As we head into the holiday season, we’re projecting a significant increase in fraud attacks targeting eCommerce businesses. In this article, learn how to protect your business from the threat of fraud.
In 2020, consumers spent $861.12 billion online with U.S. merchants alone – an increase of 44% from the year prior.
The same research also found that this was the highest annual rate of eCommerce growth in the U.S. for at least two decades, and was triple the 15.1% growth seen in 2019.
Salesforce’s 2020 Holiday Shopping Report found that there was a 50% increase in digital spend over the 2019 shopping season, marking it as one of the biggest digital holiday shopping seasons to date.
For eCommerce merchants, the pandemic-driven shift towards online shopping creates huge opportunity for growth during the holidays this year, but with that comes the growing threat of digital fraud.
At Vesta, we recently released our first Global Card-Not-Present (CNP) Fraud Report, leveraging internal data from Q1 2020 to Q1 2021 to provide merchants with insights into how much fraudsters tried to steal, how their attacks in the U.S. compared to those in Mexico, the operating systems they’re using to make fraudulent transactions, and how they’ve become more sophisticated over time.
We discovered that the overall percentage of attempted fraud was lowest in Q4 2020, which we attributed to the larger volume of seasonal transactions that occurred during the holidays.
The average dollar amount per fraudulent transaction was the highest during the fourth quarter out of every quarter analysed, which indicates that fraudsters were particularly aggressive around the holidays.
As we head into the holidays, we advise businesses to take extra precautions, especially with Black Friday and Cyber Monday approaching, as well as encourage consumers to be wary of buying from third-party sellers.
Now more than ever, merchants need to implement a sophisticated fraud prevention solution to increase consumer confidence and protect their businesses.
We’ve outlined five tactics that can help online retailers balance strong fraud prevention while maintaining an exceptional shopping experience for their customers.
1. Utilising 3-D Secure Authentication
To add an extra layer of fraud protection for credit card transactions, businesses have adopted 3D Secure (3DS), which stands for three-domain secure, to prevent unauthorised use of credit cards in online purchases and protect them from being liable for fraudulent card payments.
After a buyer enters their payment details online, the buyer would be asked to confirm their identity through an authentication page by being redirected to their debit or credit card provider’s 3DS web page to provide either the password associated with their bank or a one-time authentication code that’s sent to their mobile device.
Once authentication is verified, the transaction is approved. But if not, the purchase is deemed fraudulent and declined.
The 3DS protocol gives an added level of security for both you and your customers, helping to stop card details from being stolen and used online.
It also protects against any unauthorised transaction chargebacks. Once the transaction has passed the 3DS authentication process, the liability shifts from merchant to the cardholder.
2. Utilise Biometric Authentication
Implementing a form of biometric authentication in the checkout process can be a highly effective way to strike the balance between preventing fraud while preserving a great shopping experience.
Since biometrics technology measures the physical characteristics of an individual to validate identity, such as device fingerprinting or facial recognition, this method can be a highly effective form of identity verification that’s difficult for fraudsters to get past.
Additionally, consumers have been accustomed to biometrics as an authentication method, with facial recognition now being a standard feature on smartphones and tablets.
According to Deloitte’s 2018 Mobile Consumer Survey, nearly half of consumers with biometric technology on their smartphones have used it to authorise a purchase, representing an increase of 35 % from the year prior.
3. Invest in a guaranteed fraud solution
As CNP fraud continues to rise, and with fraudsters being most aggressive around the holidays, it’s critically important for merchants to find a happy medium between preventing fraud, maximising approvals of legitimate transactions and delivering an exceptional customer experience.
If your business deals with a high volume of transactions, it may be valuable to invest in a fraud solution that can guarantee all approved transactions, in addition to keeping your company safe, increasing consumer confidence and ultimately growing your topline revenue.
With this approach, you also won’t need to worry about covering the high cost of chargeback remediation expenses.
4. Clarify shipping and return policies
Providing your customers with an easy and quick return, exchange, and refund policy is a great way to help reduce the number of chargeback disputes you have to deal with.
Provide your customers with options that are clearly outlined should they be unsatisfied with your product or service, as well as how long they have to contact you regarding a return or exchange.
This is an effective way to prevent a specific type of chargeback fraud known as “friendly fraud,” which is when a customer uses the chargeback process to get a refund, either by mistake or on purpose.
Having a helpful and frictionless return policy will lead to less friendly fraud and more happy customers during this holiday shopping period.
5. Utilise a fraud solution that uses artificial intelligence
If you’re relying on manual review of high-risk transactions to get you through the holiday season, you should instead consider using a fraud solution that harnesses machine learning and artificial intelligence.
Machine learning has become a key pillar in the fraud detection process, and your business should be using it to its full advantage.
Sophisticated machine learning models can draw connections between disparate transactional data points that humans simply can’t detect.
Deploying a machine learning-based solution that prevents fraud while maximising approvals of legitimate transactions can provide shoppers with a frictionless experience without sacrificing security.
First appeared on Vesta’s Blog on eCommerce Fraud.