The holiday season is upon us, traditionally contributing to a substantial chunk of annual retail sales. Despite rising interest rates and higher prices, this is unlikely to change. In 2022, retail sales during November and December combined for a staggering $936.3 billion, marking a 5.3% boost from the previous year.
Behind these glittering numbers lies a less cheerful reality. They don’t reflect the amount that’s lost to fraudulent transactions. According to a recent Juniper Research report, global e-commerce fraud is projected to surpass $48 billion in losses through 2023. This danger is top of mind for 93% of global merchants, according to Experian’s 2022 report on identity and fraud. These losses can be especially devastating for smaller retailers, which tend to rely on holiday sales to sustain themselves through the year.
Fortunately, there are measures that businesses can take to prevent fraudulent transactions from occurring. It’s helpful to start by learning why holiday credit card fraud has become such a problem in the first place.
Making Sense of the Influx of Fraud
Although the likelihood of a fraudulent transaction remains relatively steady year-round, the actual quantity of fraud scales up in direct proportion to the volume of transactions during the holiday season. In other words, fraud spikes during the holiday season mostly because there are more transactions. This phenomenon is exacerbated by retailers that try to maximize sales by lowering their identity verification standards in the hopes of making the checkout process easier.
In fact, the holiday-related change in spending patterns can sometimes entice retailers to eschew traditional, common-sense fraud detection procedures. For example, a change in a shipping address — something that could indicate fraud — may trigger an alert during any time of the year outside of the holiday season. After all, this is when consumers often travel. A sudden rise in chargebacks, which account for 42% of online fraud incidents, or shifts in online payments might also be ignored.
Unfortunately, consumers contribute to the increased risk of holiday fraud. Many are so busy preparing for the season that they don’t track their spending or monitor their financial accounts, which could allow fraudsters who have acquired their information to make purchases without being detected. They’re also more prone to falling for scams such as fake delivery notices and counterfeit websites.
The dark web makes matters even worse. Through this medium, a fraudster can simply purchase compromised credit card information from other unscrupulous parties and make purchases with it through a fake shopper. They don’t need to become creditworthy to open a card — they just need to open an account with an online retailer to start making fraudulent purchases.
All of these risk factors are present during the holiday season, and all partially explain why it’s the most dangerous time of the year for fraud.
How to Protect Your Business From Fraud During the Holiday Season
While the tactics employed by fraudsters have grown more sophisticated, businesses aren’t without defenses. Here are some tactics you can use to mitigate or even eliminate holiday fraud risk:
1. Be realistic.
Fraudsters aren’t going anywhere, and the increase in fraudulent activities just makes it more likely that your business will be hit. Enact procedures to monitor all activities and stay informed about what’s going on in the retail industry to reduce your business’s vulnerability to cybercriminals and other bad actors. It might be tempting to speed up holiday checkout times by lowering your identity verification standards, but this will likely backfire.
2. Listen to your customers.
Customers will tell you when something is amiss. If you haven’t already, establish a channel on your online store where they can voice their concerns about suspicious interactions. Giving customers a clear and easy way to report issues helps prevent large-scale fraudulent activities. Often, you won’t know that your platform has been compromised until your business begins to suffer from it.
3. Integrate an effective identity verification solution into your process.
There are now highly effective identity verification solutions that are capable of detecting fraudsters and stopping their crimes from occurring in real time. Intellicheck leads the pack in advanced solutions with a guaranteed response rate, swift transaction times, and a frictionless customer experience. These features allow retailers that want speedy checkout processes to maintain their security without driving away potential customers with lengthy verification processes.
The holiday season should be a joyful and profitable time of year for retailers and consumers alike. With the right fraud-preventing tactics in place and an effective identity verification solution like Intellicheck, you can stop fraudsters in their tracks and set your business up for a financially healthy new year.
With integration that’s swift and painless, we can have you up and running in less than a day, allowing you to provide the best customer experience possible without any downtime.