Is your store prepared to take on holiday season fraud?

2018 Holiday Season is closing in and by now, your eCommerce store would have undergone experience-level enhancements to win customers. Another area your sore must be prepared this holiday season is online shopping fraud.

Fraudsters will thrive regular shoppers during the holiday season. If you aren’t prepared, you might lose your sales.

“eCommerce fraud has cost $58 Billion worldwide in 2017 – Global Fraud Report”

While the online fraud attempts have affected eCommerce revenue significantly, the attempts have been at its peak during the holiday season 2017.

“Fraud attempts were at its peak on Thanksgiving day, Christmas Eve and Dec 21st – ACI Worldwide benchmark data in 2017”

eCommerce fraud has many forms and differs based on the type of products sold and the size of a business. Knowing the fraud tricks and applying appropriate eCommerce fraud prevention techniques can help you avoid losing your hard-earned eCommerce dollars. We have summed up a few below.

Online shopping fraud #1 – Return Fraud

“A 2017 survey by the National Retail Federation has found that retail return fraud losses will cost companies as much as $15 Billion.”

Return fraud attempts can be made by both customers and employees of an eCommerce store.

For instance, an employee can ring a fake return and gain cash return. The worst part is, no actual stock will be returned and there is also a loss in cash.

In the case of shoppers, wardrobing is one of the common return fraud. Shoppers purchase an expensive wardrobe online, use it once and try to return for cash returns. Such products cannot always be put back for sale and affect the eCommerce store’s revenue as damaged goods.

In order to overcome such frauds, stores should appropriately change return policies.

“30 percent of retailers have altered their return policies in 2017 to address organized retail crime – National Retail Federation.”

Suggested eCommerce fraud prevention techniques:

Your return policies can demand the invoice received with the product while filing a return in order to cross-refer sale with your backend systems and avoid returning cash for a sale that has not happened.

eCommerce stores can add tags like shark tags. Such tags, once removed from a clothing, cannot be put back which can prevent any plans for returning it after using.

You can add restocking fee for high-value electronics and clothing but be very selective in the products to which you are going add this fee.

Specify a shorter date for consumers to file returns, especially for orders of high value.

Online shopping fraud #2 – Coupon Misuse

Coupon abuse isn’t performed by third-party fraudsters rather your eCommerce store’s potential customers. These customers would be deal seekers who love making the most out of a deal your eCommerce store offers.

For instance, let’s assume that your website is providing a coupon code via email that says customers can get ‘Product B’ for free on purchase of ‘Product A’ (usually a high-value product). And now, let’s imagine a user who tries to purchase 4 numbers of Product A so that she/he can get 4 numbers of Product B for free.

Under such scenarios, your potential customer turns into a coupon abuser resulting in loss out of the coupon idea that you believed would spike sales or motivate more customers to buy.

Despite your website showing that a user can avail only one coupon, customers will try options like creating different email IDs and addresses to pose as a different user to break the one-coupon-per-customer limit.

“Coupon abuse has increased 217 percent in the first quarter of 2018 – Forter MRC Fraud Attack Index”

Suggested eCommerce fraud prevention techniques:

Care to check on usages of coupon during the holiday season. In coupon fraud, users will create different emails ids, use different real names and buy the product multiple times but the only thing that can help you here is the payment card used.

If a single digital wallet or payment card is associated with many usernames and multiple purchases of the same product, then it could be a coupon abuser in action.

Online shopping fraud #3 – Account Fraud

‘Account Fraud’ or ‘Account Takeovers’ is a scenario where a fraudster gains access to a registered customer’s account and plays like a user trusted by the eCommerce store.

After gaining access to a customer’s login credentials a fraudster can

  1. Place orders using the saved payment information
  2. Redeem points awarded for the next subsequent purchases
  3. Just slip through a fraud detection software of the store posing as a genuine user

In addition to losing the goods ordered, eCommerce websites also lose a loyal customer which results as a costly miss for retailers. Account takeovers are constantly increasing in numbers.

“In Q1 and Q2 of 2018, the eCommerce industry has witnessed 35 percent increase in account takeover attacks.”

Suggested eCommerce fraud prevention techniques:

To protect your eCommerce store from an account takeover fraud, start detecting changes in your customer behavior. For instance, if a registered customer who is purchasing regularly in your online store using a specific payment gateway,

  1. starts using different names, shipping addresses, and new payment cards.
  2. uses new payment methods to check out, especially when ordering multiple items.

then check out these transactions thoroughly.

Well, we have discussed the online shopping frauds that could evade your revenue the most. But still, there are other forms of holiday season frauds that you’ll have to look for.

Friendly fraud is one such case where users deliberately book for a product using credit cards and later claim that their card has been stolen and still retain the product purchased. Affiliate fraud, Clean fraud, merchant fraud (for multi-seller websites), card testing fraud and phishing are some of the other online shopping frauds that can be a potential threat to your holiday season revenue.

In a Nutshell – Why you can’t afford to ignore eCommerce fraud prevention?

Be it, return fraud, coupon misuse or account fraud, we insist the need for adopting fraud prevention methods and systems that are specifically designed to detect patterns and flag a possible fraud operation while in progress.