Shoshana Maraney
by Shoshana Maraney • November 02, 2017

Holidays, online fraud

For the very first time, online shopping is set to attract more holiday shoppers than physical stores. The same is true for holiday dollars: the Deloitte study predicted that while last year saw a tie between online and store shopping spend, in 2017 e-commerce will edge into the lead. That’s great news for merchants with an online presence — as long as they can provide the experience customers expect.

That’s more of a challenge than you might think. A startling 47% of shoppers were frustrated with their online shopping experiences during the 2016 holiday shopping season, according to a study by Pitney Bowes.

As all retailers know, there are many factors that can sour a shopping journey. One that often isn’t given enough attention at this time of year is e-commerce fraud protection.

The Fraud Fear in the Holidays

It’s not like retailers can afford to ignore the risk of fraud during the holidays. Fraudsters love to hide in among good shoppers, knowing how much harder it is to pick out the criminal needle in a haystack of customers.

It’s often pointed out that the fraud rate usually stays stable or even decreases slightly during the holidays, making this period the “safest” of the year. (Except for Christmas Eve, which usually sees a spike since most good customers have finished their shopping already.) But this is misleading.

If you think of the flood of orders that characterize the holiday period, you’ll realize that the fact that the fraud rate stays about the same means that in terms of sheer numbers of attacks, you’re seeing a lot of fraud attempts. So there’s good reason to be cautious.

The Wolves in Sheep's Clothing

The challenge is that the nature of holiday shopping makes fraudsters even harder to catch. For one thing, fraudsters do their research, and they target the items that are popular this year. This is partly because those are the goods most in demand and therefore the easiest to resell. It also means they’ve got a better chance of going unnoticed in the wave of people making similar purchases.

There are also certain checkout choices that many merchants consider to be risky the rest of the year which won’t help in the holidays. Criminals like to try rush shipping, to increase the chances that they’ll get the goods before being found out. Close to a holiday, that isn’t helpful anymore. There are plenty of genuine shoppers panicking about making sure their gifts get there in time.

Similarly, many retailers rely on simplistic matching like AVS - a billing/shipping match. At this time of year, though, plenty of legitimate purchases are being sent to locations which aren’t obviously connected to the billing address used. People visit family in different states or countries, send presents all over, and even pool resources to get pricey gifts for friends or loved ones.

Fraud Prevention: Failing the Frictionless Test

Customers exhibiting “risky” behaviors like these will often be sent to manual review queues. An employee will go through the details of the transaction, try to do a little more research online about the person, and finally decide whether the order should go through or not.

Leaving aside the possibility of false positives, which is when customers are mistakenly rejected as fraudsters, this is still a horrible shopping experience during the busy holiday period. Whether you’re running through your gift list in spare moments or spending time finding the perfect gift for a special someone, the last thing you want is to experience delay once you’ve already checked out.

Today’s consumer is intolerant of being made to wait at the best of times. During the holidays, shoppers often simply can’t afford to wait. Whether they’re worrying about missing a sale window, or about checking items off their list, or about ensuring a gift gets to its destination in time, time and peace of mind are important factors. Customers who have to wait hours for an order confirmation due to manual review… probably won’t wait. They’ll go elsewhere.

Don’t Let Anyone Tell You You Can’t Have It All

So if you want to protect your site against fraud, but also want to protect your customers from friction, what can you do? It’s simple. You need an e-commerce fraud prevention system that’s designed to deal gracefully with the speed and scale of holiday shopping.

Manual reviews are never going to be a part of that solution — each review takes an average of five minutes. Replace manual reviews with full automation so that every transaction on your site gets an instant approve/decline decision.

Ensure that your system is calibrated to accommodate holiday norms. Relying on simplistic mechanisms like rules that block AVS mismatches or flag fast shipping is bound to end in poor customer experience. Make sure that your system is using dynamic data such as behavioral analytics, device intelligence, and smart linking to understand your customers rather than trying to judge them by rigid assumptions that don’t reflect reality.

It’s not too late to rethink your fraud prevention planning for the holidays. If you want instant decisions for every single transaction, made by a highly accurate system that is tailored to your data and needs, get in touch.