Cyber Criminals Don’t Take Holidays

$3.5 billion. That’s how much online retailers lose every year to fraud. With ecommerce and mobile commerce on the rise through the holidays, credit card and data theft should be on every e-tailer’s mind.

  • Overall, merchants are reporting fraud loss as a percent of revenue at 0.68% this year compared to 0.51% in 2013.
  • Although the average value of a successful fraudulent transaction fell this year ($155 in 2013 vs. $114 in 2014), fraudsters are bombarding merchants with 61% more attempts at fraudulent transactions—only 55% of which are prevented.

There are two main ways that cyber criminals steal payment card data and personal identifiable information (PII). The most sophisticated hacking involves targeting an enterprise organization, usually a financial institution or large retailer like Target or Home Depot, to steal millions of customer records. Some 375 million data records had been confirmed stolen or lost worldwide.

The second way is to target individual consumers by capturing credit card information at POS payment processing, or creating elaborate ways to trick consumers into divulging personal information via fake online websites, phishing emails, or even fake charities!

So how can busy brands protect their profits from malicious cyber criminals, who are most active during the lucrative holiday season?

The keys are proactive planning supported by aggressive automation to reduce the manual oversight required to spot – and stop – potentially fraudulent orders.

According to a report by Cybersouce, online brands use over 20 dimensions to “flag” suspicious credit card orders by checking customer history, purchase device tracing, multi-merchant purchase history and validation services.

According to the survey respondents in the report, the most successful management tools are fraud-scoring models. The fraud management system evaluates each order at checkout and instantly assigns a fraud score. Brand owners set the fraud threshold based on unique business rules, so any order above the threshold is automatically halted for further review.

This is a huge time saver because the operations team now only reviews suspicious orders: they are not inundated trying to manually review every order. This also increases the efficiency of the operations team by allowing them to focus on fewer orders, so fewer mistakes slip through the cracks.

Stopping the order before shipping is the holy grail of fraud detection. Upon review, the ops team can push the order through to fulfillment, identify fake accounts or block bad customers. Catching the order before it ships avoids costly chargebacks that can harm your business.

The most successful businesses treat fraud prevention as an ongoing process. The most frustrating thing about fraud is that it evolves: if criminals get flagged for certain behaviors, they’ll simply think of new ways to beat the system. This is why your fraud prevention strategy needs to be just as flexible to minimize the impact of fraud on your bottom line. Many solutions can be adjusted to fit the fraudulent behaviors that you see most often. However, best-in-class solutions run on algorithms that improve and adapt to your unique use cases as well as the shifting fraud landscape.

In any case, as you continue to formulate a game plan to the holidays, it’s important to seriously consider an approach to fraud detection and prevention. You’ve worked too hard to let fraudsters put their hands in your pocket. Luckily, there are tools out there that can increase the odds in your favor.