Holidays are the busiest time of the year for many retailers. While an uptick in sales, especially on Black Friday, helps with growth, it also creates an environment where fraud is harder to detect. The 2020 holiday season will look different as even more shoppers than usual turn to e-commerce or in-store pickup to avoid crowds post-pandemic. Now is the perfect time to assess and update your holiday fraud prevention strategy.

What does holiday fraud look like?

Some businesses see their fraudulent transaction rate fall during the holiday due to the increase in legitimate purchases. But make no mistake, fraud typically increases during the holidays.

Suspected fraud increased by 29% during the 2019 holiday season compared to the 2018 season. The 2020 holiday season could see even higher levels of fraud since more than 70% of U.S. adults plan to do half of their holiday shopping online.

While account takeover is the most common fraudulent scheme during the holidays, discount and coupon abuse aren’t far behind. Return fraud is another common scam to watch out for. Fraudsters also tend to target digital goods like gift cards and high-ticket items, including electronics.

Preventing holiday fraud

You can mitigate risks by implementing the following strategies. 

1. Turn holiday fraud prevention into a documented process

Establishing a clear plan now helps with internal communication and ensures everyone knows their role. Document the steps to approving or declining orders and list the criteria for spotting suspicious transactions. Determine the next steps for when a transaction is flagged.

Think about providing additional training for fraud prevention to help employees prepare for the holiday season.

2. Prevent and fight chargebacks

Shoppers are also aware that fraud rises during the holidays. They might scrutinize their bank and credit card statements more closely than usual and initiate a chargeback if they don’t recognize a transaction.

Shoppers are more likely to dispute legitimate transactions after the holidays because they might make purchases from unfamiliar merchants or forget where they bought gifts from.

Using an accurate merchant descriptor and up-to-date contact information can go a long way in preventing chargebacks from shoppers who don’t recognize the purchase.

You should prepare to dispute chargebacks by keeping a paper trail that includes purchase orders, tracking numbers, communications with customer service and more.

3. Get customer service ready for a higher return volume

Retailers typically see more returns and refunds at the end of the holiday shopping season. Don’t hesitate to establish a cutoff date for holiday returns or to limit the return window for high-ticket items. Encouraging shoppers to return their purchases quickly can deter fraudsters. A restocking fee on high-ticket items can have the same effect.

Processing returns and refunds efficiently can reduce chargebacks from frustrated customers.

Preventing holiday fraud will be easier if you review your return and coupon policies now for loopholes scammers could take advantage of.

4. Take steps to prevent account takeover

Account takeover is a common holiday fraud scheme. These steps can prevent holiday fraud committed with stolen accounts:

      • Encourage customers to create strong passwords and update them regularly.
      • Enable two-factor authentication for logins.
      • Use Google Alerts to keep track of mentions of your brand online. This will help you discover spoofed versions of your site created to steal login credentials.
      • Audit your IT infrastructure to look for data breach risks.

5. Expect unusual shopping patterns

Data from previous holiday seasons might not help you predict shopping patterns this year since more people will shop online due to COVID-19.

You can predict some behaviors by communicating with sales and marketing. Events like a new product release or special offer are often instances when you’ll see higher order volumes.

Try these two strategies for preventing holiday fraud when shopping patterns are unpredictable:

      • Establish velocity limits to prevent scammers from testing multiple payment methods on an account.
      • Implement thresholds for order amount or size. It’s best to perform a manual review for orders with high-ticket items or high purchase amounts.

6. Invest in machine learning and real-time monitoring

A machine-learning solution can analyze large amounts of data in real time and spot things human eyes would miss. You can use this technology to flag suspicious transactions and send them to your fraud prevention team for review.

Machine learning can deliver insights into fraud patterns, for instance, uncovering which items are likely to be targeted.

It also analyzes transaction data to highlight things like discrepancies between IP, shipping, and billing addresses; accounts that share compromised data points; or unusual activity from an account that has been taken over.

How can help with holiday fraud prevention? can help you get ready for the holiday season with the following features:

      • Continuous innovation. We’re a forward-looking fraud prevention company that is always developing new ways to fight the latest threats.
      • AI and machine learning. Leverage the latest fraud prevention innovations tailored to your unique needs with our machine-learning scoring system that assigns a risk level to each transaction.
      • Collective intelligence. Data from our merchant network will help you flag fraudsters who have targeted e-commerce companies in the past.

Download’s FREE EBOOK, a comprehensive guide to creating the best holiday shopping experience for customers, while also protecting your organization from fraudsters.