Many retailers take over a third of their total annual income during the final six weeks of the year and New Year Sales drive significant volume through stores and online channels for many merchants. This makes the festive shopping season a vitally important period for retailers. However, the huge increase in sales volumes, the quick turnaround times required for fulfilling online orders and the influx of new customers can also present significant fraud prevention challenges and put retailers’ fraud teams under added pressure.
Consumer behaviour tends to change during the holidays too, adding to the challenge of accurate fraud detection and prevention. Buying for family and friends, or taking advantage of special deals during this period, means customers frequently purchase a broader variety of products than usual and use different channels to find and select those products.
A further challenge is created by the tendency for customers to buy last minute gifts and bargains during this period, which increases demand for speedy deliveries and reduces the time available to authenticate and verify customer details. It is important to adjust fraud rules to accommodate these changing behaviours and make sure that genuine customer transactions are processed quickly and smoothly to support loyalty and protect revenue. However, it is also critical that fraud teams remain focused on vulnerable areas such as high risk products and identity markers which have been previously linked to attempted fraud, compromised cards and chargeback requests.
Fraud heat maps show fraud rates by postal district and can assist in the identification of delivery areas which represent the greatest risk for e-commerce merchants. Monitoring where the fraud originates is a key element in successful fraud prevention, especially for online retailers shipping physical goods. Merchants can leverage the fraud heat maps to identify geographical areas where they need to implement more stringent fraud prevention rules. Fraud strategies can also be adjusted to take into account new areas of concerns as soon as they are flagged. Responsiveness and swift rule changes are critical during peak trading periods as fraudsters move quickly. Additionally, if certain areas which have historically shown high fraud rates are now showing below average fraud rate, merchants may wish to change/relax some of the delivery address based rules in order to enhance the customer experience.
Merchants can also use fraud heat maps to review other aspects of their business processes. For example, they may decide to implement more stringent identification checks on customers collecting at a store in a fraud ‘hotspot’ area. Fraud heat maps are also a useful way for fraud prevention teams to demonstrate to their stakeholders the proactive steps that they are taking to reducing fraud losses across the holiday season and beyond, once clearance sales have finished.
Internal fraud and collusion can also be of concern for merchants. Fraud heat maps can assist in the identification of potential internal fraud as well as delivery driver fraud. For example, a tight cluster of delivery addresses in an area that has been reported as fraudulent can trigger alerts to flag that some form of collusion might have taken place internally and should be investigated.
ReD has already released fraud heat maps showing confirmed fraud across a number of cities in the UK and US. New maps will be added during 2014 so, if you are a retailer operating in these markets, or are looking to expand to these geographies, make sure you take a look at the latest information and make any rule changes needed to combat fraud and protect good business.
About Ronan Le Mestre, Head of Risk, EMEA, ReD
Ronan leads a team of risk analysts supporting ReD’s customers across Europe, Middle East and Africa. The team works closely with merchants across multiple sectors to tailor, deploy and adapt fraud strategies to meet their business needs. They monitor and advise on changing fraud patterns and behaviours and deliver risk assessments to meet customers’ Key Performance Indicators.
Ronan joined Retail Decisions in 2009 with several years’ experience as a risk analyst at Barclaycard and Toyota Financial Services. Ronan serves on the European Advisory Board of the Merchant Risk Council and is certified as an Ecommerce Fraud Professional by The Fraud Practice.
COMPANY PROFILE
ReD is a specialist provider of fraud prevention and payment services worldwide. The company has offices and staff across North America, Europe, Middle East and Africa, Latin America and Asia Pacific. We also work closely with global, regional and local partners.
ReD provides fraud solutions for all payment transaction types. The company is present in every part of the payments value chain, protecting merchants, issuers, acquirers, PSPs, processors and switches, through our ReD Shield, ReD PRISM and ReD Fraud Xchange fraud prevention solutions and ReD1 Gateway and LiveProcessor processing solutions. All our solutions are supported by a team of industry leading fraud and risk experts, standing ready to help protect you in the global fight against payment fraud.
For more information about ReD, please check out a detailed profile of this company in our dedicated, industry-specific online companies database.
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