For many brands and retailers, the Q4 holiday season delivers more online revenue than any other time of the year. In fact, in 2022, US retail ecommerce holiday sales are projected to grow 15.5% to reach $236 billion!
Unfortunately, with so much online revenue opportunity, there’s also an increased chance for holiday ecommerce fraud.
Between 2021 and 2025, merchant losses from online payments fraud are set to exceed $206 billion.
Businesses that don’t adapt can expect to lose profits to fraud this holiday season. One effective ecommerce fraud prevention strategy is to join forces with a fraud detection partner to continuously assess risk and establish trust across the customer journey – from account creation and login to payment.
The Acceleration of Ecommerce Fraud
Extensive fraudulent activity can transform a profitable holiday marketing plan into a disastrous situation where revenue plummets down the drain.
Ever since online shopping started to accelerate with the coronavirus pandemic, myriad new and convenient ways for customers to shop online have appeared, from curbside pickup and buy online, pick up in-store (BOPIS) to increased opportunities for same-day and next-day shipping.
BOPIS fraud provides one major example of holiday season ecommerce risks. Because BOPIS orders typically require minimal proof of purchase, bad actors can easily use stolen credit cards or account credentials to buy goods to keep or resell.
Without protection, this type of fraud can result in substantial product and chargeback losses. And because of its potential to increase revenue and give customers a convenient shopping experience, the absence of a BOPIS option can cut off a critical path to growth.
Digital identity trust solutions can save $130 billion in revenue.
Following ecommerce fraud prevention best practices will help your brand prepare for unique fraud tactics and risks that appear when entering new channels such as BOPIS this holiday season.
Businesses are facing more types of fraud that target high transaction volumes and new models, – effectively undercutting your revenue and clogging up your operations. An automated digital identity solution can help businesses approve more orders, eliminate unnecessary friction, and reduce operational costs from manual reviews.
Let’s explore 5 signs that you might want to take action to prevent ecommerce fraud for your brand this holiday season.
1. You Want to Prevent Losses From Criminal & Friendly Fraud
Retailers stand to lose $130 billion in revenue to fraudulent card-not-present (CNP) transactions by 2023.
There are various types of fraud your business might experience this holiday season, many of which result in chargebacks, which go hand-in-hand with ecommerce and are one of the primary risks digital sellers face during the holidays. The direct and hidden costs of chargebacks are extensive, from financial losses to operational costs and brand damage.
Too much friction may prevent chargebacks, but it will also turn away good customers.
Successfully managing chargebacks in Q4 means you keep a higher percentage of your holiday sales without your operations being bogged down by slow and costly manual reviews and disputes. Kount leverages artificial intelligence for fraud detection to help businesses stop chargebacks, reduce manual reviews and false positives, and increase approval rates, so you can generate more profitable revenue, enhance promotional strategies, and avoid brand damage.
2. You Want to Improve Your Customer Experience
Consider the following statistics:
- 25% of consumers would not return to an ecommerce site if it turned away their legitimate transaction.
- 27% of consumers would abandon their online cart if they experienced too much friction during ordering or checkout.
With the velocity of holiday ecommerce, friction at any point in the customer journey can cost your business both sales and customers. By creating easy and fast account creation, login, checkout, shipping, delivery, and even dispute experiences, you’re more likely to increase conversions and inspire shoppers to make multiple purchases.
Account Creation & Login
Easy login experiences help provide the exceptional shopping experiences that customers expect. However, many systems designed to catch fraud (like CAPTCHAs or manual reviews) slow down the process. Complex login or purchase processes can cause friction and lead to cart abandonment.
By irritating customers with a complex or slow process, businesses can negatively impact brand loyalty.
Friction at any point in the path to purchase is a potential loyalty and revenue leak, especially during the highly profitable holiday shopping season. Customers who are pressed for time during the holidays may switch apps and stores in order to complete their purchase more quickly. Fraud prevention solutions can reduce friction at account creation to improve the customer experience and quickly capture digital revenue.
Shipping & Delivery
The ability to meet high-volume fulfillment demands depends on effectively managing inventory and focusing energy only on good orders. Companies that can’t ship quickly risk losing the sale or incurring chargebacks for items delivered too late.
A fraud prevention platform can help your brand identify fraudulent purchasing behaviors that target popular and hard-to-find items, making it easy to manage inventory.
Payments & Disputes
A slow dispute process can cause lasting damage to customer loyalty. In addition, tight dispute time frames mean that any missed deadline can result in a chargeback and an increase in a business’s chargeback rate. Businesses can face undesirable consequences if that rate gets too high.
Kount’s fraud prevention platform accurately establishes risk levels in every interaction. It intelligently challenges potential bad actors while providing a low-friction experiences for good customers pre-authorization so that businesses can reduce disputes post-authorization. With established trust in each customer’s digital identity, you can confidently launch new models like BOPIS, loyalty programs, and more to acquire new and returning customers.
3. You Want to Reduce Brand Damage as a Result of Fraud
Fraud leads to chargebacks, product losses, and brand damage. Large account takeover attacks make the news, but even smaller attacks may need to be disclosed to customers.
6 out of 10 consumers are concerned about a retailer’s credibility or potential personal data breaches when shopping online.
The holiday season is short. Damage to your brand’s reputation can dry up profits at a critical time. Prospective customers often avoid a brand that has recently fallen victim to an attack, and existing customers affected by the attack may not return. Bad actors can employ several methods to take advantage of the incentives your brand tries to provides to customers.
4. You Want to Protect Your Critical Business Infrastructure
From requiring manual work to straining your fulfillment capabilities, fraud can wreak havoc on your critical business infrastructure. Preventing fraud can benefit every facet of your business, – including internal operations and foundational structures.
A solution that automates decisions with advanced AI, machine learning, and global network data reduces false positives up to 70% and manual reviews up to 83%.
Lengthy Manual Reviews
The manual review process is costly, is difficult to scale, and depends on employee time. Manual reviews consume valuable time and resources for your business.
With an AI-based strategy for fraud prevention, you can apply adaptive decisioning to accept, challenge, or deny a transaction without resorting to lengthy manual reviews so that you can accelerate the manual reviews that are actually necessary.
Inventory Depletion & Denial of Inventory
In addition to constraints on time and resources for your business, supply chain strain will be even greater this holiday season. Having secure and well-managed inventory will be essential.
With inventory depletion, a single buyer (typically aided by bots) purchases a large quantity of inventory intended for many consumers. The lack of product availability can push customers to buy elsewhere and damage their impression of your brand. Your business is prevented from serving your intended market, and you could be violating promotional agreements with your suppliers.
Kount’s platform can help you identify fraudulent transactions, configure policies to stop inventory abuse, and stop bot-driven inventory depletion and denial to free up inventory for your legitimate customers.
5. You Want to Accept More Good Orders & Increase Revenue by Reducing False Declines
To control chargebacks effectively, you need to reduce false positives. A digital identity trust solution delivers the most accurate evaluation of risk and trust in real-time to reduce payments fraud.
Best Practices to Prevent False Positives
You can leverage these ecommerce fraud prevention best practices to help reduce false positives:
- Implement a fraud prevention solution that uses AI and machine learning to deliver frictionless experiences and approve good transactions to keep customers happy and retain more revenue.
- Find a solution that uses real-time passive authentication to reduce friction in the authentication process.
- Automate the review process to increase approval rates and sales.
- Leverage a global data network that provides insight into the shopper’s digital identity to improve risk assessment.
False positives can permanently damage customer relationships. The accuracy and speed in Kount’s platform enables businesses to reduce friction at every point in the customer journey. The largest and richest set of risk and fraud signals, linked by AI, allows Kount to establish the identity trust level of each customer. Businesses can confidently apply appropriate friction to deliver the desired experience, – from frictionless shopping to step-up authentication to blocking fraud. With Kount, businesses can accurately confirm identities in real-time to reduce false positives and increase order approval rates.
Tying It All Together
Fraudulent activity can not only lead to decreased profits but can also damage your brand’s reputation. You don’t want to miss out on revenue this holiday season because of a lackluster ecommerce fraud prevention strategy.
A solution that automates decisions and combines advanced AI with supervised and unsupervised machine learning and a global data network can reduce chargebacks up to 99%.
The speed at which Kount can link fraud and trust signals means businesses can approve more good orders and decline high-risk orders faster. And they don’t have to rely on manual reviews or compromise the customer experience. Connect with the experts today to learn more about Kount’s AI-driven fraud prevention for ecommerce businesses.
- Insider Intelligence, 2021 US holiday review: what it means for the 2022 season.
- Kount, BOPIS fraud trends, strategies increase thanks to curbside demand.
- Kount, E-commerce fraud prevention and detection best practices for businesses.
- Kount, Digital identity trust solutions can save billions (infographic).
- Kount, The 2020 Holiday eCommerce Guide: Risks, Tools, & Keys to Success.
- Kount, Fraud detection software companies and how to find the best solution.