If history is any indication of what is to come, online merchants should expect a record number of fraud attempts this holiday season. Digital fraud has risen as more companies engage in their digital transformation, personal and financial data is readily available from a barrage of global data breaches, and fraudsters grow more sophisticated in the technology and techniques they deploy.
According to the most recent Mobile Payments and Fraud Survey Report, criminals find weaknesses in merchant operations that process transactions online and via mobile. Merchants had mixed concerns where they observed the highest risk of fraud, but one thing is for sure, they are experiencing higher risk in every sales channel. The report states:
about half of merchants (49%) stated that traditional ecommerce (consumers shopping from desktop browsers) is still their highest risk channel;
mobile web browser transactions are the next most likely to be considered the highest fraud risk, as indicated by approximately 21% of merchant respondents;
18% of merchants say mobile app payments are the highest risk.
With the holidays quickly approaching, merchants are preparing anticipated increases in sales, but are they ready for increases in fraud? For many, this preparation is multi-faceted and begins with identifying blind spots that resulted from what they experienced last season and their changing strategies throughout the year. These changes may have been from introducing international geographies to their sales plan, adding products or new sales channels, making their site mobile-friendly, or from creating and launching a mobile app.
An annual audit may be urged in order for online retailers to review their changes and make sure their fraud system is still operating at peak efficiency to identify real fraudsters from real customers. Outlined below are some suggestions to help merchants prepare for the holiday season, minimise fraud, and reduce the negative financial and brand ramifications associated with chargebacks in the new year.
1. Use your data to understand your consumer. Access data from last years’ holidays and determine how normal activity looked compared to fraud. Holiday buyers may look different from average, normal buyers from other times of the year. Fraudsters often use the same strategy and tactics that have proven successful in the past. Only comparing sales and fraud data in the same period from the previous year will isolate these patterns. This provides the necessary insight to identify the characteristics of legitimate orders, so you can automate their approval, avoid false positives, and maximise sales.
2. Determine the right risk vs sales ratio for your business. Again, use data to make informed decisions about how much risk you might be willing to accept this holiday season to maximise sales opportunities. In identifying a risk threshold, businesses can adjust their policies that govern a fraud strategy to allow merchants to respond confidently and quickly to fast-changing conditions during the holidays.
3. Utilise a multi-layered approach to detect and deter fraud. Because there is a limited amount of time during the holidays, fraudsters identify a merchant, or in some cases an entire industry, and attack. Inserting obstacles throughout the buying path, including during account registration, before authorization, at authorization and post-authorization, is typically enough to detect the most aggressive fraudsters from targeting an organisation.
4. Review, analyse, and repeat. Continually review your transactions, automated systems, manual review rates, exceptions, declines, etc., to make sure you have the most up-to-date methods of approving, declining, and reducing false positive orders. Because fraud is constantly changing and evolving, it is critical for your organisation to be fluid, open to change and nimble in its approach to addressing current and new fraud.
5. Engage your data team and/or fraud solution provider or even your payment provider. Knowledge is key and by tapping outside resources, merchants can gain a new perspective and stay abreast of timely changes that can impact a business.
6. Train, train, train. Make sure your fraud analysts and review agents know the latest news and tactics that are impacting the industry. For example, if data from Black Friday is revealing new fraud tactics, make sure all of your analysts are aware and have a strategy in place to defend against them.
These are best practices that can be applied to many facets of an organisation, especially fraud. Fraudsters look to exploit opportunities and if they are faced with multiple hurdles, they are more likely to move on to a merchant that is less vigilant and more vulnerable.
The time is now to identify your organisation’s blind spots, refine your fraud strategy, automate order approvals and update your business rules to successfully manage digital fraud over the holidays. Attend the webinar “How to Prepare for Digital Fraud This Holiday Season” and learn holiday fraud prep best practices from Gymboree, LUSH, Whitepages Pro and Kount.
About Kelly Reynolds
Kelly Reynolds, VP of Client Success has been helping Kount customers achieve fraud prevention and revenue generating strategies since 2009. Prior to Kount and after obtaining a business administration degree from Boise State University, Kelly worked in the corporate domain industry with MarkMonitor. Prior to MarkMonitor, Reynolds worked in the contract manufacturing and banking industries.
About Kount
Kount’s award-winning fraud management, identity verification and online authentication technology empowers digital businesses, online merchants and payment service providers around the world. With Kount, businesses approve more orders, uncover new revenue streams, and dramatically improve their bottom line all while minimising fraud management cost and losses. Kount delivers certainty in every digital interaction.
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