It’s Time to Refine Your Holiday 2024 Fraud Prevention Strategy

It may not feel like it right now, but the winter holiday shopping season will be here in just a few months. While you’re planning your marketing campaigns and product mix for holiday 2024, take some time to review and update your fraud strategies. Adapting your fraud prevention to account for trending e-commerce fraud methods can help you avoid attacks, approve more legitimate orders, and give your customers a better holiday shopping experience.

Rising rates of friendly fraud, synthetic identity fraud, and brand impostors may have a particularly strong impact on retailers and consumers this holiday season. These trends are being amplified and accelerated by free and inexpensive generative artificial intelligence technologies that make it easier for fraudsters to create more convincing attacks and to automate large-scale fraud campaigns. Understanding each of these trending types of fraud can help you put prevention strategies in place before the holiday rush hits.

Friendly Fraud Erodes Holiday Revenues

Chargebacks and return fraud are two common ways that previously trustworthy customers can turn into “friendly” fraudsters. One analysis found that consumers charged back more than $65 billion in 2023, with chargeback-related impacts on retailers adding up to more than $243 billion. Return fraud cost U.S. retailers $101 billion in 2023, according to the National Retail Federation (NRF), which also found that wardrobing is the most common type of return fraud, experienced by 49 percent of retailers in 2023.

Wardrobing occurs when customers buy an item, use it for one event, and return it as “new” for a full refund or credit. Common products targeted for wardrobing include apparel, accessories, jewelry, and high-end electronics. Note that these are all items that customers might be especially tempted to wardrobe during a season of holiday gatherings.

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Plan now to fight holiday season friendly fraud:

• Provide real-time package tracking and delivery confirmation to reduce false claims of delivery failure.
• Consider working with a chargeback management service to handle disputes and find ways to reduce your chargeback risks.
• Reduce return fraud temptation by offering site credit rather than refunds.
• Use anti-wardrobing tags for items that are popular targets for this type of fraud.

Synthetic Identity Fraud Can Spoil the Holidays for Retailers

Synthetic identity fraudsters play the long game. They create fake identities using a mashup of false and real consumer data, open bank accounts, and wait for credit offers. Once the fraudsters behind the synthetic identities access credit, they go shopping for products to resell.

Synthetic identity fraud is harder to detect than traditional card-not-present (CNP) fraud because these identities have credit histories supported by legitimate banks. When the credit runs out, or when consumers learn that their data has been stolen to synthesize an identity, those synthetic customers simply evaporate, leaving banks and retailers with the losses. Thanks to endless data breaches and AI, half of businesses have reported an increase in synthetic identity fraud this year. It’s now the fastest-growing kind of fraud in the U.S.

Plan now to protect your site against synthetic identity fraud:

• Use AI models to detect characteristics that can indicate possible synthetic identities.
• Consider batch order assessment to look for patterns and similarities that could indicate multiple synthetic identities targeting your store.
• Ensure capacity for secondary expert review of flagged orders to confirm synthetic identity fraud without delaying approval of legitimate peak season orders.

Brand Impostors Deceive and Defraud Your Customers

Brand impersonation accounted for almost half the fraud reports the Federal Trade Commission received in 2023. The agency said U.S. consumer losses to brand impostors have tripled since 2020, topping $1 billion last year. This type of fraud hijacks consumers’ trust in brands to phish their payment data and, in some cases, sell them counterfeit goods that may be financing global criminal activity. Brand impersonation can take several forms, including lookalike sites and social pages as well as fake goods.

Lookalike sites, fake search ads, and social media content use domain and account names similar to real brands to trick customers into placing orders, steal their payment data, and deliver nothing — or fake goods. Because the criminals also collect the customer’s name, address and other personal data, they can also steal that identity to open new accounts.

Criminals tend to flood the market with cheap fake goods in early December hoping to scam bargain-hunting holiday shoppers. Counterfeit goods can be difficult to spot during the holiday sales season, when flash sales sometimes offer unusually low prices on popular items, which makes a low price less of a red flag. When shoppers fall for fakes, not only does your brand lose revenue, but customers can get stuck with poor-quality items that may put their health and safety at risk.

Plan now to stop brand impostors this holiday season:

• Monitor the web, social media, and e-commerce marketplaces for lookalike domains, ads that link to fake websites, and impostor social accounts and marketplace storefronts. Report impostors to have them taken down.
• If you find sites or marketplaces offering knockoffs of your products, you should also notify law enforcement.

Enhancing the Holiday Customer Experience

Taking the steps outlined above can help you head into this year’s holiday sales season with stronger defenses against fraud and abuse of your brand. You’ll also be better positioned to provide a great customer experience. For example, when customers know when their orders will arrive, they can arrange to bring them in to avoid package thieves. When they don’t have to wait for a bottleneck of orders to be screened before their orders are approved, they can work through their list faster. When they’re less likely to encounter criminals posing as your brand, they’re more likely to avoid fraud that would disrupt their holidays. By planning now, you can ensure a safe and rewarding holiday season for your company and its customers.

Original article at: https://www.mytotalretail.com/article/its-time-to-refine-your-holiday-2024-fraud-prevention-strategy/