I know. It’s not a good time to use “Nigeria” and ‘scam’ in the same sentence, but it’s gotten too close to home and I think it’s worth talking about. I’m a very vocal promoter of non-cash payment instruments and I’ve spent more than the past half-decade working to advance the mainstream adoption of these instruments, specifically gift cards and cryptocurrency (a story for another day). So, my interests are hurt when these tools are identified with nefarious activities by default.

Some background

A few years ago, say, up until 2013, gift cards were not really a thing among Nigerians. Retail brands in the West have been selling gift cards for decades and the industry is worth hundreds of billions, but there were hardly any issuers or consumers in Nigeria ten years ago. If people were using them for anything then, those activities were either very small or largely underground. In 2014, my partners and I launched the first gift card company in Nigeria, SureGifts, with the goal of pioneering local gift card creation and distribution. The idea was simple and the utility of gift cards was well-proven in the West: Individuals and companies buy gift cards for someone when they prefer not to bother with selecting a specific gift item, and when giving cash gifts would be inappropriate. We launched the company to create gift cards for Nigerian brands for the first time, and we’ve been on about that business since. Today, Nigerians are generally aware of gift cards (or shopping vouchers), and you’re unlikely to mention 3 companies in Nigeria without naming one that has probably used SureGifts gift cards for their customer or employee reward programmes.

What’s the scam?

I first got a hint that something was going on when foreign card processors declined to process payments for us when they heard “gift cards” and “Africa”. Since then, I’ve had to tip-toe around the business world as I try to introduce myself and what I do, and it partly inspired us to develop the SureRemit cryptocurrency. It turns out that, according to the Federal Trade Commission in the US, over 25% of scammers asked their victims for gift cards last year. In light of recent events with several Nigerians getting caught in the FBI net for one fraud or the other, there’s been a lot of local chatter and I’ve joined most people to shake-my-head or park the issue behind “not-all-Nigerians” (or “not-all-Forbes”), until an investor shared this tweet with me to investigate why the gift card business has developed such a bad reputation, so, here I am…writing:

One of the two guys “working hard” is selling gift cards which is an ancillary service to cyber crime lol

— $h£R (@__shrapnel) August 23, 2019

You see, over the past few years, the legacy system has done a pretty decent job policing petty fraud. If you’re in Nigeria and you want to defraud an innocent person in the US, covering your tracks won’t be easy since the victims have to send you money somehow, either through the banking system or via regular remittance providers. These channels leave a paper trail, so I imagine that it’s quite a headache for fraudsters. Scammers needed something victims could buy and send instantly and electronically very easily, and that thing has to be easily exchangeable for cash locally. Popular foreign gift cards were perfectly qualified. Scammers convince unsuspecting people in the West to walk into a nearby store and purchase popular gift cards (Amazon, Google Play, iTunes, etc.) and send the codes over. The scammers, in turn, sell them for cash locally in an untraceable manner via a fast-growing secondary local marketplace for gift card exchanges.

I’m aware of how exchanging these gift cards for cash has become a HUGE business over the past few years, and while some people might have acquired gift cards legitimately and have intentions to convert them to cash, that is not the overwhelming perception of what is majorly going on. Every day, multiple businesses now advertise foreign gift card exchange services using influencer accounts on Instagram. If you look at public comments on those adverts and judging from comments like the tweet above, it is clear what people generally think about the operation. In fact, those businesses have made influencer marketing on Instagram an unattractive marketing channel for us as a business because of its association with fraud.

Of course, I understand why gift cards have become “an ancillary service to cyber-crime” in Nigeria. It’s difficult to imagine that so many Nigerians have been legitimately “gifted” these cards by loved ones abroad, and it’s hard to imagine why a loved one abroad would want to gift someone in Nigeria a gift card that’s only redeemable abroad. One could argue that it’s used as a remittance channel, but these gift cards are often converted to cash at very steep discounts, and the process for converting to cash is not often straight-forward and quite risky. We had someone on our team try to sell an Amazon gift card. It was via WhatsApp and the process was what I would guess a drug trade would look like. All these rules out any merit behind the idea that the channel is useful for innocent cash remittances. I’m open to any clarity around why there is such a large market for the conversion of foreign gift cards to cash in Nigeria.

We need to do better

Now, we have a business on our hands that deals with the sale of gift cards. We don’t buy your foreign gift cards at SureGifts, we enable you to purchase gift cards exclusively redeemable at your favourite local Nigerian retail brands, and these gift cards are in no way exchangeable for cash as we clearly state in our terms and conditions. So far, SureGifts is still the only local gift card aggregator and retailer in Nigeria, and we even serve government agencies. From the beginning, we were aware that a cash-out window for gift cards creates an opportunity for a dark secondary market, and it could get fraudsters creative around using the instrument for money laundering. It was quite clear to us that any prepaid instrument, closed-loop or otherwise, for which there is a cash-out window will and should have regulatory oversight, and as with banks, any entity facilitating such cash-out should adhere to know-your-customer (KYC) standards. This is important to combat fraud.

I suggest that in pursuing their work to clean up our reputation, local authorities (the Central Bank and EFCC, perhaps) should step in to ensure that the providers of gift card cash-out services identify their customers and collect basic details about how these gift cards were acquired. Maybe this will help combat 25% of this scam issue.