Earn more revenue, suffer fewer losses and end the holiday shopping season with satisfied customers by ensuring that your online store is protected against fraud attempts.
Each year, the holiday shopping season brings online retailers a flood of business – and a big wave of card-not-present (CNP) fraud attempts.
In 2017, e-commerce fraud attempts increased by 22 percent between Thanksgiving and the end of the year, in part because criminals knew they could take advantage of the additional load on retailers' order screening, manual review, and customer service teams to slip fraudulent orders through. To ensure that your business is ready to thwart holiday fraud, use this checklist to see where you're prepared and where you need to work quickly to shore up your defenses.
1. Check each channel's prevention program.
Some retailers approach fraud prevention the same way across all their sales channels, but each has its own unique risks. For example, LexisNexis found that synthetic identity fraud is emerging as a particular challenge for m-commerce, and mobile CNP fraud of all types now costs large e-commerce retailers 2.03 percent of their revenue, compared to fraud costs of 1.91 percent of revenue for large e-commerce retailers without a mobile sales channel.
That difference in fraud rates could translate into even more lost revenue this holiday season when anywhere from 46 to 70 percent of orders will come from mobile devices.
Review your mobile and desktop fraud-prevention strategies to make sure they're tailored to each channel's customers, frequently targeted items and most common fraud types.
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2. Scale up your fraud screening capacity.
As holiday orders pour in, your store's fraud screening capabilities may get overwhelmed, especially if you only have a small staff to manually review flagged orders. The solution is not to skip manual review in favor of automatically declining flagged orders, because falsely declining good orders can cost merchants more in the long run than fraud by driving those customers to your competitors.
There's no reason to let orders pile up in your manual review queue either. If you've had problems keeping up with manual review demands during past holiday seasons or if you'd like to avoid the possibility of delays, now is the time to look at outsourcing some or all of your manual review to a third party, at least through the peak holiday season.
3. Focus on customer service.
The best fraud prevention programs make it easy for good customers to buy what they want. Take a look at your false decline rates during the past few holiday seasons to see if there have been spikes during that time. If so, look at how your fraud prevention program handles flagged orders.
Automatic decline rules can contribute to false declines, as can undertrained or understaffed manual review teams. If you don't have historical data on false declines, make this the year to change that. Understanding your false decline rate and trend is critical to maximizing your revenue; in 2016, merchants in the U.S. lost $2 billion more to false declines than they did to completed fraud.
Another aspect of customer service that can help fight fraud is your manual review team's training and skills. Reaching out to customers to check the validity of their orders requires a savvy approach that makes the customer feel taken care of rather than treated as a suspect. For merchants with an international customer base, the manual review team also must be able to reach customers during the appropriate time of day in their time zone, using the language they speak. In some cases, it may be more cost-effective and faster to outsource manual review than to hire and train an in-house team with all these capabilities.
4. Set up stricter shipping procedures.
As merchants get better at spotting attempted CNP fraud during the order stage, organized criminals look for other weaknesses they can exploit.
One area we've seen targeted is the shipping stage of the order. To do this, fraudsters use a complete set of stolen customer data that includes the victim's card number, billing address and shipping address in order to avoid raising flags when they place the order. After the order is approved, the fraudsters then attempt to get the merchandise re-routed to an address where they can get their hands on it. One way they do this is by asking the merchant's customer service team to re-route the package. Another is to simply call the shipping company and request the change themselves.
To avoid shipping fraud losses, instruct your customer service team and your carriers to refer all re-routing requests to your manual review team so the order can be rescreened.
By tailoring your store's fraud prevention for each sales channel, tracking your false decline rate, improving your manual review capacity and outreach quality, and guarding against shipping fraud, your store can earn more revenue, suffer fewer losses and end the season with more satisfied customers who will want to shop with you again.