Is your store prepared to take on holiday season fraud?
2019 Holiday Season is closing in and by now, your eCommerce store would have undergone experience-level enhancements to win customers. Another area your sore must be prepared this holiday season is online shopping fraud.
Fraudsters will thrive regular shoppers during the holiday season. If you aren’t prepared, you might lose your sales.
Online transactional fraud will be more than double by 2020 to $25 billion, according to a report by Juniper Research cited by Forter.
While the online fraud attempts have affected eCommerce revenue significantly, the attempts have been at its peak during the holiday season 2018.
eCommerce fraud has many forms and differs based on the type of products sold and the size of business. Knowing the fraud tricks and applying appropriate eCommerce fraud prevention techniques can help you avoid losing your hard-earned eCommerce dollars. We have summed up a few below.
Online shopping fraud #1 – Return Fraud
Return fraud spiked 119% following Cyber Monday but then declined 65% in Q1 2018.
Both customers and employees can make return fraud attempts.
For instance, an employee can ring a fake return and gain cash return. The worst part is, no actual stock will be returned, and there is also a loss in cash.
In the case of shoppers, wardrobing is one of the common return fraud. Shoppers purchase an expensive wardrobe online, use it once, and try to return for cash returns. Such products cannot always be put back for sale and affect the eCommerce store’s revenue as damaged goods.
To overcome such frauds, stores should appropriately change return policies.
30 percent of retailers have altered their return policies in to address organized retail crime – National Retail Federation.
Suggested eCommerce fraud prevention techniques
Your return policies can demand the invoice received with the product while filing a return in order to cross-refer sale with your backend systems and avoid returning cash for a sale that has not happened.
eCommerce stores can add tags like shark tags. Such tags, once removed from a clothing, cannot be put back which can prevent any plans for returning it after using.
You can add restocking fee for high-value electronics and clothing but be very selective in the products to which you are going add this fee.
Specify a shorter date for consumers to file returns, especially for orders of high value.
Online shopping fraud #2 – Coupon Misuse
Your eCommerce store’s potential customers are coupon abusers. These customers would be deal seekers who love making the most out of a deal your store offers.
For instance, let’s assume that your website is providing a coupon code via email that says customers can get ‘Product B’ for free on purchase of ‘Product A’ (usually a high-value product). And now, let’s imagine a user who tries to purchase four numbers of ‘Product A’ so that she/he can get four numbers of ‘Product B’ for free.
Under such scenarios, your potential customer turns into a coupon abuser resulting in loss out of the coupon idea that you believed would spike sales or motivate more customers to buy.
Despite your website showing that a user can avail only one coupon, customers will try options like creating different email IDs and addresses to pose as a different user to break the one-coupon-per-customer limit.
Coupon abuse has increased 217 percent in the first quarter of 2018 – Forter MRC Fraud Attack Index
Suggested eCommerce fraud prevention techniques
Care to check on usages of coupons during the holiday season. In coupon fraud, users will create different emails ids, use different real names, and buy the product multiple times. The only thing that can help you here is the payment card used.
If a single digital wallet or payment card is associated with many usernames and multiple purchases of the same product, then it could be a coupon abuser in action.
Online shopping fraud #3 – Account Fraud
‘Account Fraud’ or ‘Account Takeovers’ is a scenario where a fraudster gains access to a registered customer’s account and plays like a user trusted by the eCommerce store.
After gaining access to a customer’s login credentials, a fraudster can:
- Place orders using the saved payment information
- Redeem points awarded for the next subsequent purchases
- Just slip through a fraud detection software of the store posing as a genuine user
In addition to losing the goods ordered, eCommerce websites also lose a loyal customer which results as a costly miss for retailers. Account takeovers are continually increasing in numbers.
In Q1 and Q2 of 2018, the eCommerce industry has witnessed 35 percent increase in account takeover attacks.
Suggested eCommerce fraud prevention techniques
To protect your eCommerce store from an account takeover fraud, start detecting changes in your customer behavior. For instance, a registered customer who is regularly purchasing in your online store using a specific payment gateway might:
- Start using different names, shipping addresses, and new payment cards.
- Use new payment methods to check out, especially when ordering multiple items.
Check for such unusual shopping patterns to identify coupon abusers.
Well, that completes the list of online shopping frauds that could evade your revenue the most. But still, there are other forms of holiday season frauds that you’ll have to look for.
Friendly fraud is one such case where users deliberately book for a product using credit cards and later claim that their card has been stolen to retain the product purchased. Affiliate fraud, Clean fraud, merchant fraud (for multi-seller websites), card testing fraud and phishing are some of the other online shopping frauds that can be a potential threat to your holiday season revenue.
In a Nutshell – Why you can’t afford to ignore eCommerce fraud prevention?
To handle online shopping frauds, adopt fraud prevention methods and systems specifically designed to detect patterns and flag a possible fraud operation while in progress. Refresh your terms of service and return policy guidelines accordingly.
If you want to improve your store’s security, performance, experience, or conversions before this 2019 Holiday Season, Ziffity can help. Talk to our eCommerce optimization experts for a free consultation.
