The pandemic sparked changes in shopping trends as consumers flocked to digital channels. We discuss four effects of this shift that fraud managers should act on.
Increased awareness of consumer rights drives first-party fraud
Over the past year or so, many shoppers have become more aware of their rights as consumers. In many cases they will have learned about the concept of chargebacks from consumer-focused money-saving websites, TV shows and press articles.
Although many consumers will pursue chargebacks for legitimate reasons, others may seize the opportunity to carry out 'friendly fraud' (also known as 'first-party fraud'). This is when a consumer:
- Buys a product or service online using their credit card.
- Subsequently contacts their card issuer to dispute the charge—claiming, for example, non-delivery of goods, a non-processed refund, or other issue.
There are many reasons why shoppers may carry out friendly fraud. For instance, they may be under financial pressure, or experiencing 'buyer's remorse' over an impulse purchase made online.
To help keep chargeback rates low, we recommend that merchants:
- Ensure their process for genuine customer refunds is smooth and straightforward, to reduce the level of disputes.
- Form a dedicated team to investigate potential cases of friendly fraud, and distinguish them with a separate code in their fraud screening solution.
Merchants should also be alert to the emergence of professional refunders, who carry out friendly and first-party fraud on behalf of customers.
Fraudsters may take advantage of BOPIS, if security controls are relaxed
During pandemic-related restrictions, many stores introduced or ramped up buy online, pick up in store (BOPIS) and curbside pickup choices. Even as retail re-opens, these options remain popular with consumers who aren't ready to shop in store, or simply like the speed and convenience they offer.
Of course, fraudsters are opportunistic: they'll take advantage of BOPIS and curbside pickup if they believe a business may have relaxed its in-store screening or other security controls in order to enhance the customer experience, or more easily maintain social distancing.
We advise merchants to protect against fraud in this context by maintaining or even strengthening their security controls. For example:
- At the pickup point:
- Retain security measures, such as requiring photo ID and presentation of the card that was used to buy the goods.
- Train your staff to recognize and flag suspicious behavior.
- Implement CCTV surveillance.
- Use your fraud screening solution to help spot anomalies that may indicate fraud, such as multiple pickup locations linked to a single identity or device fingerprint.
As consumers continue to shop online, account origination fraud rises
The shift to online shopping has led to a large numbers of new user accounts being set up—but it's possible not all of them are genuine. Fraudsters may take the opportunity to create fake accounts in the belief that businesses will be less likely to spot them in among a sea of other new accounts. Fraudsters will then use those fake accounts for various purposes, such as card testing or abuse of promotions and trial offers.
The rise in fake account creation—known as 'account origination fraud'—means that businesses should consider fraud screening at the account creation stage of the customer journey, to improve their chances of spotting and averting this type of fraud.
To help you do this, we recommend making a solution like Cybersource Account Takeover Protection part of your fraud management approach. Using a range of techniques, including analysis of behavioral characteristics, our solution monitors account events (creation, login and update) to help you identify account origination fraud, as well as protect genuine user accounts from takeover by fraudsters.
Shifting consumer shopping trends cause a re-evaluation of high-risk product lines
Periods of pandemic-related restrictions inevitably led to changes in consumers' shopping habits. Sales of goods like bikes, home exercise equipment, home office equipment, and online education and entertainment products rose sharply—and fraudsters took advantage.
To keep pace with these changing trends, merchants should:
- Review their high-risk product lines, which may need updating with items that wouldn't previously have made the list.
- Track new high-risk products for fraud using custom lists based on the highest associated fraud ratios over the preceding 90-day period.
Businesses who work with Cybersource can benefit from the expertise of our Managed Risk Analysts as they adjust their fraud strategies in line with evolving shopping trends and fraudster behavior.