Page 78 - Cyber Defense eMagazine - November 2017

‘TIS THE SEASON TO PREPARE YOUR E-COMMERCE

BUSINESS TO EFFECTIVELY FIGHT FRAUD

With the holiday shopping season fast approaching, e-commerce companies are once again
planning for and preparing to profit from the increasing numbers of shoppers who purchase their
gifts online. While etailers anticipate heavenly profits, they’re also wary of the earthly reality of
CNP fraud. Does the increased opportunity of the holiday season also contain an equally
increased risk of fraudulent orders and costly chargebacks?

While this fear might seem logical, the reality is the Grinch of fraudulent orders is unlikely to
steal the yuletide bounty. This is because e-commerce fraud rates actually significantly
decrease during the holiday shopping season - not because fraudsters are taking a break, but
because of the huge influx of legit shoppers during this time. This is especially true for the three
kings of Cyber Monday, Black Friday, and New Year’s Eve.

Change your fraud prevention focus

Since the percentage of all orders which are fraudulent drop during this time, online merchants
face a higher risk of turning down legit orders unless they adjust their fraud prevention systems.
Declined legit orders mean lost revenue, not only for that particular order, but also any future
online orders which will now be diverted to your competitors because your crude fraud filter
seriously dampened that shopper’s holiday spirits by mis-labeling them as a criminal. This is
precisely why many etailers are switching to more advanced e-commerce fraud protection
solutions, like the machine learning-based service offered by Riskified.

Not only is there a danger in overreacting to the actual fraud risk, e-commerce companies can
also make costly mistakes when it comes to manual review of suspicious orders. The huge
surge of shoppers during this time results in a large volume of orders which need to be manually
reviewed by analysts who then accept or decline the order. This in turn forces online merchants
to add seasonal hires to their fraud review team as well as increase the workload on permanent
staff, both of which can result in inaccurate, rushed decisions (especially if the seasonal hires
are new to fraud prevention).

Help bring joy to the world: don’t falsely decline international orders

Rushed decisions and fear of chargebacks often result in more false declines and thus lost
revenue. What compounds this problem of false declines during the holiday shopping season is
not only the already discussed quantity of orders, but also their quality, because perfectly
legitimate holiday e-commerce shopping can have one or more indications of a fraudulent order.
One of these is a mismatch between the billing address of the card used and the shipping
address of the gift, which can indicate a fraudulent order. It can also indicate, however, a
consumer shopping for friends or family and choosing to have the merchandise shipped directly
to them. The fact that many online merchants offer gift wrapping before shipping makes this all
the more convenient.

78 Cyber Defense eMagazine – November 2017 Edition
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