COMMENTARY: The Holidays Are Coming, But Transaction Fraud Doesn’t Take Holidays

Since the global pandemic turned the world upside down, millions of consumers have taken their in-person shopping habits online. Fraudsters have noticed this shift in consumer shopping behavior and are capitalizing on it by trolling and exploring vulnerabilities throughout users’ entire online shopping journeys.

While the holidays may seem far off, if your current fraud-prevention solution can’t handle the four items listed below well or at all, you should start upgrading your systems now, in time for the 2022 holiday season.

Saying ‘yes’ to your new users

On top of the existing rise in new online shoppers as a result of quarantines and store closures, we will likely see a further increase around the holidays. Unfortunately, many merchants unknowingly turn away new customers because they use fraud-prevention solutions that have limited visibility into customer identities. In fact, new users are five to seven times more likely to be falsely declined than returning customers because of a lack of data.

When businesses wrongly decline new users, they often miss opportunities to convert them into buyers—and, possibly, loyal lifetime customers. They need to ensure their system has access to a larger external network of identity data so that it can distinguish between new legitimate users and fraudsters.

Offering same-day delivery and pickup

Many consumers have embraced convenient delivery options like same-day delivery and buy online pickup in-store (BOPIS). During the 2020 holiday season, stores that offered convenient services like BOPIS saw their sales rise 49% on average over 2019, while stores that didn’t offer these options saw about a 28% rise.

Retailers need to offer their customers fast and convenient delivery options year-round, and especially during the holiday season. But they can’t without an automated fraud-prevention solution. Legacy solutions that rely on rules and manual reviews can’t evaluate transactions fast enough to offer these services.

Preventing account takeover

If retailers fail to maintain the trust of their customers, those customers will shop elsewhere. And maintaining trust involves protecting customer accounts. However, fraudsters often obtain account usernames and passwords through dark Web marketplaces and phishing attacks. Without the right fraud-prevention solution, these cybercriminals can take over accounts completely unnoticed.

Businesses need a fraud-prevention solution that can block automated account takeover (ATO) attacks and can detect when an account has been compromised. And that solution must detect ATO fast. Once fraudsters take over an account, they act quickly. In fact, 40% of the fraudulent activities that occur with an ATO happen within 24 hours.

Identifying returns abuse

Most consumers expect merchants to offer convenient and flexible return options. So offering customers convenient ways to return merchandise, especially those looking to buy gifts, can increase customer loyalty and improve the overall experience. However, the holidays bring out policy abusers and fraudsters. In 2020, fraudulent holiday returns to U.S. merchants totaled about $10.2 billion.

Legacy fraud prevention solutions can prevent basic returns abuse, but they aren’t sophisticated enough to prevent omnichannel abuse like buy online, return in-store fraud. It is critical to ensure that all forms of fraud are monitored, not just fraud exclusive to the virtual or e-commerce environment. Next-generation systems are designed to monitor all potential fraudulent transactions. To conquer holiday and overall fraud threats, retailers should seek out a fraud-prevention solution that allows them to seamlessly enforce their returns policy across all types of purchases.

Cybercriminals don’t take holidays. However, retailers can certainly make criminals’ malicious endeavors far less fruitful by ensuring their organizations’ fraud-prevention plans and solutions take into consideration all of the factors noted here.

—Andrea Montero is director of product management at Forter, New York, N.Y.