why is trading gift card risky
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The Current State of Gift Card Trading on Paxful

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The constantly evolving nature of cryptocurrency has truly changed the world. People who previously did not have access to financial services are now part of a new system that allows them to control their finances. Our mission is to help provide financial services to the unbanked and underbanked, but it hasn’t been easy.

Gift cards can be a risky payment method

Currently, we are the only peer-to-peer bitcoin marketplace that still supports gift card payments; others have stopped because of the hassle and near impossibility of proving proper account balances. Here at Paxful, we have fought hard to keep gift cards as an option to enable the unbanked. We know this is how many unbanked users in Africa obtain their bitcoin and we refuse to disable the same people who we built the company for in the first place.

As much as we wish otherwise, bad actors will always try to take advantage of honest users. To fend off scammers and maintain our standard of security, we make sure to uphold strict guidelines when dealing with gift cards. It’s important to abide by these rules to not only protect yourself but to also have a strong case in the unlikely event that something goes wrong. 

Here are the checkpoints you should never forget when trading with gift cards:

  1. Proof of purchase
  2. No brokering of gift cards
  3.  Long dispute times for gift cards
  4. Sellers tend to have the upper hand
  5.  Zero tolerance for fraud

You need to have proof of purchase. This applies to both physical cards and e-codes.

Why?

Proof of purchase is needed to support your claim as the owner of the card. If you’re not the owner, it’s impossible to know how many hands the card has been in before it came to you or have any knowledge of the integrity of the process as a whole. If you are the owner of the card, you present a stronger case in a situation where the other party is trying some fishy business. In case of a dispute, we ask for the following:

  • A photo of the original gift card with your Paxful trade chat clearly visible in the background
  • A complete photo of the original receipt (do not cut off any portion of the receipt)
  • For electronic codes (e-code), an invoice of the original payment and a video recording of your bank statement are required as proof of purchase
  • Proof of exchange with the third party’s customer support 

FAQ: How can an African user sell their gift card for bitcoin possibly be expected to show the original card if those cards are not sold there? 

Answer: We understand many West Africans have found gift cards to be a profitable business and are happy that Paxful has created many success stories. The problem here is that the gift card companies have imposed a DATA EMBARGO on all of us. This means that they keep their records private and there is no way to automatically check if the codes are valid. They refuse to work with us or anyone to fix this as they do not see it as a problem. We continue to support gift cards as a way to help the unbanked buy bitcoin. If your aim is to make a profitable business, there are many other ways besides gift cards to earn the profit. We have outlined many of them here for our West African users. 

The brokering of gift cards is strictly forbidden. Brokering refers to buying a gift card from trade then reselling the same card on Paxful. If you are caught brokering, your account will be banned. 

Why?

If you are not the original owner of a gift card, it makes proving the validity and brokerage history of the gift card in question nearly impossible. 

The gift card companies have imposed a DATA EMBARGO on all of us. This means that they keep their records private and no one can access them. They simply do not want their gift cards used outside of their retail economy and it is with a great legal expense that we continue to support this payment method.

FAQ: Why doesn’t Paxful work out a deal with the gift card companies to check the validity of the codes and stop fraud? 

Answer: We have tried. 98% of all gift cards in the world go through two American companies. We have tried reaching out to them many times but they refuse any such deals.

Thus, the validity of many gift cards cannot be checked until they are redeemed. Let’s imagine this situation for a moment: 

  1. A Nigerian user buys an iTunes gift card through online brokering then sells it on Paxful to a Chinese vendor. 
  2. The Chinese vendor finds out that this gift card is invalid and initiates a dispute with the Nigerian buyer. 
  3. The Nigerian user has no idea where the gift card came from but swears that the card is valid when asked by our moderators. 
  4. Our moderators need real proof and ask the Nigerian user to call Apple to obtain recorded proof of who used the card and when. 
  5. The Nigerian user doesn’t bother or doesn’t have the resources to call Apple from Nigeria, which makes proving the validity of a gift card near impossible. 

Gift card disputes can take up to three weeks to resolve.

Why?

The volume of attempted dishonest trades involving used gift card codes can sometimes cause a huge delay in gift card disputes. We have a team of more than 50 people working 24/7 around the globe to keep the trading experience safe and secure for all our users. 

To speed up a dispute, make sure that you have valid evidence, follow the moderator’s instructions, and remain responsive in the trade chat.

Often times, bitcoin sellers have an advantage during disputes.

Why? 

It is an extremely difficult job to prove the validity of a gift card. This is especially true for codes from, say, iTunes or Google Play as it’s not possible to check the balance until the cards are redeemed. In many cases, gift card holders provide tampered screenshots to the seller, which renders the integrity of the former questionable. 

How have we tried to solve this problem?

In a trial, we attempted banning gift card payments in Africa but things backfired and the fraud rate tripled, as honest users were banned and the scammers used VPNs to bypass the block. 

We’ve also considered having vendors record videos when they receive each code and try to redeem it. However, we didn’t achieve much success, as vendors have a tendency to give up after being scammed by shady buyers multiple times.

Paxful is a “no-gaming zone” with zero tolerance for fraud. If you try to sell a used gift card code, your account may be suspended.

Why?

Our goal here at Paxful is to help users earn money and make profits in an honest way. It is written clearly in our Terms of Service that any attempt to gain profits using any form of fraud is strictly forbidden. Attempting to sell a used gift card code is not only damaging to your trade partner, but also to the trustworthiness of the Paxful platform as a whole. Therefore, we always ask for proof of purchase and strictly forbid the brokering, or reselling, of gift cards. Users who intentionally sell used gift card codes will have their accounts banned. Safe trading experience and environment are as important to us as it is to you. 

Why are gift card disputes nearly impossible to solve? 

In many circumstances involving gift card trades, not even our moderators can provide a viable solution. There are several reasons for this:

  1. Gift card codes from companies such as iTunes and Google Play cannot have their balances checked until they have been redeemed and there is currently no way to automate it.
  2. Buyers of bitcoin are often selling gift cards that they did not buy themselves (e.g. a Nigerian user that sells a Walmart gift card but there are no Walmarts in Nigeria). This act is considered brokering and is strictly against Paxful’s Terms of Service.
  3. In the example of the Chinese vendor and Nigerian buyer given above, we illustrate that having gift-card holders call the issuer of the gift cards is nearly impossible, as buyers are often not in the US, where most of the cards are issued. The issuers may also decline to give out such sensitive information. Even if the issuer does agree to provide such information, the holder of the gift card may just use the code themselves. It’s a sticky situation. 

Moving forward to maintain gift cards as an option on Paxful 

Despite the difficulties associated with gift card trades, Paxful has continued to dedicate efforts in experimenting with possible measures to counteract the harshness of gift card disputes:

  • Today, when we identify users associated with fraud activities on our platform, we ban their accounts and lock their funds immediately. Before this policy of locking funds was implemented, these banned users would simply create new accounts and start trying to defraud again. These users always have their way to get around using VPNs and device detection checks. Though, the threat of losing their scammed funds seems to be working as a deterrent.
  • Our “Know Your Customer” (KYC) verification process allows each user to have only one account, verified through email, phone number, identification documents, and address. If we make it impossible for bad players to make multiple accounts, then the possibility of them creating new accounts and resuming their scamming behavior will go down to nil.
  • By raising fees for iTunes and Amazon gift cards — two highly risky payment methods — from 1% to 5% and other gift cards to 2%, we are beginning to see a slowdown in dispute buildup. 
  • Lately, we have begun experimenting with CodeEscrow, a new tracking system that compares all gift cards submitted and checks their validity within Paxful and on their own ledgers. So far we see that this is much easier to do with Amazon, but we hope to find a similar tool to do this with iTunes as well in the near future. Soon, several other image detection and hardware fingerprinting security services will go online, too.
  • Last but not least, a potential collaboration with Apple that allows us to check gift card balances through a system would be an immense help. We have spoken to Blackhawk and Incomm, the two companies Apple has hired to handle their iTunes gift card network. However, they claimed that currently there is no available API or service to check gift card balances. It is clear, however, that Apple stands firm against their gift cards being used in fraud.

We are by your side and hope you are by ours

As the only P2P platform that still allows users to obtain bitcoin with gift cards, Paxful is paying a tremendous price and providing human resources to fight against gift card scams. We stand by the side of honest traders and condemn brokering, reselling gift card codes, or any other kind of illegitimate trading behavior. Because of the complex nature of gift cards, it is often extremely difficult to trace a card’s origin and brokerage history. However, Paxful is actively trying new technologies and procedures to increase security and reduce the risk associated with gift card trades. 

This is an ongoing process for us, but we are determined to keep the iTunes gift card as a payment option because it is still how most the unbanked, especially from Africa, obtain their bitcoin. We refuse to abandon their key to financial freedom as the whole idea of bitcoin and Paxful’s mission is to serve the unbanked and underbanked.

Bonus: If you know of a way that can automate gift card verification processes, let us know! We have a huge bounty waiting for you. 

 

Paxful Team

Paxful is a marketplace where people can buy and sell bitcoins directly with each other. You can get bitcoins instantly and pay with debit, credit, cash, Paypal and any currency.

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55 comments

  1. Contrary to what you said at number 4 of this article, which say bitcoin sellers will be favored because the gift card holder might have used it or somehow, there are have been tons of other ways vendors would load the card on different accounts then send a screenshot claiming the unused card has been used by other people..
    I’ll suggest vendors should also make video recordings on every trades they do and provide it if the buyer is not satisfied that the card has been used.. The video should be in the real time frame with in the trade minutes as well
    Thanks

    1. That’s a very nice idea and I’m in support of that cos many vendors will used an unused card and paste you a screenshot of card used by another account to convinced you. I guess if paxful moderator can allow the idea making necessary videos at time of trading with date it will help us alot from all ripper’s.
      Thanks you

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