The year-end shopping season is in full swing, with Black Friday, Cyber Monday and pre/post Christmas shopping all on the horizon. This year is shaping up to be one of the biggest on record, with industry research forecasting consumers will spend $52.7 billion, an increase of 2.6 per cent from 2018. eCommerce is predicted to contribute a large portion of these sales, with 70 per cent of Australians ‘finding online shopping less stressful than in-store’. With this in mind, it is unsurprising that one in four shoppers plan to shop online during Boxing Day instead of venturing outside.
As eCommerce spending surges, so do instances of fraud, 85 per cent of which now occur online. Fraud costs merchants over half a billion dollars annually, a figure that continues to increase. Putting this into the retailer’s perspective, every USD $1 of fraud costs merchants USD $2.40, quickly eroding the bottom line. On top of that there is 73 cents of fraud for every $1,000 spent.
With retailers looking to make the most of increased eCommerce retail activity, it is imperative that they protect against fraud. Here are three ways businesses can avoid falling victim to fraud during year-end sales.
Get the balance right
Retailers will want to make the most of the busy time of year by providing a great and frictionless customer experience, while ensuring they have strong protections in place to safeguard against fraud and minimise chargebacks. Getting the balance right between sales enablement and protection is essential. For example, if you allow all purchases to go through unmonitored, you risk lost revenue through fraudulent transactions, while employing too stringent security measures can make it hard for genuine transactions to be accepted – and that also impacts the bottom line. Luckily there are some simple measures that can protect retailers without infuriating customers.
A quick re-cap and analysis of last year’s holiday shopping season and reviewing areas of improvement is a great start. Also on a more practical front, consider enforcing shipment to a billing address for products purchased online, as using ‘pick up’ locations makes it easier for fraudsters to send purchases to a bogus location.
For retailers that offer cross-border purchases (allowing consumers in international markets to shop in their online store), offering locally-preferred alternative payments methods can increase acceptance rates of transactions and strengthen fraud mitigation.
Protect against Bot attacks
20.4 per cent of all website traffic in 2018 was from bad bots – a threat that continues to grow. However, retailers can employ a layer of protection through website monitoring tools that can detect potentially fraudulent purchases early in the sales journey.
Ask your payment services provider (PSP) / merchant services provider about any additional layers of protection they can provide on their end. Many PSPs/ merchant services providers will have access to technology that can detect bot patterns to catch fraudsters early, such as acquirer-reported fraud measures and ‘consortium data’ that draws purchasing trends from large sets of data to profile customers and predict fraud trends.
Ensure that your website security team have access to the most up to date tools and procedures to detect and mitigate bots. Clear communication and internal alignment is crucial in this regard, especially during the year-end frenzy.
Use historical data
Data is one of the most powerful tools you have at your disposal to understand fraud ‘hot spots’ within your business. Regular reviews are essential and looking back to previous busy periods can help you uncover common threads in fraudulent transactions.
Understand the factors that can lead to card declines – 3-D Secure, CV2 responses and bank declines. Customers who receive a decline notification during a purchase may try repeatedly to make a purchase, placing increased strain on your systems and back office processes. Work with your web, data and PSP/merchant services provider teams to see which cards, IP and email addresses pose the biggest threats. Create ‘triggers’ around these hot spots to minimise bottlenecks.
As retailers look to capitalise on increased spending around Black Friday, Cyber Monday and pre-Christmas shopping, they should have an effective strategy in place for combating fraud, while providing a seamless customer purchase experience. Simple measures to help reduce chargebacks, like being prepared, reviewing and tighten up your fraud mitigation strategies and while offering alternative payment methods could reduce the likelihood of fraud with minimal friction to the customer experience. Develop a strategy for bot attacks by aligning internally and seeing how your PSP/merchant services provider can provide additional protection during peak season.
Finally – data remains your greatest ally, so use it to help anticipate common fraud patterns so you can implement automated triggers to combat fraudulent transactions.