Protecting payments: From EMV to holiday sales and beyond

BRANDING: #PaymentsTips
Each month, we’ll help you navigate the emerging trends and forecasts for card-not-present (CNP) merchants with (what we think) are the best pieces of advice from Verifi, as well as from across the web. We promise to keep this newsletter short and sweet, so let’s get started!
Q> The holiday sales season is quickly approaching and on top of that, the EMV liability shift has taken place. What steps do I need to take to ensure that my payments are protected through all these major industry events and as we move into this period of increased holiday fraud risk?

It’s October, which means many merchants are scrambling to prepare for the busy holiday season. Sales and mobile and fraudsters…oh my! Aside from choosing which promotions holiday fraudto run and how to boost sales, merchants should be thinking about a comprehensive, omni-channel fraud and risk mitigation strategy that will protect their payments from opportunistic cybercriminals waiting to pounce on unsuspecting victims. This October is also compounded by the EMV liability shift. It came, it went and now merchants must deal with the fallout. CNP fraud will begin to increase as fraudsters move to the more vulnerable online channel. For merchants who haven’t adopted the EMV standard, there is much at risk. We’ll outline the major things to be aware of regarding EMV as well as what you can do to protect your payments and continue to boost profits amidst holiday fraud risk.

holiday fraud riskOctober 1 was the official date of the EMV liability shift, which many merchants weren’t even aware of. The merchants that were aware and updated POS hardware and software to become NFC-capable have a little less to worry about. But not all risk is gone especially for CNP merchants. The Aite Group predicts EMV will cause CNP fraud to more than double in the next 3 years to $6.3 billion. Javelin confirms this prediction and says that this forecast is not dependent on EMV adoption. So what is left to be done? For one, merchants should ensure they have a layered, comprehensive fraud strategy in place to mitigate online fraud via various channels. Also, Finally, take a look at how different transaction scenarios may impact your business now that the liability shift has occurred. 

iStock_000060852946_MediumAccording to a recent ThreatMetrix report, growing mobile popularity is making it an increasingly appealing channel for cybercriminals looking to steal payment information. Spoofing is the most popular method for these bad actors, who impersonate a mobile device to unlawfully collect sensitive data.
CNP fraud overall is predicted to more than double in the next three years and mobile in particular will be a vulnerable channel. Merchants should ensure they are aware of all the channel risks and develop a comprehensive fraud prevention strategy that accounts for and integrates with all channels.
Need more reasons to look into mobile fraud and risk mitigation? Take a look at these convincing stats:

  • M-commerce fraud costs retailers, on average, 3% of total revenue
  • A study of 250 organizations averaging $2.54 billion in revenue reported average annual losses attributed to m-commerce fraud that equaled $92.3 million
  • The average mobile fraud rate for large companies is 10 to 24 percent

iStock_000021160233_MediumIt’s no secret that holiday promotions are starting this month. In fact, most started in earnest last month and some even started as early as July. In fact, 20% of U.S. retailers reported that they would begin holiday promotions earlier than they did last year.  Amazon’s “Black Friday in July” promotion this year aka “Prime Day” kicked off this type of holiday promotion earlier this year, even though most reported it was a flop.
Despite that seeming omen, predictions are in for holiday retail 2015 and things look good. Why? Unemployment in August was the lowest it’s been since 2008 and jobless claims are low, boosting consumer confidence and discretionary spending power.  With a forecast like this, it’s no surprise most e-retailers plan to get out ahead of things in 2015. Other key findings to note about the holidays:

  • Three quarters of retailers says at least 20% of their sales come during the holidays
  • The vast majority – more than 80 percent – of retailers expect 2015 holiday sales will increase over 2014.
  • 34% of retailers say on-time order fulfillment is the biggest holiday challenge, followed by adjusting to competitor activity (27%) and mobile traffic conversion (19%)

iStock_000070828219_MediumWhile forecasts call for healthy online sales this holiday sales season, it’s no surprise that holiday fraud risk will be lurking right behind. While most merchants will want to expend time and resources on customer service as opposed to manually reviewing orders for fraud this holiday sales season, this requires having a comprehensive fraud prevention strategy in place.  There are several things merchants can do to prepare ahead of time for the influx of fraudulent activity that will undoubtedly occur during retail’s busiest season. Additionally, merchants should pay special attention to their total chargeback management strategy. Chargebacks shouldn’t be considered a “cost of doing business” and there are ways to fight the Chargeback Grinch and hold on to holiday profits. When it comes to fraud prevention during the holidays – and all year – layer, layer, layer.
We’re headed full steam during the busy holiday sales season and it’s important to bolster your fraud prevention strategy now to prevent crashing and burning later. The impacts of EMV will begin to unfold for both CP and CNP merchants, and remember – it’s not too late to become EMV-capable. Mobile will continue to boost sales and fraudsters will continue to find ways to exploit the channel. Omni-channel fraud prevention is critical to protect your profits across the board. Finally, get ready for a booming holiday sales season. While predictions look promising for merchants’ bottom lines, they look just as promising to bad actors that will seek to skim those profits through illegal and shrewd schemes. Guard your payments!
Don’t forget…you can now download our updated ebook: What Every Card Not Present Merchant Should Know: Navigating Today’s Challenging Payment Ecosystem? Get it now!
What are your thoughts? Ping us on Twitter (@verifi) with #paymentstips and let us know what you think.