Ecommerce Merchants: save yourself from holiday woes with smart data analysis

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With the holiday shopping season almost upon us, online merchants are in the final days of preparation for the Big Bang which it starts it off: Black Friday. The deals are announced and the ads are running. But hold on there – what’s your fraud prevention plan for the deluge of orders? If this holiday season turns out to be a smashing success, could you fully capitalize on it by avoiding the two biggest fraud screening Grinches: falsely declined orders and chargebacks from fraudulent orders which slipped through and got approved?

Chargebacks deal out a double measure of pain

First, there’s the returned purchase amount. Then there are the fees and penalties. That’s like bad fruitcake and a lump of coal in the stocking. On the other hand, when a legitimate order gets falsely declined, you lose out on revenue from that order, but very likely also any further business from that same customer. You’ve worked hard to fill your funnel, yet you lose out on plenty of revenue right before you reap the rewards. A fraud prevention workflow which integrates smart data analysis can boost your profits by both increasing your revenue and minimizing your losses.

Before going into a few tips your fraud prevention team can use this holiday season, let’s start with some general advice:

First, most merchants are far too risk averse during the holiday shopping season. Due to the fact that the number of legitimate online orders surge while fraudulent ones remain steady, the top holiday sales days (Black Friday, Cyber Monday, New Year’s Eve) are actually far safer than average shopping days.

Second, the fraud rate for returning customers is around half that of new customers. Whatever techniques and tech you can use for linking an order to a returning customer (IP address, email domain, name, device fingerprinting) can easily pay for itself, both in saving you from lost revenue from a false decline, but also in the time spent on manual review.

And finally, fraudsters are constantly adapting their methods and learning from past successes and failures. This means you must too. In, fact an adaptable card not present (CNP) fraud prevention system is far more effective than crude rules-based detection systems or blacklists.

Augment your staff with the latest tech

Our first tip regarding fraud prevention for ecommerce is to switch to a scalable, adaptable, and automated solution, if you’re not using one already. This will free you from the compromising tradeoffs of the three usual strategies of alleviating the bottleneck of a large order review queue: adopting an overly conservative approval process (exacerbating your rate of false declines), hiring temporary staff to manage the influx of orders (leading to large investments of time and money for their training and support), and reallocating your resources from other departments to manual order review – do you really want to pull people away from customer service to handle this?

Data formatting is key

Even if you do go down the automated route, there’s a good chance you’ll want to review some orders by in-house experts. Our second tip is to make their job much easier. Display the order data so that the most important or relevant information is at the top of the page. Limit clickthroughs by displaying data hierarchically on the page according to priority (this one’s a big time saver). Cluster-related details should be next to each other (e.g. show billing and shipping addresses comparatively) so that the crucial correlations between various data points is displayed logically.

Data at your defense

These two tips can help prevent chargebacks due to CNP fraud, but if you do get hit with one, it’s best to be prepared, so our last tip is to save all data related to each order. This includes all email or chat correspondences with the customer and digital shipping confirmations. An even better tip is to team up with a third party fraud prevention partner who is able to enrich your data by tapping into sources such as social media. The more data you have behind each order, the more likely you are to win chargeback disputes arising from so-called “friendly fraud”: illegitimate chargeback claims from customers who are afflicted with either buyer’s remorse or a desire to obtain free merchandise by claiming the product(s) never arrived.

Hopefully, we’ve given you enough advice and specific suggestions to make your spirits brighter this holiday season. By cutting losses from false declines and letting fewer fraudulent orders slip through and result in chargebacks, smart fraud prevention can put everyone in a more festive mood.

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