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How to Maximize Sales While Avoiding Fraud Losses During the Busy Holiday Season 

Online retailers need advanced data-driven fraud prevention solutions to avoid their holiday season profits eroded by lost inventory and high chargebacks.

Maximize holiday sales

After months of build-up and painstaking preparations, the busy holiday shopping period is upon us. Retailers all over the US and beyond will be primed to cash in on an expected consumer bonanza, which starts around the time of Halloween and runs through the new year. But where there’s people and money, there’s also fraud.  

Online retailers must therefore undergo a fine balancing act this holiday season: ensuring that legitimate customers see no slowdown at the virtual checkout, while also spotting and blocking any purchases that use stolen identities. Achieving this balance will require adaptive fraud prevention powered by advanced machine learning algorithms. 

Time to Spend 

With a red-hot economy and low unemployment, the US retail sector in particular is looking forward to uplifting year-end sales. The last two months of the year are peppered with numerous opportunities to drive retail sales and growth. Alongside the relatively new shopping ‘festivals’ of Black Friday and Cyber Monday sit Hanukkah at the start of December and, of course, Christmas at the end. 

Shopping has always been a major part of the holidays. Consumers need food, drinks and decorations for home entertaining, gifts for friends and family and even holiday attire. And, they’re increasingly going online to get what they need.  Total e-commerce sales are expected to be somewhere between $128 and $134 billion in 2018, with 17 to 22% increase over last year’s holiday season sales, according to Deloitte.1 

Retailers may have been preparing for months to ensure that everything goes off without a hitch. In the online world this could include stock management, SEO, hiring extra staff, IT testing, and new promotions. Marketing emails and social outreach can create interest with seasonal discounts and coupons, while buy online pickup in store options are designed to entice last-minute shoppers.  Preparations should also extend to payments systems. After all, the last thing a retailer needs is their systems crashing due to excessive demand.

Tackling the Fraud Challenge 

Fraudsters know all of this, of course, and are ready to capitalize on any shortcomings in retail filters to try and sneak through their own purchases. Much of bad actor’s activities are fueled by the proliferation of breached identity data on the dark web. But fraudsters themselves are also getting smarter. Attacks could be of the low sophistication, high volume variety — using breached card details to make online purchases. But they could also be highly sophisticated and low in volume – using automated bots that impersonate humans to pry open accounts, gather information and make fraudulent purchases.  

The end result is the same: if retailers fail to spot this activity, they could see their holiday season profits eroded from lost inventory and high chargebacks. Without the right fraud tools in place retailers may also be hit with increased operational costs resulting from manual reviews. These in turn can lead to delays at checkout which may put some shoppers off completely.  

The best way to preserve the customer experience without impacting the bottom line is to invest in advanced data-driven fraud prevention solutions. Fraud prevention is tough. Historically, it required analysts to expend significant time and effort creating multiple complex fraud rules. With Simility, a PayPal service, things are different. Our manual rule builder allows teams to write their requirements in plain English, test and deploy usually within minutes. A self-optimizing machine learning engine then detects the pattern to be implemented, while also adapting, strengthening, and reacting with speed to help detect new fraud schemes. 

As we head into the peak shopping season, don’t let fraud come between you and a sizable growth opportunity. 

Want to be well prepared to handle fraud in 2019? Reach out to us to view our on-demand webinar ‘Year in Fraud: A  Look Back and 2019 Predictions’. 

 

[1] Deloitte’s Retail and Distribution practice – https://www2.deloitte.com/us/en/pages/about-deloitte/articles/press-releases/deloitte-2018-survey-retail-holiday-sales-to-climb.html  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tushar Shah

Tushar Shah

Tushar Shah leads Product and Engineering for the Global Risk, Regulatory and Operational Platforms at PayPal. He is a business leader with years of experience in delivering Large Complex Enterprise wide programs with the use of technology and business process management to effectively deliver the desired business case outcomes.
Tushar Shah