Keys to prepare for 2020 holiday eCommerce and fraud
Black Friday and Cyber Monday are speeding around the corner, ready to launch businesses into a unique season of holiday spending that is largely dependent on digital channels. With the pandemic impacting consumer habits and online shopping in 2020, eCommerce will play a more pivotal role this year than ever before. In a new Kount survey of more than 500 digital merchants, 96% say that the upcoming holiday season is more important to their business. Nearly half say that their business will need to catch up on sales in order to recover from the economic downturn. For businesses, this means a sharp increase in competition for limited consumer dollars, and through eCommerce channels that are enticing targets for holiday fraud.
In this new environment, businesses will need to address some clear concerns:
- Reduce fraud-related chargebacks from payments and friendly fraud
- Secure and control inventory
- Roll out and protect new channels
- Prevent account takeovers
- Reduce friction
As always, creative criminals respond to improved security with new tactics, exploiting vulnerable aspects of the relationship between brands and customers. In fraud, there’s always something new creeping over the horizon, and businesses will need to take quick and comprehensive action to protect and preserve their holiday revenues.
Merchant chargeback protection is key
Even with new threats on the radar, chargeback protection for merchants or for companies doing business online is still the clear priority. Every type of fraud that ends in an illegitimate purchase can become a chargeback. Likewise, some legitimate purchases results in chargebacks by accident or through friendly fraud. To respond, businesses need two capabilities:
Identify and reduce fraud-related chargebacks. The ability to identify and stop high-risk transactions in advance, or to manage chargebacks in flight can help to prevent, stop, or deflect chargebacks and avoid monitoring programs.
Identify and prevent friendly fraud. Friendly fraud often uses chargebacks as a tactic in policy abuse, shared cared fraud, and more. Identifying likely culprits can prevent not only chargebacks, but also product losses.
Digital business and merchant chargeback protection is an important tool in everyday fraud protection, but the likelihood of high eCommerce volumes in 2020 make it essential to protect revenue and avoid costly chargeback monitoring programs.
4 more fraud risks, trends, and targets for the holidays
Chargebacks aren’t the whole story. Fraud tactics and targets are changing, leading to new threats that are harder to detect and stop. Experts predict that fraud will test each of the following vulnerabilities in 2020:
- Inventory versus bots. Bots will target popular items for resale via inventory denial or deletion.
- New channels versus emerging fraud. Without access to deep and wide-ranging fraud and trust data, businesses will struggle to detect fraud in new channels.
- Customer accounts versus bot attacks. Malicious bots can create new fake accounts to take advantage of new customer deals, or they can take over existing accounts using credential stuffing or brute force attacks to steal customer information, drain loyalty points, or place fraudulent purchases.
- Customer experience versus friction. Speed and convenience are the elements of eCommerce that attract consumers. Friction at any point in the customer journey, whether due to manipulated inventory, slow shipping times, manual review, or complex authentications, can drive customers to the competition.
Throughout the holiday preparation season, Kount will provide resources to help businesses prepare for each of these threats.
Holiday fraud drives chargebacks and customer losses
No matter which risk you look at, the actual cost of fraud to a business’s bottom line is staggering. While the immediate expense of fraud and chargebacks is obvious, the related hard and soft costs are equally damaging. And during the holidays, when stressed and cash-conscious consumers expect a frictionless experience, fraud can permanently damage their relationship with a brand.
How can holiday fraud hurt? Here are (some of) the ways:
Chargebacks. Chargeback fees are expensive and challenging to fight, and excessive chargebacks can eventually threaten a business’ merchant account.
Product losses. Production, shipping, and recovery (if possible) costs can all hit the balance sheet.
Loss of loyalty points. With loyalty program crime doubling in recent years, thieves are targeting rewards that brands use to build a loyal customer base.
Brand damage. Fraud can permanently damage the relationship between a brand and loyal customers.
AI is the secret weapon for fighting holiday fraud
Everyone wants a frictionless buying experience and a safe holiday transaction, two goals that appear to butt heads. Fortunately, next-generation artificial intelligence (AI) provides prevention and detection tools to allow a more nuanced, risk-based approach to fraud. As fraud grows in quantity and sophistication, stopping it means staying ahead of new schemes – not just reacting to known types of fraud. That’s where AI shines.
Advanced AI uses two kinds of machine learning to make trust or risk decisions in real time.
Supervised machine learning detects known threats. AI analyzes historical transactions and looks for known fraud signals, mimicking the work of an experienced fraud analyst but at greater speed and scale.
Unsupervised machine learning identifies new threats. AI uses advanced algorithms and models to detect transaction anomalies far faster, more accurately, and at a much greater scale than human fraud analysts. It catches emerging fraud attacks that supervised machine learning models can’t find before they result in chargebacks.
In both models, AI uses existing data to pinpoint fraud – friendly, foreign, desktop, or mobile – even when the type of attack is new on the scene. The richness and size of that data network is the fuel that drives effective AI solutions.
Kount’s Identity Trust platform protects businesses and customers
Conventional wisdom holds that you can’t out-train a poor diet to lose weight (especially during the holidays). AI works in the same way, relying on a diet of excellent data to catch old and emerging threats. Kount’s industry-leading solution uses its vast data network of trust and fraud signal data from more than 9,000+ customers, 250+ countries and territories, 75+ industries, 50+ payment process and card networks to drive accurate decisions in any channel. AI links that data using supervised and unsupervised machine learning to protect the complete customer journey.
Kount’s Identity Trust Platform excels at the essentials, helping businesses to:
Prevent emerging fraud. Next-generation AI protects against new and existing fraud attacks before they become chargebacks.
Accept more good orders. Improve the customer experience, increase order acceptance rates, and generate more revenue while reducing false positives.
Reduce manual reviews. Lower operational costs and drive greater scalability to fraud operations teams by automating approve and decline decisions.
Automate and fine-tune fraud decisions. Customize risk thresholds to achieve desired business outcomes: decline rates, fraud rates, and fraud operations costs.
Improve protection and discover growth opportunities. Data on Demand and Datamart, Kount’s advanced analytics tools, allow businesses to continually improve protection and discover up-sell and cross-sell opportunities to increase revenue.
In a first-of-its-kind holiday season, effective protection can give digital businesses the edge they need. Kount’s AI-driven Identity Trust Platform allows fraud teams to accurately detect and stop fraud at scale, all while focusing on the holiday sales that will allow businesses to survive and thrive.