Fraud prevention critical during holiday season
For payment businesses and merchants ramping up during the year-end holiday crunch, Kount produced a 2017 holiday retail guide. The software-as-a-service platform provider and fraud detection specialist warned that retailers must prepare to combat fraudulent transactions with vigilance during this high-volume season. The company stated it prepared the Merchant Holiday Retail Guide to alert merchants and their service providers about "holiday pitfalls seen from the 2016 season and what merchants can do now for a holly jolly retail season."
Kount noted that to glean insights from last year, the company analyzed millions of transactions from its network of thousands of merchants. Highlights from the findings include the following:
- Black Friday 2016 saw the biggest increase in sales at 189 percent.
- Cyber Monday 2016 saw the biggest increase in fraud attacks at 134 percent.
- Transactions via mobile browser saw significant growth at 221 percent.
- Fraud attacks from mobile browser transactions also saw an increase during Black Friday, Cyber Monday, and Green Monday.
- Overall, sales during the holiday season in 2016 increased 148 percent, with fraud attacks up 122 percent.
Kount's research also indicated that "desktop transactions appear to be most risky, with an average attack rate of 11.013 percent of orders in Q4 2016." In addition, the company noted, "not all mobile orders assume the same amount of risk ‒ mobile browser transactions are about twice as risky as transactions via mobile app."
Another key finding is that retailers often experience post-holiday season negative repercussions during the first quarter of the following year. This is due largely to chargebacks.
"Our data shows that chargebacks seen in Q1 are a huge problem for merchants, and one that will only to continue to grow if retailers don't get a handle on their fraud problem," said Don Bush, Vice President of Marketing at Kount. "Chargebacks reports are included in calculating our average fraud attacks, which spiked in Q1 2017 due to holiday fraud from the previous quarter. Q1 2017 reporting showed an increase in fraud among all device types over what was seen during 2016's holiday retail quarter."
The good news is that it's not too late for merchants who either have no fraud prevention or inadequate systems in place to protect themselves. Kount summarized several steps merchants and their advisers can take to remedy this. They are excerpted, as follows:
- Identify type of mobile device being used. The first rule is the simplest, and one that all merchants should already be able to determine.
- Speed is king. Fraud systems need to react as quickly as possible to limit delays for the customer.
- Maximize the use of artificial intelligence (AI). In order to truly capitalize on all that AI and machine learning have to offer, fraud solutions must implement a combination of four pillars: patented, proprietary technology, vast amounts of data, AI to make sense of all of that data and to identify anomalies, and finally, human intelligence.
- Reduce manual reviews. Manual review of orders should be a last line of defense when fighting online fraud. The process is slow, resource intensive, and not scalable for company growth. Plus, making your customer wait for approvals can cost you sales and brand reputation. Automating the transaction review process can eliminate costs and speed up order acceptance while maintaining a high-quality customer experience.
- Use order linking and personas. Capabilities like order linking and personas use hundreds of variables to construct a definitive link to online purchase behavior ‒ either directly or indirectly ‒ to help reveal fraudulent activity.
- Recognize if the phone number being used is a forwarded number. Fraudsters forward calls from a stolen or compromised account to their own phone.
- Optimize rules. Every business is different and there is no universal setting for rules within your fraud platform. After reviewing specific business goals and objectives, merchants should make sure their fraud platform conducts an analysis of currently active rules and their overall effectiveness to best make recommendations, along with an assessment of future performance gains.
For further details on implementing a fraud prevention program for holiday season 2016, visit www.kount.com
, where Kount is also offering a webinar on holiday fraud, and company reps are available to chat.
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