‘Tis The Season To Prepare Your E-Commerce Business To Effectively Fight Fraud

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By Anna Jones

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 a 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 mislabeling 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, but 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.

Another example is an international shopper using their non-US card (with an overseas billing address) for payment, but requesting a US shipping address. This could be a fraudulent order from a criminal in a foreign country using a reshipping service to conceal their location.

This could also be a legitimate international shopper using a reshipping address because the merchant doesn’t ship products globally, but they still want to jump on a great deal. This example combines the billing/shipping address mismatch of the previous example with international factors – foreign card and use of a reshipper—which often raise red flags and thus can get falsely declined.

By responding to the actual size of e-commerce fraud risk, switching to more sophisticated fraud prevention solutions, and optimizing their manual review policies, online merchants can both boost their revenue and minimize their losses from fraudsters this holiday season.

About the Author
Anna Jones is an experienced freelance writer and has written for a number of high-quality publications. She loves to write about anything technology but dabbles in a bit of interior design. She may be reached at anna.helen.jones@gmail.com and on twitter at @a_jonesyjones