Prepared for Holiday Fraudsters?

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November 10, 2017


The November Blog Series | Holiday Preperation

Issue 14: Prepared for Holiday Fraudsters?


Just after Thanksgiving, most retailers experience an influx of orders that make up for any preceding slow months. Unfortunately, this is often accompanied by holiday fraud. eCommerce fraud rates grow by as much as 8 percent over the holidays, as transactions themselves increase by over 20%. And holiday fraud isn't just a pain to deal with from an administrative perspective -- it can also substantially cut into any profits that are made throughout the season.


The Dangers of Holiday Fraud

During the holidays, retailers experience a flood of transactions, often from new accounts and sometimes quite large. Fraudsters are aware that they can often "sneak in" fraudulent transactions that would otherwise be flagged. Not only are retailers paying less attention to each individual order, but they may also be willing to bend their own rules to secure larger sales. On a smaller scale, some fraudsters may be attempting to complete their "holiday shopping" without spending as much money as they should. Retailers need to be wary of both large and small-scale attempts at fraud -- and eCommerce and brick-and-mortar risks.

Fraud can have some substantial consequences for a business. Even if you can recover stolen inventory, you may not be able to recover it in time to take advantage of the holiday purchasing. If you are paid through fraudulent means, the funds will generally be confiscated. And though your insurance may pay for issues with fraud eventually, this can hurt your company's liquidity and make it difficult for your business to continue operating. Repeated fraud can freeze your account entirely, making it difficult to secure sales.


Be Wary of Any Unusual Requests

Large, fraudulent orders are often accompanied by unusual requests. The addresses may not match, methods of payment may not initially go through, or the orders may simply be unexpectedly large. Follow your gut instincts: if a customer is asking you to do something unexpected, you should carefully review all of their materials. Unusual requests will generally pertain to either method of payment or where orders need to be shipped. International orders are especially high risk.


Take a Closer Look at New Customers

It isn't unusual to get new customers through the holidays -- in fact, it's beneficial. But retailers need to balance their need to court clientele with their need to be cautious. If fraud does occur, it's very likely to be a new customer who is making a substantial order. When orders come through from new customers, they should be carefully analyzed for anything that doesn't seem correct. If there are any discrepancies or if there is any missing information, it can be corrected in a professional and courteous fashion.


Invest in Seasonal Help

It's likely that you are going to need more help during the holidays. Seasonal help is often needed to ensure that transactions are processed with the same level of accuracy as they are throughout the rest of the year. Fraud is far more likely to occur if transactions aren't being handled in a timely manner. The only caveat is that seasonal help has to be trained thoroughly before the busy season begins, or you run the risk of red flags being overlooked.


Be Cautious About Returns and Refund Requests

The end of the holiday season often comes with a significant number of returns and credit requests. Fraudsters may attempt to return items that they never purchased. While solid customer service is extremely important, you should be skeptical about any unusual return requests. If transactions cannot be properly tracked and identified, refunds should be in store credit only. This at least avoids a situation in which a business has to give out cash for no reason.

Holiday fraudsters are, luckily, a problem that retailers only need to deal with once a year. Ideally, the holiday season should result in new orders, new customers, and new opportunities. Retailers simply need to be vigilant about the potential for fraudulent orders to capture the most profit possible.