If holiday shopping is hard work for buyers, it's a marathon race for retailers - and that's true for online retailers as much as for merchants in physical stores. There’s another group of people who are hard at work at this time of year, too: online fraudsters.
And just like friendly felines around the country who can't take their eyes off tempting Christmas decorations (otherwise known as "cat toys"), these canny criminals always have their eye on the prize.
Fraudsters Love the Holidays
These clever criminals love to hide among the flood of genuine shoppers, knowing that they’re less likely to get caught when manual reviewers are overwhelmed by the sheer number of orders, and when everyone in the company is under pressure to get the packages out the door as soon as possible for the holiday.
All this leaves e-commerce merchants with the challenge of how to successfully configure holiday fraud prevention - without annoying good customers.
The Pressure is On
Customer expectations remain high even in the holidays, when the spike in orders presents difficulties for retailers. Delays in confirmation or fulfillment are infuriating at any time of year, but especially so when you’re buying gifts that must arrive by a certain date.
Similarly, friction at checkout is unpopular - and bad for conversions - at any time, but it’s especially problematic in a busy period when shoppers are in a hurry. The growth of mobile shopping this year indicates that customers are leveraging the convenience of shopping from smartphones when they have a spare minute - meaning friction is particularly likely to be a turn-off.
The Holiday Fraud Prevention Advice That Retailers Usually Hear
Online retailers know that fraud is a problem during the holidays, and they want to prepare and prevent it being a serious issue for them. Unfortunately, the advice they usually receive isn’t enough to meet the double challenge of stopping fraud and delighting customers with easy, friction-free checkout.
Here are the sorts of things retailers are likely to hear:
- Use AVS - watch out for cases of fast shipping when billing and shipping addresses differ
- Make sure IP location and credit card billing address are a match
- Always require the 3 digit security code on the back of the card
- Ship your orders using tracking numbers and require signatures
- Maintain a "hot list" of past offenders
- Use a transaction velocity filter (to flag many transactions using the same card and IP or multiple IPs in a short period)
If you’re in online retail, you’ve probably heard all of this before - and you probably heard it recently. (I’m not setting up a straw man: these things are genuinely taken from articles I’ve seen published in the last few weeks. Chances are, you’ve seen articles like that too.) But while this kind of advice is sensible, it won’t do enough - and it’ll cause problems of its own.
Why It’s Not Enough
The main reason that these sorts of suggestions won’t have the desired effect is simple: they can’t keep up with the holiday rush, or the profile of holiday shoppers.
AVS is handy, but the scenario described above is precisely the one that numerous legitimate shoppers are acting out right now, all over the world. Last-minute shoppers want fast shipping to make sure the presents arrive for Christmas, and they often need gifts delivered straight to the intended recipients, not to their own address.
Velocity checks are useful things too, but shoppers often shop in short bursts at this time of year, fitting their holiday shopping in while they have time - a trend that's increasing with the spread of mobile shopping.
Shopping online and picking up in store is also popular this year - an omnichannel challenge for fraud prevention since there's no relevant shipping address and leveraging extra channels gives fraudsters an extra way to hide.
Requiring CVV numbers is helpful - but it blocks far too many genuine customers to be something retailers should rely on heavily. (This is a topic for a whole article of its own.)
And a hot list is a nice idea, but it's a drop in the ocean when you're combating today's agile, fast-moving and creative fraudsters who go to lengths to appear to be different every time.
The Unintended Consequences
This holiday season, 77% of online consumers planned to shop at a retail site/store they don’t normally shop. That's a fantastic opportunity for retailers, both in the short-term and the long-term. They have the chance for a season of high sales, and also the chance to gain new customers who will keep coming back.
To achieve either of these enticing results, retailers need to provide a wonderful purchase experience. Surfing the site, checkout and fulfillment must all be great.
The trouble is, the pressures of the holiday rush make it difficult to create the ideal experience. This holiday season, many retailers faced problems with fulfillment, with on-time delivery for online orders declining in December.
Omnichannel proved equally challenging: on Black Friday and Cyber Monday, 25% of customers who chose same-day store pickup encountered glitches in what sounded like a great holiday shopping strategy. Some retailers suspended the option altogether.
Fraud prevention often gets in the way of what customers want. It introduces delay at checkout, delay in receiving confirmations, and delay in delivery. It limits sales, has a negative impact on customer experience, and ultimately restricts the number of customers who will return in the new year.
Automated, real-time, guaranteed fraud prevention. It's the future - and early adopters will get the greatest benefits. Until recently, it wasn't possible - manual reviews and rigid rules were necessary to prevent fraud. But that's no longer the case. Retailers who are slow to realize this, and slow to make the change to the better option that new technology makes possible, will lose out to more innovative and forward-thinking competitors.
It's time for fraud prevention to stop being all about stopping fraud. Risk-averse, conservative policies aren't good for business. It's now possible to block fraudulent transactions without adding friction or delay - and that's something that fraud prevention must optimize for as well. Anything else is bad for the bottom line.
Forter treats customers as "innocent until proven guilty" so that approvals are high, false positives virtually non-existent, and customers never experience friction or delays as a result of fraud prevention. And that's all year round: scalable automation means the system works smoothly regardless of the number of transactions it's processing.
That means that with Forter, the holidays are just like any other day of the year as far as fraud prevention is concerned. And customers, for whom this time of year is not at all like the rest of it, get the ideal experience retailers aim to provide - and so they might keep coming back.
See how it works in action - check out the case study from a large electronic goods online retailer. Their customers now love their fast, frictionless service. You might not be able to achieve the same results in time for this holiday, but with Forter you can make sure that well before next holiday season, your own checkout and conversions look just as good.