Consumers are shopping online more than ever before. Holiday season has e-commerce marketing and sales teams working overtime to churn out attractive holiday campaigns. With holiday come a flurry of fraudulent transaction with fraudsters lurking in the dark ready to spoil the spirit of the season. As sales increase, so will the total dollar amount of fraud transactions.
"Retailers need to constantly improve their level of fraud prevention by incorporating consumer purchasing behavior analytics and originating IP addresses for online orders. This should help minimize a spike in online orders," said Max Silber, Director of Mobility at MetTel, a B2B communications and IT firm in New York.
Know thy past
According to enterprise e-commerce fraud prevention solution Riskified, retailers see a 100% rise in the number of purchases made using international credit cards and therefore advise merchants to scour past data to understand and dissect successful orders and transactions from fraudulent ones.
"Most merchants are likely to discover that they've been overly risk averse during the holidays. Our analysts have determined that top holiday sales days are actually far safer than average shopping days, and that any given order placed during the holidays is 55% less likely to be fraudulent. Partially because merchants were unaware of this, 4 out of 5 orders rejected during last year's holidays were, in fact, legitimate," wrote Riskified's Ephraim Rinsky in a blog post.
Rinsky writes that it's crucial for e-commerce merchants to understand the difference between customer profiles to understand future behavior.
"The fraud rate among returning customers is about half that of new customers: 1.4% compared to 2.6%. This means that returning customers should be treated very differently than new ones. This distinction is especially critical during the holidays, when order volume is so much greater."
As e-commerce platforms keep accumulating consumer data, these businesses become even more valuable targets to cyber-criminals looking for economic gains.
"In addition to hacking into companies' customer databases, cyber-criminals can also spoof companies' identities to trick customers into divulging their personal information by sending emails with misleading subject lines such as "Click to track your transaction," said Gus Anagnos, VP, Global Alliances of crowdsourced cybersecurity firm Synack.
The problem with same-day delivery
The interesting question fraud isn't only about the increase in the sheer volume of transactions, but also about the improvement in logistics. Many retailers, namely Amazon, are offering same day delivery services, which opens up another front in the fight against cyber hacks.
"The increasing demand for same-day delivery will raise the bar for fraud detection service providers. The faster the turnaround from order to shipment, the more sophisticated the tool to give a go/no-go assessment for each transaction. It will be increasingly difficult for brands of any size to manually handle fraud detection on their own," said Thom O'Leary from Fixergroup.
Same-day delivery decreases the amount of time between the transaction and the time your purchase takes to show up at your door. This means consumers have less time to take notice of the problem and then contact the merchant or their bank regarding the fraudulent transaction. This is important because after the item ships, there is little to be done to recover it. To complicate matters, most consumers contact their bank first which adds lead time to how long it takes the merchant to be notified of the issue, which can take weeks on occasion.
"There are solutions that can help mitigate this by analyzing the order information, such as the billing address, shipping address, and IP address of the purchaser to determine if there is a higher risk for fraud. In which case you can choose to hold the shipment until the transaction can be verified," said ExpandLab's Eddie Spradley.
As the holiday season shopping is in full swing, it's clear that e-commerce merchants need to do a better job tracking past data to understand future customer behavior and the consequent threats. This understanding becomes even more important with new and improved methods of delivery, such as same-day delivery, which poses a whole new dilemma for merchants.
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