How can you protect your eCommerce from fraud in Q4?

What are the most common fraud problems faced by online retailers during the festive season?

Black Friday and Cyber Monday (BFCM) are the Super Bowl for retailers. But it also means that fraudsters are in action, which can cause a lot of problems for online merchants:

• More transactions: With a significant increase in sales, it’s harder to find the suspicious ones. It’s estimated that US consumers will spend around $1.1 trillion this holiday season, 14% more than in 2023. If you’d like to get a better understanding of all your data during Q4, check out this article;
• Bot attacks: Fraudsters are not necessarily real people. Automated bots can flood websites with false orders, overwhelming systems and resources, and ultimately disrupting the business of legitimate customers. Last year, they accounted for 52% of all web traffic during the festive season (1);
• Account takeover: Your customers may no longer have access to their personal accounts because someone else has already used them to make unauthorized purchases and access their credit card data. Account usurpation fraud increased by 25% during the 2023 holiday season (2) compared to 2022;
• Gift card scams: This is the highest-grossing scam. Fraudsters buy gift cards with stolen credit card information and sell them for cash. By the time the fraud is discovered and the card blocked, they have money in their pockets. Gift card fraud costs companies around $50 billion a year;
• Friendly fraud: This refers to a genuine customer who makes a legitimate purchase on your eCommerce site, but disputes it because they don’t want to pay. This type of fraud costs retailers around $117 billion a year (3).

Why is fraudulent activity generally on the rise in Q4, and what new fraud trends should merchants be on the lookout for this year?

Fraudulent activity is on the rise in Q4 because online shopping is on the rise in this quarter. New fraud trends to watch out for this year include:

• Deepfakes: No longer reserved for funny videos. Advanced AI techniques can be used to create realistic fake identities that can be used to access accounts;
• Supply chain attacks: With the supply chain nightmares caused by COVID-19, fraudsters have been paying attention. They are now able to target suppliers or logistics service providers to compromise the supply chain and facilitate fraud. Attacks on the supply chain increased by 60% over the holiday season 2023;
• Mobile payment fraud: Pickpockets have gone digital. Consumers are using less cash and more mobile payments. As a result, fraudsters are targeting mobile wallets and QR code payments more than ever. Juniper Research predicts that fraud losses on mobile payments will reach $20 billion worldwide by 2025 (5). To ensure you have the best strategies for mobile promotions during Black Friday and Cyber Monday, check out our article “ 5 tips for optimizing your Black Friday & Cyber Monday promotion in 2024”.

What are the top three indicators of potential fraud that eCommerce companies should be keeping a close eye on in Q4?

• Unusual buying habits: People don’t often change their spending habits on a whim. So we need to be alert to sudden changes in consumer habits, such as large purchases made from new accounts or multiple purchases made over a short period of time. According to PayPal, customers who make purchases from new devices or locations are 10 times more likely to be involved in fraudulent activity;
• High-risk countries or regions: Fraud has its preferred locations. Be aware of the regions where the incidence of fraud is highest, and keep an eye on transactions carried out in these areas;
• Suspicious delivery addresses: Consumers generally want the items they’ve purchased. Orders shipped to unusual locations or to addresses that don’t match billing information are therefore red flags. Our analysts have found that 20% of fraudulent orders are shipped to addresses other than the billing address.

How can eCommerce businesses prepare their fraud detection and prevention strategies to minimize risk during busy times of the year?

To minimize the risk of fraud during peak periods, online merchants should:

• Invest in advanced fraud detection tools: Manual authentication is slow. So you need to rely on AI-powered fraud detection solutions capable of scanning and analyzing large amounts of data in real time;
• Implement strong authentication measures: Multifactor authentication (MFA) is your best friend. Auth0 reports that companies requiring it can reduce fraud rates by 99.9% (6);
• Train staff: AI needs human support. So train your employees to recognize common fraud indicators and react appropriately. Companies with well-trained staff can reduce fraud losses by 20% (7);
• Review and update policies: Fraud has evolved considerably over the years. So have your fraud prevention policies. Review them regularly and update them to deal with new threats. IBM Security recommends doing so at least once a quarter to keep up with new threats (8);
• Partner with payment processors: You’re not expected to know everything about fraud prevention, but when you work with payment processors, you have access to their extensive fraud prevention expertise. Companies that partner with reputable payment processors can reduce fraud losses by up to 50% (9). Also, online wallets like PayPal are quite popular with 23% of consumers. To find out more about eCommerce consumption trends of Canadians in 2024, download this free report.

What role do machine learning and AI play in real-time fraud detection during peak periods, and how can companies leverage these tools effectively?

Machine learning and AI play a crucial role in real-time fraud detection. These tools can:

• Analyze large data sets: Process huge quantities of transaction data to identify patterns and anomalies;
• Learn and adapt: Continuously learn from new data to improve fraud detection accuracy over time;
• Detect evolving threats: Stay one step ahead of new fraud trends by identifying new patterns and behaviors.

How can online retailers effectively recover losses due to Q4 refunds, and what proactive measures can they take to reduce their occurrence?

To recover refund losses and reduce them in the future, online merchants must:

• Investigate refunds: Examine retrocessions to determine the cause and prevent similar problems from recurring. Ideally, companies will use a retrocession management partner to handle everything from prevention to dispute resolution;
• Provide clear evidence: Gather solid evidence to dispute chargebacks and increase the chances of a successful reversal. PayPal reports that companies that provide clear evidence to dispute chargebacks have a 70% success rate;
• Improve order fulfillment: Customers expect their orders to be delivered quickly. So make sure orders are filled accurately and on time to minimize chargebacks and keep your customers happy. UPS has found that companies that improve order fulfillment accuracy can reduce chargebacks by 25% (10). To help you prepare for Q4, read the article “eCommerce logistics challenges – how to avoid the December nightmare”;
• Provide customer support: Satisfied customers are less likely to initiate refunds. So it’s important to offer excellent customer service to address concerns and resolve disputes before they turn into chargebacks. Companies that offer excellent customer support can reduce chargebacks by 50% (11).

How can merchants strike the right balance between implementing robust fraud prevention measures and maintaining a seamless customer experience during Q4?

It’s important to strike the right balance between fraud prevention and customer experience. Merchants must:

• Avoid excessive friction: Customers who find it difficult to place an order with you will shop elsewhere. So look for fraud prevention measures that don’t create excessive friction for legitimate customers. Forrester Research found that companies that create excessive friction for their customers can lose up to 20% of their sales (12);
• Personalize the experience: Use data analytics to personalize the customer experience while maintaining security. This can increase customer satisfaction by 20% (13);
• Ensure clear communication: Explain fraud prevention measures to customers, and clearly communicate any delays or restrictions. According to PwC, companies that do this can reduce customer dissatisfaction by 30% (14).

What AI and machine learning capabilities should companies prioritize to prevent fraud during peak seasons?

Preventing fraud today requires sophisticated technology that evolves with your business. Recent data shows that companies using advanced AI tools achieve high accuracy rates while spending far less time on manual reviews. Here are some of the key areas AI tools focus on:

• Real-time detection: Systems that instantly analyze thousands of data points per transaction;
• Dynamic risk assessment: Tools that adjust security levels according to seasonal trends and emerging threats to increase protection during peak season;
• Multi-platform monitoring: These tools track your presence on the web, cell phones and marketplaces;
• Intelligent workflow automation: Technology that handles routine checks while flagging complex cases for specialist review.

How can major retailers effectively coordinate fraud prevention across multiple sales channels during peak periods?

People buy on different channels, which means companies need intelligent ways of keeping track of everything. Companies that use integrated control systems see a significant drop in fraud, which is a good thing for everyone who wants to keep their hard-earned money. Here’s what to look for:

• Unified monitoring: A system that lets you see all your sales channels in one place;
• Customized security: Protection tailored to each platform;
• Behavioral analysis: Tools to track consumer buying habits;
• Complete tracking: Synchronized tracking of all transactions.

What documentation practices maximize success rates in claims disputes?

Whenever possible, keep everything. Resolving a dispute requires keeping a complete record. The more complete your documentation, the greater your chances of success. You’ll need the following documents:

• Technical data: Transaction details and digital verification;
• Delivery confirmation: Complete shipping and tracking history;
• Service records: All customer interactions and assistance provided to a customer;
• Payment verification: Authorization and authentication records.

How can merchants use customer communication strategies to avoid friendly fraud refunds?

When you communicate clearly and proactively with your customers, you can prevent disputes before they start. Well-informed customers are less likely to file refund claims. So make sure you do the following for every transaction:

• Send a clear purchase confirmation: It should be professional, timely and branded so that it’s clear it’s from you;
• Keep them informed about shipping: Consumers want to know where their purchases are, at virtually any time. So send regular automated updates on delivery status;
• Make your policies transparent: Make it easy to find your terms and conditions and return information. Also make sure this information is easy to understand once your customers have found it;
• Recognizable billing: When billing information is unclear, your customers may think it’s a fraudulent transaction. So make sure your business information on statements is easy to understand.

What order fulfillment best practices reduce the risk of refunds?

When customers receive the items they’ve purchased, they’re less likely to dispute a charge. So focus on good order fulfillment practices:

• Double-check addresses: Make sure billing and shipping information is correct before sending anything;
• Provide proof of delivery: Always have confirmation that the item has been delivered;
• Keep product records: Document the condition of your products before shipping;
• Offer easy tracking: Provide clear, accessible tracking information so customers can see the status of their order;
• Deliver on time: Keep your delivery promises. If the product is supposed to arrive in two days, make sure it does.

By addressing these challenges and implementing effective fraud prevention strategies, merchants can protect their businesses and retain the trust of their customers over the festive season.

Contact ClearSale today to find out more about how they protect merchants from fraud, especially during busy periods like the festive season.

Contact Novatize specialists to help you with your eCommerce strategies for Q4.

💻 [email protected]

📞 +1 844 932 6682

Sources : 

(1) https://www.akamai.com/blog/security/defend-against-digital-cyberthreats-this-holiday-season

(2) https://risk.lexisnexis.com/global/en/insights-resources/infographic/fraud-and-identity-trends 

(3) https://www.businesswire.com/news/home/20241001561130/en/2024-Chargeback-Field-Report-Merchant-Survey-Reveals-Latest-Trends-Impacts-of-Friendly-Fraud 

(4) https://www.supplychainbrain.com/blogs/1-think-tank/post/37813-supply-chain-attacks-one-of-the-biggest-cybersecurity-threats-of-2023 

(5) https://www.juniperresearch.com/research/fintech-payments/fraud-identity/online-payment-fraud-research-report/ 

(6) https://auth0.com/docs/secure/multi-factor-authentication 

(7) https://www.accenture.com/us-en/insights/public-service/cracking-code-consumer-fraud 

(8) https://www.ibm.com/fraud-prevention 

(9) https://docs.stripe.com/disputes/prevention 

(10) https://www.refundretriever.com/blog/ups-chargeback 

(11) https://support.zendesk.com/hc/en-us/articles/4408843597850-Contacting-Zendesk-Customer-Support 

(12) https://www.forrester.com/blogs/harness-friction-in-customer-journeys-to-drive-emotional-engagement-eu/ 

(13) https://business.adobe.com/resources/customer-experience-personalization-at-scale.html 

(14) https://www.pwc.com/gx/en/services/forensics/fraud.html