For most, the winter holidays are a time of great joy and cheer. It means taking time off of work, spending time with family, and exchanging gifts with loved ones. And if you’re a merchant, the holidays bring a significant uptick in sales as people flock to stores and websites to get gifts for friends and family.
But the holiday season also comes with a negative aspect, and no, this doesn’t refer to spending time with the in-laws.
Here’s the dark side: As consumers begin shopping more online to get gifts for loved ones, fraudsters are presented with a great opportunity to exploit cyber vulnerabilities.
Forter, a leading fraud prevention company, explores fraud during the holidays in its white paper “The Holiday Shopping Season is Upon Us: Don’t Let Cyber-Grinches Steal Your Holiday Cheer.” The white paper provides data on fraud rates and shopping patterns during the holiday season, explains the challenges merchants face in combatting fraud, and concludes by highlighting potential solutions.
More shopping, more potential for fraud
The white paper begins by noting that the overall dollar volume of fraud rose 12% between Q2-2018 and Q2-2019, with activity soaring once holiday shopping begins. The data comes from the Forter Fraud Attack Index, a report surveying over $140 billion in e-commerce transactions, meaning it’s the most extensive research ever conducted on fraud.
With the dollar amount of fraud already on the rise, it’s only going to get worse this holiday season. According to the National Retail Federation, American consumers are expected to spend an average of $1,048 during the holidays, an increase of 4% from last year. Globally, the numbers are even more shocking: The top 10 e-commerce markets will bring in a collective $3 trillion, according to CloudWays.
Such stress on merchants creates openings for criminals to exploit, as supply chains are under significant pressure due to the “unusually high volume of purchases, payments, shipping, and returns.”
The challenges of stopping fraud during holiday shopping
Merchants hoping to counter the criminals face a variety of challenges. The immediate challenge, and one that exists regardless of the season, is the need to speedily process orders while also screening for fraudulent ones.
According to Forter’s research, 50% of online shoppers “are less likely to buy if the entire checkout process takes more than 30 seconds.” In fact, the research shows that some customers will abandon the checkout process if it takes more than 10 seconds to verify their credit card details. With only a matter of seconds to screen an order before losing a potential sale, the merchant must act swiftly.
When it comes to identifying fraud during the holiday season in particular, one major problem for merchants is that buying patterns can become erratic. Many fraud detection services work by picking up on strange behavior—an abnormal purchase for a consumer, for example—and flagging that as potentially fraudulent. This approach is known as a legacy, or rules-based approach.
However, during the holidays, many consumers begin shopping in a “strange” manner. Customers will have gifts shipped to the recipient, causing the billing address to not match the shipping address, and that latter address may not even be associated with the customer’s account.
Then there’s the problem that people often buy things they typically wouldn’t, be it jewelry, gift cards, or toys for a young family member. In a rules-based approach, these transactions might be flagged as fraudulent, causing unneeded friction for the consumer and a potential loss in sales.
While the white paper covers an additional five challenges, the last one covered here is that the increased shopping volume during the holiday season can overload traditional fraud prevention systems. The systems will get bombarded by a stream of alerts and either slowdown or start erroneously flagging transactions, especially if the system relies on manual reviews. To keep up with the demand, many companies will hire temp workers who are inexperienced and may struggle in such an environment.
How Forter fights back
By utilizing Forter’s fraud detection platforms, merchants are able to address these challenges and accommodate the increase in holiday shopping. Forter’s platform combines advanced machine learning models with human expertise to accurately and effectively identify fraud.
And since machine learning algorithms get more accurate with larger datasets, Forter’s platform is highly accurate: Forter’s network has seen more than 525 million unique users across the globe. As the white paper notes, more than 96% of online transactions in the U.S. are made by users known to Forter’s system.
All this comes together to make Forter’s fraud solutions especially effective. With Forter you can:
- Detect and prevent more fraud
- Improve the customer experience
- Protect the entire buyer’s journey
- Scale to support seasonal spikes in activity
- Benefit from white glove service and tailored performance
To learn more about these benefits by reading the white paper here.