How to Adjust for Fraud During the Holiday Season
US shoppers spent $12.8 billion online in the five days between Thanksgiving Day and Cyber Monday this year. While the season’s biggest shopping days have passed, many shoppers are expected to come online to purchase last-minute holiday gifts over the next two weeks.
At Riskified, we help businesses around the world reduce fraud and we analyzed our data to create an infographic with predictions on holiday online fraud patterns. Below are three of our key findings, along with steps you can take to safely maximize online revenue.
When online sales surge, fraud doesn’t!
Fraudsters have no particular reason to concentrate their efforts during the holidays. So while sales soar between Thanksgiving and New Years, the level of online fraud remains constant, and the rate of fraud actually decreases.
Online purchases during the holidays are 55% less likely to be fraudulent, compared to the rest of the year.
Don’t fall for scare tactics: you’ll lose good customers
Media reports about online fraud ‘exploding’ during the holidays lead retailers to grow overly risk averse during the busiest time of year. The result is not only backlogs and fulfillment delays, but also a massive increase in false declines – good customers rejected due to suspected fraud.
A whopping 80% of holiday orders declined due to suspected fraud are actually placed by perfectly good customers!
Data mismatches are safer over the holidays
Declining orders due to data mismatches is a common fraud prevention practice. But such mismatches are both common and safer during the holidays. With many shoppers sending gifts to friends and family, 1 in 5 online orders has a billing-shipping mismatch. US retailers can also expect to see international shoppers taking advantage of holiday sales.
Domestic orders with a billing-shipping mismatch are 58% safer over the holidays, while international orders with US shipping are 37% less likely to be fraudulent.
So what can you do to adjust for fraud during the holiday season?
1. Modify fraud systems for holiday shopping behavior
With Christmas and New Year’s ripe with opportunity, merchants can still benefit from adjusting their fraud systems for holiday shopping behavior. Many legitimate shoppers will opt for expedited shipping as they scramble to get gifts in time, and the surge in cross-border shopping will continue until the sales end. By removing rigid fraud filters, merchants will be able to stop cybercriminals without turning away good customers.
2. Focus on scalability & customer experience
Having an effective online fraud management prevention process is important all year round. During the holidays, however, the key challenge is volume – not fraud. Focus on ensuring your fraud process is scalable and allows you to provide a great customer experience, avoiding backlogs and shipping delays.
3. Learn to identify safe shopping patterns
Many international customers may have good reason to use reshippers, which are often considered to be fraud indicators. Behavioral indicators can also be programmed into your fraud systems to distinguish friend from fraudster. For instance, did the shopper compare features of similar products, read the returns policy, or use a promo code? Fraudsters using stolen credentials are not likely to engage in such on-site activities.
Research shows that retailers lose more sales over fear of fraud than to actual fraud attempts. The key to effectively stopping fraud without curbing online revenue, is improving your understanding of the legitimate and fraudulent shopping patterns across your key markets and product lines.
Shalhevet Zohar is Head of Marketing at Riskified, the enterprise fraud solution that allows global retailers to sell to anyone, anywhere. Over 1,000 brands and merchants across the world trust Riskified to safely grow their eCommerce revenues.
Shippo is a multi-carrier API and web app that helps retailers, marketplaces and platforms connect to a global network of carriers. Businesses use Shippo to get real-time rates, print labels, automate international paperwork, track packages and facilitate returns. Shippo provides the tools to help businesses succeed through shipping.