Walmart’s fraud detection program, Redemption, has helped return $4 million from would-be gift card scammers since 2018. The proprietary technology anticipates when a gift card has been drained by a scammer, preventing a crime that is often impossible to otherwise rectify. But those proprietary concerns may prevent the program from being adopted or imitated by other retailers.
Redemption was developed after Walmart became aware of a trend of people being tricked into buying a Walmart gift card. The victims would typically get calls from scammers pretending to be a government agency or customer service representative. The victims were urged to load the cards with money, then divulge the PIN or gift card number.
Redemption uses an algorithm with “red flag” markers for gift card fraud and effectively stops those types of crimes during the transaction. Larry Lundeen, Senior Vice President of Global Security & Chief Security Officer at Walmart, told the Better Business Bureau that those flags are confidential to prevent scammers from figuring out how to beat them.
In most cases, it can be nearly impossible to recover the funds. But if Redemption intercepts the fraud, Walmart puts the funds into an escrow account. The U.S. Secret Service then works to return the funds to consumers through its Victim Witness Program. Calls to Walmart’s law enforcement response team are also down by more than half, according to Lundeen.
A Growing Problem
Walmart’s program arose after gift card scams threatened to spiral out of control a decade ago. According to the website TopClassActions.com, Walmart froze nearly $4 million in gift-card balances suspected to be part of fraudulent activity between 2016 and 2017. Last year, Walmart reported it was offering compensation of up to $4 million for affected customers who had bought a Walmart gift card between April 2016 and July 2017.
Walmart wants others in the industry to follow its lead, despite not sharing details of Redemption’s tactics. “This is not a competitive space with others,” Lundeen told BBB. “By collaborating with other retailers, law enforcement and associations, we are working to mitigate this industry-wide issue.”
“Gift card scams represent a significant risk to consumers,” said Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research. “Javelin research shows that nearly 20% of all U.S. consumers have been asked to buy a gift card as part of a victim-assisted fraud attempt, with 17% of those asked buying the card. What is staggering is the average value of those purchases, at $290 per person. Walmart’s program represents a positive step of retailers utilizing both technology and human capital to assist their customers in identifying these scams.”