10 Different Ways You Can Avoid Holiday Fraud

Updated on November 22, 2021

With the holiday approaching at a faster pace, it is sure that fraudsters are also planning on ways by which they are going to conduct holiday fraud this season. That implies that this is the right time for merchants to prepare for ways by which they can fight such fraudsters. The loss from online retail fraud in North America is about $2.7B in 2010 and $3.3B in 2009. The best way to reduce such attack and reduce the amount of money is to stay ahead of the bad guys by developing a plan to stop fraud before its occurrence.

It is very difficult to detect fraud during the holiday and this is why it is the perfect season for criminals. There is occurrence of higher transaction and a demand for faster turnaround time will place pressure on the retailers, this is what will make proper screening very difficult. Because of the short duration of the season, trading also becomes challenging. And the season will be over at the time when there is enough data to evaluate. In addition, temporary or seasonal workers are not familiar with normal transaction and because of this; they won’t be able to recognize fraudulent transaction whenever they come across one.

This issue is a common occurrence whenever there is high transaction during the year such as Mothers Day, Valentines Day, and Fathers Day, but the occurrence is very high during the holiday season thereby causing a greater threat to the merchant. Merchandise loss, the cost of order fulfillment, and chargebacks occur without any offsetting revenue. The occurrence of fraudulent transaction can also reduce stock leaving no product for real customers. There can be future revenue lost due to the negative customer experience.

Question mark exclamation mark on the blue and orange background. Eps 10 vector file.

Fraud is very difficult to fight because it comes in various shapes and sizes. There are some fraud which is comprised of amateurs trying to get away with a quick scam; however there is a growth in fraud whereby an organized group will use sophisticated technology to outsmart e-commerce sites. Due to the various ways and the rate at which new scheme are being identified, there is need for risk management plans to be comprehensive so as to protect the merchant very well from various angles. Below are 10 different strategies that merchant can use to manage their risk during this holiday season.

  1. By monitoring the transaction of express shipping, this is because fraudsters love retailers who offer express shipping because they would be able to receive the good faster and this will make it very difficult for the retailers to track or recover the merchandise.
  2. Try to implement device intelligence or identification software which is also known as digital fingerprinting. People who organize fraud use technology to make multiple transactions to the same merchant so that it will look like its coming from different IP addresses. However, with the aid of device intelligent software, devices that are used to submit orders would be identified by using the combination of information such as name and type of device, operating system, IP addresses as well as the protocol which is used to transmit data to uncover the real location of the buyer. There is also device detention software which can be used to monitor platforms due to the threat of mobile fraud.
  3. Leveraging address with standardization or validation software: With this product you will be able to detect if the address which you are shipping to is valid by comparing it with United States Postal Service address database. If the merchant is finding difficulties in validating the address provided, it is crucial for the merchant to raise a red flag. The software can also help in the reduction of cost because shipping company won’t need to redirect packages.
  4. Ensure you did not monitor only sales as well as web traffic, but the reason why credit cards are declined. If you observe an increase in hard declines, especially those that are related to “pick-up”, there is need to monitor those transaction and also review them carefully. Also check for what is common between declines. If this is well investigated, you may discover that these transactions came from a single source which is a fraud point.
  5. Ensure you match the security codes (CVV2 for Visa or CVC2 or MasterCard). With these codes, you’ll be able to verify that a customer is with the credit card.
  6. Ensure you add 3D Secure authentication as an additional security measure during checkout. Verified by Visa or MasterCard’s SecureCode because they are programs this is aimed at eliminating fraud for those customers who chose them. The support for these screening would add additional step for customer during checkout, however if it is the legitimate customer, they do not need to enter a password to protect the credit card.
  7. Make sure you keep a list of account with a history of fraudulent activity and compare new orders with it.
  8. Make sure you seek out for data and keep up with the latest fraud publication trend because they will be familiar with them and you will be able to catch them with that.
  9. Endeavour to open communication channels with banks that provide alerts regarding cards which have been stolen or participate in retail groups or services that provide information about various fraudulent activities. When a merchant is knowledgeable about the fraud environment, the merchant will be able to combat it properly.
  10. Always remember the fundamentals, there is common saying that “common sense is not common,” here are some reminders so that you won’t forget the basic things to monitor:
  • High value orders
  • Large quantities of specific items such as electronics
  • Orders which have big-ticket items
  • International shipping addresses
  • Transactions with multiple cards but shipping to a single address
  • Multiple transactions on one card but shipping to multiple shipping addresses
  • Multiple transactions on one card over a very short duration

Finally, make sure you educate the customer service teams on how to listen to buyers and also recognize warning signs, this include not knowing their address immediately, incomplete information or trying to get off the phone when they are asked for more details.

The combination of these tactics will allow the merchant to formulate a strategy to prevent any fraudulent activity. Based on such strategy, orders can be blocked, placed on hold for manual review, or additional monitoring may be implemented so as to verify the legitimacy of the buyer as well as the order.

An investment is required to implement a risk management strategy but more retailers are now enjoying the benefit. According to the research conducted by Forrester Inc., 29% of online retailers plan to invest in payment and web site security systems this year, which is an improvement to the 21% last year. In-house resources can be used to tackle fraud but many merchant have turned to holistic fraud management system.  This is being offered on premises or as a service so as to combat the type of technology which is being used by organized fraud rings. Regardless of the technology, a comprehensive strategy is the only way by which criminal activity can be prevented so that only legitimate customers will be able to place orders.

Square, Best Choice
for Low Volume
Credit Card Processing

Starting at 2.6% + 10¢ per swipe for Visa, Mastercard, Discover, and American Express.