While avid deal-hunters mark their calendars in preparation for November 28th, this year’s Cyber Monday, fraudsters are also gearing up. According to research by TransUnion, eCommerce retailers should anticipate a 25% increase in fraud between Thanksgiving and Cyber Monday. The annual shopping frenzy provides the perfect cover for bad actors seeking a payday, but eCommerce businesses do not need to suffer needless fraud losses. Preventative measures can be taken to detect and prevent fraud losses this holiday season.
Tips for Spotting Fraudulent eCommerce Transactions
Look out for proxies:
In classic fraud cases, a fraudster will attempt to make a purchase using stolen credit card credentials purchased on the dark web. Generally, fraud of this nature is carried out by unsophisticated criminals. It can be spotted by the use of internet proxies, which are used to mask the international IP where a majority of this type of fraud originates.
Try to avoid address changes:
Be aware of customers requesting an address change after an order is created. Fraudsters will place orders where the billing and shipping match the address linked to the card to avoid having the order flagged as fraud. They aim to intercept the package after it is screened for fraud and deemed safe to ship. They may request the delivery change via your customer service department or by contacting the shipper directly.
Block the bot:
Learn how to spot fraud by bot. Fraudsters use bots for a variety of reasons. They may use a bot to test the validity of a credit card number, determine the credit limit, or garner a missing piece of information, such as guessing the expiration date through multiple tries. Transaction attempts will happen quickly, in rapid succession. The data on the orders will often be identical, either all the data or just a subset of data — like the shipping address. Fraudsters will then use the valid credentials at the same site or on another website to commit fraud. Be wary of multiple orders placed using similar credentials, especially if a valid order follows multiple declines.
Spot an account takeover attempt:
Verify email and address changes made to existing accounts to avoid falling victim to account takeover fraud. Fraudsters may get ahold of a legitimate customer’s login credentials and take advantage of stored credit cards to purchase goods. Often, fraudsters will attempt to change the email address to where order confirmation and updates are sent to allow the fraudster to keep tabs on the order and to avoid alerting the cardholder to the illicit activity. An update on the shipping address will also usually occur shortly before purchase so the fraudster can retrieve the stolen goods.
Befriend friendly fraudsters:
Legitimate cardholders may make a purchase, then issue a chargeback, claiming their card was stolen. The chargeback usually occurs after the goods are delivered. This type of fraud is traditionally not carried out by hardcore criminals but rather by consumers who are clearly aware of what they are doing. This type of fraud is difficult to detect preventatively but can often be won via proper chargeback representment. Keeping good records and encouraging customers to reach out directly to your business if they are unsatisfied with their purchase can help mitigate friendly fraud.
Don’t fall prey to gift card scams:
A fraudster may use stolen credit card information to purchase a gift card on an eCommerce website. The fraudster will purchase the electronic gift card using the cardholder’s legitimate shipping address, which will make the purchase more likely to appear legitimate. They will then use the gift card to complete a purchase on the same site, as opposed to using the stolen credit card information. Placing an order using the gift card allows the fraudster to have merchandise shipped to an address other than the cardholder’s without raising any flags. Requiring cardholders to verify gift card purchases and not allowing gift cards to be activated within 12 hours of purchase can help deter this type of fraud. (Learn more about reducing gift card fraud here.)
Close fraud windows:
Businesses that rely on manually reviewing orders for fraud may be more vulnerable during peak seasons when teams are spread thin, and fulfillment centers are flooded with orders. For example, fraudsters may attempt to place an order at 3 a.m. and opt for quick shipping to avoid the review team. If a fraudster is successful at a fraud attempt, they are likely to ramp up their efforts to take full advantage of the fraud window. Look out for fraud that slipped through the cracks at odd hours, and make sure to nip the method in the bud.
Remove friction caused by fraud prevention:
In addition to protecting your eCommerce business from fraud, be cognizant of the risks of employing restrictive fraud prevention practices that may harm your business. Fraud protection may cause revenue losses in one of two ways:
- Blocking legitimate orders that display risk factors
According to “LexisNexis True Cost of Fraud Study,” over half of eCommerce declined orders are false declines. Avoid rejecting good customers by employing an advanced fraud prevention solution, such as NoFraud, that delivers high approval rates (over 99% in most cases) coupled with a financial guarantee against chargebacks. This combination of advanced fraud screening and financial protection will allow you to ship even high-risk orders with confidence.
- Hampering customer experiences and causing cart abandonments
To verify the true identity of their customers, businesses often require shoppers to provide more information than necessary to complete a purchase. According to research by Baymard Institute on cart abandonment, lengthy checkouts were cited as the cause of 27% of abandonments. Offering customers a guest checkout option, an autofill option for returning customers, and a one-click-checkout option will have a positive impact on conversion rates.
Being hit with fraud is avoidable, but mitigating fraud losses can be a tedious, time-consuming experience. If you aren’t using one yet, ahead of Cyber Monday consider a full-service fraud prevention solution that employs machine learning and expert analyst oversight to stay ahead of classic and emerging fraud trends. An effective full-service solution will protect your business from fraud and relieve you of all fraud-related tasks. Additionally, updating your checkout can help you capture more business this holiday season.
To learn more about how NoFraud has been protecting thousands of businesses globally from fraud liability, including brands such as Burton Snowboards, Dockers, and Pat McGrath, click here.