Expecting a Holiday Rush? Here’s How Merchants can Protect Themselves from Fraud

Even though it’s been three years since retailers have been able to switch to new chip-based credit and debit cards, a recent study shows that payment fraud is still a major concern in the United States as criminals take advantage of remaining vulnerabilities at point of sale, while also focusing more on online merchants. And with the holidays in full swing, criminals are also ramping up their efforts because they know retailers are often overwhelmed by high order volume. In fact, just last year, e-commerce fraud attempts went up by 22 percent between Thanksgiving and the end of the year.

Clearly, one of the reasons for this increase is that chip cards don’t protect retailers from online fraud at all. Still, the new technology has not been as effective in the U.S. as it is in Europe, most likely because In Europe, the customer is required to enter a PIN at the point of sale to complete the purchase both online and in person.  Additionally, some retailers still aren’t compliant with the chip technology, despite the incentive of substantially reducing their risk to loss from fraud when they update their equipment.

For retail merchants, this trend means it’s even more important to take any steps available to protect yourself from credit card and debit card fraud. The most obvious step you can take is to make sure that you are using up-to-date processing machines that accept chip-based cards. Other steps you can take include:

As holiday orders start coming in faster and faster, you may find that your fraud screening capabilities can’t keep up. If that’s the case, don’t make the mistake of skipping manual and simply declining all flagged orders. While it may seem easier, declining valid orders can cost you more in lost business than the fraud you’re trying to prevent. Also, you don’t have to let orders get backed up in your manual review queue. If you haven’t been able to keep up with manual review demands during previous holiday seasons, you may want to consider at outsourcing that function.

In 2016, false declines cost businesses in the U.S. $2 billion more than completed fraud did. For many retailers and merchants, that’s an eye-opening statistic. It also may point to a customer service problem related to how flag orders are reviewed. When your manual review team reaches out to customers to check the validity of a flagged order, it takes skills and training to be able to present that review as an example of outstanding customer service, instead of a nuisance or making the customer feel like a suspect.

That includes treating mobile and desktop online sales as separate channels, as well as in-store purchases. For example, one study found that synthetic identity fraud, the practice of creating fake identities with both fabricated and real information, has become a particular challenge for mobile commerce.

With merchants getting better and better at spotting fraudulent activity, criminals have started targeting a new area: The shipping department. In this scam, the criminal uses stolen customer data, including the victim’s card number, billing address, and shipping address, to place the order. This avoids raising flags at the point of sale. Then, once the order is approved, they then attempt to get the shipment re-routed to a different address. While they sometimes reach out to the merchant’s customer service team, they have also been known to contact the shipping company directly to change delivery information.

Every business is unique and experiences different challenges, including the ways that criminals attempt to defraud them. If you have specific questions about your business, reach out to us on our Contact Page. Our experts will be happy to assist with all your questions.

The post Expecting a Holiday Rush? Here’s How Merchants can Protect Themselves from Fraud first appeared on Retriever, Advantage Merchant Services.