The Holiday Fraud Season Is Coming – Are You Ready?

The busiest time of the year is here, and there is nothing quite like the holiday shopping season for merchants. The boon in sales during November and December is vital for most merchants in logging a successful year in targeted revenue. However, along with the fun and frivolity of the holiday season comes the post-holiday blues.
For merchants, these post-holiday blues come in a frightful little package gift-wrapped as fraud. There is the out-and-out deliberate friendly fraud and the obvious chargeback fraud. And there are the less obvious methods of fraud, including gift card fraud, identity theft, fake e-commerce sites, and more. It’s important for merchants to be prepared for both the volume of sales and the threat of fraud that comes with these sales.
Consider the recent investigations by Digital Shadows that uncovered an online school for fraudsters, and how this can impact merchant holiday fraud numbers. The Digital Shadows investigation revealed that criminals can pay RUB 45,000 ($745 plus $200 for course materials) to attend six-week courses with 20 lectures that provide education on how to commit online fraud and theft. With the prime focus being on how to steal crucial customer credit card data.
This simply speaks to the need for merchant vigilance at this time of the year. Take the time to learn how fraudsters win during the holiday season and what merchants can do to protect themselves, while still ensuring that the valid sales and customers are supported.
How Fraud Happens
A recent survey conducted by ACI Worldwide, which reviewed millions of global transactions during the 2015-2016 holiday shopping season (Thanksgiving through December 31), reinforces the need for merchant attention.
Most importantly, merchants should remember these two key survey findings when preparing for the holiday sales season:

  • In 2016, 1 in every 97 transactions was a fraud attempt
  • In2015, 1 in every 109 transactions was a fraud attempt

It will take time for the 2017 fraud attempt statistics to be revealed, and in the meantime it’s in a merchant’s best interests to make sure they’re not part of this statistic. Merchants, don’t let the fraudsters win with these holiday fraud tactics:

  • Buy online and pick up in store. Because merchants are acting quickly to fulfill an in-store pick-up, there is little time for order and customer review. This allows fraudsters to sneak through the authorization process with stolen credit card details.
  • Package tracking phishing. Fraudsters use package tracking alert phishing emails that trick customers into clicking a tracking link, which redirects the alert information to the fraudster. The fraudster then arrives just in time to scoop the package from the front door without the customer knowing of the delivery or theft.
  • Fake e-commerce stores. Fraudsters create fake e-commerce stores on legitimate sales sites, such as Amazon or eBay. When a customer purchases a product from the fake store, the fraudsters steal this credit card data (including the person’s correct mailing address, phone number, and email address). This information is then sold on the Dark Web or used to make fraudulent purchases from legitimate CNP merchants.
  • Account takeover. This tactic preys on the customer’s lack of attention to credit card activity. Customers lose track of how and where they’ve used their credit cards during the holidays, making it easy for fraudsters to make purchases that get noticed too late to be stopped.

The holiday sales season is the ideal melting pot of chaos: merchants and customer service team members are over-stretched, the IT team is trying to keep overly busy servers from crashing, and the new temporary holiday staff haven’t been sufficiently trained. Altogether, these factors make it easy for criminals to slip through the cracks and exploit flaws in websites, databases, payment solutions, and authentication/authorization processes.
Stopping Holiday Fraud
These kinds of fraud can have many painful impacts on merchants – lost merchandise, loss of customer trust, jeopardized database, threat of chargeback fraud, and the legitimate chargeback from the duped customer.
Merchants must take advantage of the best in fraud detection and prevention technology to stop holiday fraud. A multi-layered approach is one of the best ways merchants can be ready to defend against fraud attacks.
Make sure your e-commerce solution is taking advantage of technologies such as geolocation, biometric analysis, AVS, IP and device intelligence, 3D secure, and merchant co-op access.
The Extra Steps Count
Sometimes it’s the small changes that make the biggest differences when it comes to stopping chargeback fraud from happening. Merchants should look to their websites for errors and room for improvement. For example, update your return/refund policy for the holiday season and verify all product descriptions. And don’t forget to remind your customer service team members to be extra-attentive this holiday season.
Remember, Verifi is on your side and we want to see an end to the holiday fraud season. Please contact us to learn more about Order Insight and how it can give you the extra edge this holiday season.