Monday , December 6, 2021

COMMENTARY: Back-to-School Season Is No Time To Let Down Your Fraud Guards

Back-to-school shopping means big dollars for many merchants. In fact, the National Retail Federation predicts parents will spend $82.8 billion, and both online and brick-and-mortar retailers are hoping to get a piece of the action.

Unfortunately, so are the fraudsters. This year’s back-to-school shopping, already in progress, is sure to see its share of high sales and increased fraud attempts. Here are three important ways retailers can maximize sales and minimize fraud losses this school-shopping season.

Know your customer, know the fraudster

Wixted: “This year’s back-to-school shopping, already in progress, is sure to see its share of high sales and increased fraud attempts.”

With a data breach hitting the news daily, it is very simple for fraudsters to obtain stolen credentials for online accounts. That means it can be difficult to know if the person logging into your site is one of your best customers or a fraudster using stolen credit card information.

Understanding the details associated with an order and the transacting device can help discriminate between a legitimate customer and a fraudster. Is this transaction taking place from the same device you are used to seeing? What is the IP address of the device? Is the email address consistent with what the customer has previously used? Analyzing these attributes can provide powerful insights into the risk of a transaction.

Anticipate out-of-pattern spend

There are certain times of year when consumers will spend more. The holidays are obviously one of those times, but following close behind is the back-to-school season. This is a busy season for electronic purchases specifically. From TVs for the dorm room to the latest tablets and phones, the items that many parents are ordering are also known to be common targets that fraudsters attempt to steal.

Understanding there will be an increase in electronics purchases and larger cart sizes is important. Merchants can opt to loosen some of their fraud controls around these items for known customers. It may typically be out-of-pattern spending, but it makes sense this time of year. If there is high confidence it is a returning customer, the transacting device is consistent with prior orders, and there are other consistent order characteristics such as billing address and email, it is likely safe for the transaction to proceed without challenge.

On the flipside, merchants may also opt to tighten certain controls. If the transaction is coming from a device never seen before and the account recently had profile changes (email or phone number change, for example) it may make sense to inspect this transaction further before fulfilling the shipment.

BOPIS Beware

Many merchants are looking to attract new customers during the back-to-school season. Customers are becoming more accustomed to rapid delivery from online-only merchants. This provides brick-and-mortar merchants with an opportunity to attract new customers by offering same-day pickup in store.

The BOPIS (buy online, pick up in-store) movement is proving very fruitful for retailers. This can be a lucrative channel for fraudsters, too, as the time between placing the order and the in-store pickup can be short, making it difficult to fully screen risky orders.

Further complicating matters, fraudsters often work with an individual who lives close to the pickup store with an ID to match the order information. Merchants should consider putting in place stricter controls for orders that come from a brand-new account or through guest checkout.

In addition to analyzing the attributes of the device used for the purchase, merchants will also benefit from understanding differences between how a legitimate customer and a fraudster navigate a website.  Did the user browse online prior to purchasing or did he simply search for specific electronic item numbers, add the items to the cart, and check out? If it’s the latter, this could be a sign that it’s a fraudulent transaction. Many valid users will look at various models prior to making a large dollar purchase, whereas fraudsters know exactly what item they want to steal, and want to complete a transaction as quickly as possible so they can move on to their next target.

Back-to-school shopping is an important revenue opportunity for merchants, but it is important to recognize and understand the risks, and use the technology available to help minimize the risks.

—Jeff Wixted is vice president of product and operations at Accertify Inc., Itasca, Ill.

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