Ecommerce fraud in its many and various forms may have cost the industry a massive $58 billion worldwide annually, according to a Pymnts.com Global Fraud Report published last October.
Fraud varies across product category and company size. By way of instance, mid-market and business, multichannel merchants experience higher fraud rates compared to small online sellers. There are a number of possible reasons for this including the fact that small online retailers managing relatively few orders frequently review each order manually.
Retailers selling jewelry or electronics may experience more strikes than sellers of different types, such as apparel.
Forter notes that ecommerce fraud prices can rise during the holiday season — the third and fourth quarter of this calendar year. Some kinds of fraud may also be popular in the first quarter, when many merchants are handling returns.
In every instance, there are a number of things your company can do to help prevent fraud. This begins with understanding tendencies. Two notable examples this holiday season are account takeovers and voucher abuse.
Account takeover fraud is a kind of identity theft, wherein a criminal gains access to a registered client’s account and poses as that trusted and known shopper.
Account takeovers can be especially damaging because the merchant could lose both the fraudulently ordered product and the shopper whose account has been compromised.
After a criminal can log with a true client’s account credentials, that criminal may use saved payment methods to purchase things; get into a loyalty program; or just place orders using stolen payment cards in the hope of bypassing any fraud prevention software a shop could be using.
This specific kind of fraud is both costly and on the upswing. Javelin Strategy & Research reported that a three-fold increase in account takeover losses. Fraud prevention program manufacturer Sift Science noted that account takeovers cost the industry about $5.1 billion in 2017. And with respect to the increase of account takeovers, the fifth edition of this Forter MRC Fraud Attack Index reported a close 35 percent growth in account takeover attacks for the first two quarters of 2020.
To protect your organization, watch for changes in client behaviour. By way of instance, if a shopper who has employed the identical payment card for the past several orders suddenly starts using new payment cards and various names, take a look. If your organization’s ecommerce platform, order management applications, or fraud prevention programs permit it, flag unusual account behavior for human inspection.
Coupons can be a superb way to boost sales during the Christmas rush, but the vouchers can also create an opportunity for vacation fraudsters.
Oftentimes, coupon abuse is a kind of so-called favorable fraud, meaning it is a customer as opposed to a professional criminal who’s the perpetrator.
Imagine, within your Cyber Monday promotions, your online shop issues a coupon code via email offering a free 32-inch tv whenever someone buys a PlayStation game console.
The coupon code is limited to a single client. Your online shop is breaking on the transaction, so you won’t earn any profit if the shopper buys just the PlayStation. Rather your expectation is that the client will get a few other, possibly high-margin, items also.
The important thing here is that the voucher is limited to a free television per client.
Enter a grandma in Des Moines. She sees the deal and thinks she deserves it not only once, but four times so that she can find the deal for all her grandchildren. When she tries to purchase all four, your company’s ecommerce platform reminds her of the one-per-customer limit. So she cheats.
Granny generates four accounts, using her home address for her work speech for another, etc. She even produces a few new Gmail addresses for this purpose. She feels great. In her opinion, she got the bargain she deserved. But in fact, she dedicated coupon or coverage fraud and robbed your enterprise.
This may sound insignificant because she did purchase the PlayStations. However, it’s also coupon abuse. And according to the aforementioned Forter MRC Fraud Attack Index, coupon abuse climbed 217 percent in the first quarter of 2020.
To protect your organization, monitor coupon usage carefully. In the case of our hypothetical grandma, two or more of those PlayStation-television combinations might have been destined for the exact shipping address. And in each instance, she would have needed to use a real name and payment card. So it might have been that one payment card has been associated with more than 1 customer account.
In short, if something seems strange, take a look.
Obliterate Payment Fraud
Based upon your organization’s industry segment, you might be losing 2% of earnings or more to some kind of fraud this holiday season. That quickly adds up to lots of money — so much so that it can make sense to invest in a fraud prevention services.
There are quite a few great options, such as Kount, Sift Science, Forter, LexisNexis Risk Solutions, Riskifed, and a lot more.
A fantastic fraud prevention service will think about a shopper’s purchase rate, IP address, current behaviour across multiple ecommerce websites around the world, and a number of other data points, providing your company with a score for every purchase. It is possible to set rules around this flag and score or reject orders that are probably fraudulent.