Customers shop very differently during the holiday season than they do the rest of the year. And that requires online retailers to adjust their ecommerce fraud defenses. Doing so can minimize losses while still making it easy for good customers to purchase, says TJ Stein, customer experience and operations leader at direct-to-consumer apparel brand Everlane Inc.
During the holidays, consumers buy more and more frequently. As they do, they’re more likely to purchase for others, shipping items to addresses that are not their own. That can mean they’re more likely to engage in bracketing, purchasing items of different sizes with plans to return those that don’t fit, Stein said Wednesday during a webinar on preventing holiday ecommerce fraud sponsored by trade group Merchant Risk Council.
They may also buy several times a day, he said.
“During Black Friday, we might have a customer come back three or four times that day to take advantage of a promotion,” Stein said.
All of those behaviors might trip a merchant’s fraud-warning system if the system is not adjusted to take holiday shopping behavior into account, he said. He added that automation helps by enabling Everlane to customize its fraud-prevention rules. Those rules are based on such factors as time of year, ecommerce fraud issues the brand is seeing and the potential impact.
Everlane uses fraud-prevention tools from Sift. Sift is listed as the payment security and fraud-prevention provider to four retailers in the 2023 Digital Commerce 360 Top 1000, a ranking of North America’s leading retailers by online sales. Everlane is No. 271 in the Top 1000.
Fighting friendly fraud requires good communication
Stein said a common kind of fraud activity online retailers like Everlane face is so-called “friendly fraud.” In these scenarios, consumers use their own credentials to make a purchase but later demand a credit card refund, also known as a chargeback.
In some cases, the consumer just tries to get away without paying. But, Stein said, there can be many other reasons for this kind of dispute. Examples may include the consumer not recognizing the merchant name that appears on a credit card statement. A shopper could forget they signed up for a recurring subscription. Or a refund the consumer requested might take longer than expected to show up in the cardholder’s account.
“The best defense against friendly fraud is really clear communication,” Stein said.
He says Everlane tries to communicate clearly throughout the purchase process what was purchased, when it will arrive, its return policies and how the customer can get help if needed.
Ensuring the brand appears on notifications and billing statements
Everlane also makes sure all the emails the customer receives are branded by Everlane. An example is that shipping notification emails come from Everlane and not a delivery service. And Everlane makes sure its name and phone number appear on the credit card statement so that a customer with a concern can reach Everlane, instead of simply calling their bank to dispute the transaction.
He also said it’s important that items not eligible for returns are clearly indicated as such at every step. If the purchase of a product is final, Everlane notes that on the product page, at checkout and in confirmation emails.
“It’s really clear all the way through the user journey,” Stein said.
He said Everlane stores data on all transactions. That helps to fight chargebacks that occur when a customer disputes a purchase. That includes keeping data on the shipping address and IP address. It also means saving any communication with the shopper and photos a delivery service might provide of a parcel left at the shopper’s doorstep.
That kind of information can help the merchant challenge a chargeback, he said. The card-issuing bank likely will only take one or two minutes to consider the chargeback request. That process leads to a decision on whether to refund the amount to the consumer. At that point, the merchant’s account is charged for the purchase price.
Friendly fraud is likely to become more common as younger consumers account for a larger share of shopping, said Rebecca Alter, trust and safety architect, Sift, who spoke with Stein on the webinar. She noted a Sift survey showed that 42% of Gen Z consumers, those born between 1996 and 2010, say they have or would commit friendly fraud, such as by denying they received an item they did receive.
Combating gift card fraud on ecommerce sites
Bulk orders of gift cards are a common type of holiday fraud, Stein said. Fraud indicators could be large or frequent purchases, or a purchaser who has five or more payment methods on file. He said Everlane also looks at the risk profile of the gift card recipient. That profile can offer clues as to whether the transaction is fraudulent.
“We even look at the messages contained within the gift cards,” he said. “Fraudsters typically don’t put a lot of creative thought into these messages. Sometimes a manual review can elicit some pretty obvious signs of fraud.”
More tips for fighting ecommerce fraud
Stein also encouraged online merchants to revalidate payment methods of customers who have not shopped in a long time. In the interim, he said, criminals may have captured that person’s credit card information. Once they have it, they can use it to commit fraud.
Alter said it’s important for an online retailer’s fraud team to have all the information related to a transaction. Then, it should be kept on a single dashboard so they don’t waste time collecting data. That leaves them with more time to focus on making decisions.
And, she added, merchants should adjust their fraud-fighting defenses in several ways during the holiday season. That’s when the volume of website traffic and sales increase. Recommended steps include raising the thresholds for flagging a transaction as potentially risky and automatically accepting more purchases.
It’s also important, Alter said, to give the riskiest transactions the highest priority so analysts are sure to get to them.
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