The 2018 holiday sales forecasts are in and merchants have every reason to be excited. Multiple sources predict numbers substantially higher than 2017 sales, which were robust in their own right. While merchants are understandably pumped, so are fraudsters who see opportunities to nab their unfair share of the profits. Just as merchants must promote their goods and services strategically, they need to apply similar rigor to prevent fraud system-wide and avoid a chargeback-heavy January.
Holiday Sales Forecasts
The National Retail Federation (NRF) expects 2018 holiday sales in November and December to climb between 4.3 and 4.8 percent over 2017. In hard numbers, the increase projects sales to be between $717.45 billion and $720.89 billion.
Merchants have had to step up their game to meet the demands of consumers who choose convenience over price. That means more omnichannel shopping options, frictionless transactions, and speedy checkouts. This need for speed can come at an enormous cost for merchants that do not have the tools in place to prevent fraud and avoid interrupting or denying legitimate sales. Here are a few key methods to prevent checkout fraud:
- Know your customers. Use customer information to identify a suspicious pattern of behavior. This includes customer transaction history, previous dispute files, individual customers using multiple cards in short bursts, and multiple refunds issued.
- Incorporate 3D Secure Authorization as an additional security measure.
- Have a process in place to flag suspiciously large orders.
- Formalize collaboration between merchants and issuers. By ensuring all parties have the right information at the right time, you have a better chance of differentiating legitimate disputes from fraud.
Checkout Fraud Is Not a Merchant’s Only Vulnerability
It is logical to focus attention on preventing fraud at checkout, because historically that’s where the crime occurs. Accordingly, merchants have put defenses in place to protect themselves during the checkout process. However, savvy fraudsters are aware of these precautions and constantly search for new attack strategies in an effort to stay one step ahead of the law. Many have expanded their attacks to exploit merchants throughout the customer journey. Here are some examples:
- Account Takeover: Criminals use stolen information from customer accounts to pose as legitimate consumers.
- Identity Manipulation: By altering account details, like phone number and shipping address across multiple platforms, fraudsters steal accrued points or cash in rewards with the account owner none the wiser.
- Return Abuse: In order to satisfy demanding customers, many merchants offer flexible return policies. Consumers commit fraud by returning goods for a full refund after they’ve used the merchandise. A prime example is clothing, where consumers “rent” merchandise to wear once or twice before returning it to the merchant. The challenge is to prevent return abuse without inadvertently blacklisting good customers. Use of static rules can impact customer loyalty and add friction to the shopping experience.
Keys to a Happy Holiday Shopping Season
A frictionless buying experience is more important than ever during the holiday shopping season. Busy customers don’t have the time or patience to deal with obstacles that slow them down, and they have little patience for merchants that can’t deliver a seamless experience.
Merchants can’t rely solely on their fraud teams and solution providers to create a more secure transaction process for their customers and themselves. Instead, they need to be in lockstep with issuers and collaborate using shared data to reduce fraud, while meeting the demands of omnichannel customers who demand both a secure and frictionless shopping experience.
Contact us to learn how to make merchant-issuer collaboration a reality.