift cards, Chadwick says that distributors should also make the clients understand the role they play in gift card security. “They should ask, ‘What are you going to do with the cards? Are you going to keep them behind the counter? Will they be in the cash register or in another secure area?’”

Jacobs insists that both small and large clients should take gift card security seriously. “Adding the security features isn’t really that expensive,” he says. “And frankly the bad publicity and the poor reputation you may suffer among customers because of gift card fraud makes all those features worthwhile.”

LaShell Stratton is assistant editor at Print Solutions magazine. Email comments to lstratton@PSDA.org.