It’s that time again: Consumers, brick-and-mortar retailers and ecommerce merchants are all preparing for their busiest days of the year. Unfortunately, so are the online fraudsters, who become more brazen and disruptive every time the holiday season approaches.
During the 2016 holidays, one out of every 97 online transactions was a fraudulent attempt (see infographic). There are, however, steps you can take to minimize the impact to your enterprise’s bottom line. Adhere to the following guidelines and you will be far more likely to stop the fraudsters’ 2017 holiday party before it begins.
Understand their tactics
One of the particularly challenging aspects of holiday ecommerce fraud for merchants is the fact that the numbers of potential perpetrators and their methods both increase. Not only are the holidays the peak season for identity fraud, in which skilled thieves use stolen card data to attempt fraudulent transactions, but there is also a significant spike in “friendly fraud,” which can happen intentionally or even accidentally as a result of the hectic pace of the season.
Friendly fraud occurs when shoppers make an apparently legitimate purchase but then dispute the legitimacy of the charge, either in a scam designed to take advantage of the holiday rush or as the result of an overwhelmed consumer actually forgetting an order. In either case, the merchant is left with a hit to their inventory, a costly chargeback and a holiday headache, and thus has to be especially vigilant regarding each and every sale once the fourth quarter rolls around.
Keep meticulous records
One way to stay ahead of friendly and unfriendly fraudsters alike is to ensure that all receipts are tracked and recorded meticulously. Despite the fact that your ecommerce business is digitally driven, you still need a paper trail for every transaction in the event that disputes arise — and they will.
You may not win every battle but if you can establish a reputation for the painstaking record keeping of your online enterprise, even the most seasoned cybercriminals will think twice before targeting you a second time. There are plenty of merchants who make themselves easy marks for fraud due to their lackadaisical bookkeeping practices, so let the criminals prey on them instead.
Establish strict but fair policies
This guideline is similar to the previous one in that it deals with establishing a reputation for your business, but it requires a little more finesse in terms of managing the vitally important customer service relationship. While you want to avoid becoming a target based on your business’ willingness to accept and generously resolve disputes, you also want to limit customers’ propensity for initiating disputes while remaining fair and open-minded.
The best way to do this is by implementing a policy that will successfully protect your customers who have legitimate claims, but stick to a consistent process that first and foremost protects your business from the bad actors. This may require some marketing savvy and if standard research doesn’t provide the policy that best fits your enterprise and the business it conducts, perhaps a third-party provider will be necessary.
Be clear and transparent
Like having a meticulous record keeping process, merchants must also be extremely detailed in their communications with regard to the terms and conditions their customers are expected to follow. Too many businesses view this as either an afterthought or, worse, some sort of roadblock to the checkout cart and they bury this information in the fine print at the bottom of their website.
In contrast, clearly defined return policies and other conditions relating to any sale should be readily visible throughout the ecommerce website and also included in all sales and marketing-related email correspondences. This not only will provide some measure of protection for the merchant but it also gives the business a level of transparency that customers will appreciate and perhaps even a degree of authority that the fraudsters may respect.
Use your resources
It goes without saying that the more you invest in security, the more likely you are to prevent the next attempt at fraud — which is why we saved this guideline for last. But because this space moves so rapidly, it bears repeating that the holidays are the ideal time to reevaluate this investment to ensure that your ecommerce payments system is as secure as the budget will possibly allow.
This may include a general audit of or an upgrade to your fraud protection, chargeback management, card verification and email authentication systems, as well as exploring the latest advances in artificial intelligence and how to best combine that resource with human intelligence in the fight against fraud. Every resource a merchant can feasibly use will help in this fight, and make the 2017 holiday season that much more enjoyable.
Here’s an infographic from MerchACT which illustrates these points:
[well type=”well-sm”]Jared Ronski is co-founder of MerchACT and works with merchants globally to ensure they are paired with the right merchant account for their specific business needs. He has worked closely with higher risk business models and has provided companies of all sizes with payment processing solutions.[/well]