Voice of the Industry

The importance of fraud protection on Black Friday and Cyber Monday

Tuesday 1 November 2022 10:48 CET | Editor: Raluca Ochiana | Voice of the industry

As Black Friday and Cyber Monday approach, merchants must protect themselves against fraud and even more from false declines. Amir Sadras, founder at FUGU, makes an in-depth analysis on fraud close to the holiday season and mentions some key-points merchants must change in their anti-fraud solutions to efficiently fight chargebacks.

 

Black Friday and Cyber Monday (BFCM) are just around the corner, and merchants have been working hard to prepare for the largest online spending day of the year

In 2021 alone, customers in the US spent USD 10.90 billion on Cyber Monday and another USD 9.03 billion on Black Friday. At the same time, merchants hope to cash in on any additional traffic that BFCM will bring to their ecommerce site.

But, while more traffic often brings more revenue, it also leads to increased rates of fraud. That is part of the reason why ecommerce fraud spikes dramatically during the holiday months. So, why it is so important for merchants to be prepared to protect themselves during BFCM season? Let’s take a closer look to the facts.

Hard work should pay off

Many ecommerce merchants work hard to make big changes in advance of BFCM. Some give a total facelift to their online shops, while others focus on streamlining their operations. Almost all offer special deals to their customers. The primary goal of these changes is to increase revenue as well acquire new customers for the coming year. If a merchant makes a good first impression during BFCM, these customers could remain loyal throughout the year.

On the other hand, one declined transaction on BFCM can have a rippling effect on the lifetime value of a customer. And businesses with a high customer lifetime value are able to grow more over time. This is why merchants must be sure they do not wrongfully decline even a single valid transaction.

Increased fraud risk

Merchants must create a balance between ensuring that no valid transactions are declined on BFCM and the increased risk of fraudulent behavior during this period. Fraudsters know that merchants are overwhelmed with traffic and volume, which means merchants have less time to properly screen their transactions. Using this knowledge, fraudsters hide their schemes within increased BFCM commerce traffic. But there is another way that merchants are left vulnerable by the chaos of BFCM.

Chargeback requests

When merchants are processing a high number of orders, it often causes a dip in available inventory. This can mean delayed delivery times for BFCM customers. Customers agree to these amended terms at the checkout. But, with lots of orders, there are also lots of opportunities for confusion surrounding these terms. And, while waiting for their orders to arrive, some customers may initiate chargeback requests. This is an instance of friendly fraud, but that doesn’t mean merchants should take it lightly. 

In fact, illegitimate chargeback claims like this can cost merchants double the transaction amount. And those customers who commit friendly fraud once are nine times more likely to do it again. 

Preparing for Black Friday and Cyber Monday

Ecommerce merchants must be wary of accidentally declining valid customers. They also must deal with the increased rate of fraudulent traffic hidden in their traffic peak. One way to do this is by employing solutions that monitor relevant customer information. 

If an initial purchase is characteristic of the customer’s usual purchasing behavior, it should be approved. This can prevent merchants from declining legitimate customers but merchants should also perform post-payment customer analysis. This includes utilising decision points beyond the checkout. 

For example, deploying a checkpoint just before shipping/ delivery. Doing so ensures that other factors (like delivery delays) have not affected the quality of the initial risk analysis and opens a broader screening scope that includes multiple data points. This allows a more educated risk assessment to be performed just before the shipping/ delivery, which is where the risk for the merchant actually begins. 

Of course, this is a tall order for ecommerce platforms who are already extra busy with BFCM sales. Merchants can choose to outsource this task by employing automated solutions that monitor their increased risk of fraud and defend them against illegitimate chargeback claims.

FUGU offers protection for merchants against traditional fraudsters and illegitimate chargeback claims. The service gives merchants the ability to track payments post-checkout, which allows them to safely accept transactions they currently lose to fraud and false declines.

 

About Amir Sadras 

 

Amir has over 20 years of software management experience (CEO, BD, PM & software engineering) specialising in business process architecture, bringing a wide perspective on payment risk that goes far beyond data analysis to consider fulfillment process excellence, customer behaviour, and revenue optimisation.

Amir holds an MBA ESADE, Barcelona, Finance; BSc Information System Engineering, Technion and graduated from the Israeli Naval Academy. 

Based out of Tel Aviv, Amir is also an iron man distance triathlete and a dedicated father to three amazing kids.

 

About FUGU

FUGU offers a new breed of payment fraud solution tracking payments post-checkout, helping merchants safely accept transactions they currently lose to fraud, false declines, and payment churn.

Our multi-tier self-learning fraud prevention solution, fights payment fraud at various points along the transaction life cycle covering a wide variety of risk patterns and payment models that are currently not attended by any other solution in the market.


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Keywords: Black Friday, fraud prevention, ecommerce, chargebacks, risk management
Categories: Fraud & Financial Crime
Companies: FUGU
Countries: World
This article is part of category

Fraud & Financial Crime

FUGU

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