How To Avoid Squandering The Holiday Bump To Fraud With Signifyd
In the world of retail, nothing about the holiday season is normal. And in the post-COVID world the anomalies in consumer behavior and order characteristics are only going to multiply.
Seasoned merchants prepare all year for the holiday rush. They consider strategy around merchandising, inventory, promotions and returns. And the most successful also realize the holiday season is the ideal time to reinforce their fraud and risk management strategies in ways that will serve them all year.
Just think about holiday shopping behavior and its impact on fraud protection practices. The average holiday season shopper sends gifts to 16 different people, Signifyd data shows. That’s 16 different shipping addresses and names — and they’re likely names and addresses that a merchant hasn’t seen before.
Moreover, retailers this season will be seeing a lot of new shoppers — consumers for whom they have no order history. In fact, Signifyd’s Ecommerce Pulse data found that the number of shoppers who had never or rarely shopped online was 32.4% higher in 2020 than it was in 2019 — due to COVID-19 and the heightened attractiveness of online shopping. All indications are that cohort will continue to shop online.
Order values are likely to be higher. Some shoppers might include the same item several times in a single order. Think of a go-to gift for distributing at the office or in the neighborhood or among relatives.
Consumers are more likely to request expedited shipping in an effort to make sure a gift arrives in time. And merchants might find that familiar customers are suddenly connected to unfamiliar credit card accounts. Some consumers in the holiday season turn to little-used, secondary credit cards, either to balance their post-holiday debt load or to hide purchases from gift recipients who share living spaces and bill-paying duties.
All fairly understandable behavior during the holiday season — and all red flags indicating a potentially fraudulent order. Add in that manual fraud review teams can be stretched thin and all the elements are in place for a phenomenally disappointing season for merchants when it comes to sales.
Why? Given the difficulty in manually sorting good orders from fraudulent ones in the holiday season and the need to make decisions quickly, fraud review teams can grow overly conservative and decide the safer bet is to decline an order. When a legitimate order is declined, the merchant loses the immediate sale and it might lose a customer for life. Few things are more insulting to a loyal customer than to have an order declined for suspected fraud. Nearly two-thirds of consumers in a Signifyd survey said having an order declined for no good reason was enough to cause them to stop shopping with that merchant.
So, what’s a merchant to do? We have some suggestions:
- Get ready — like yesterday: Remember that just as the holiday season speeds up and scales up your marketing, merchandising, fulfillment and customer service, it also speeds up fraudulent orders. Gear up early to protect yourself just as you gear up for the increased orders the holidays bring.
- Trust your gut: If the order you’re reviewing were a slam-dunk, safe bet, you wouldn’t be reviewing it. Many orders come with wrinkles, but that doesn’t mean a fraudster is behind it. And the last thing you want to do is decline an order placed by a legitimate customer. (“How the Retailer Stole Christmas,” anyone?) Ask yourself: Can you craft a narrative — based on all the history and data available — that explains the unusual set of circumstances that has come together in a particular order? If you can, there is a high likelihood that you’re looking at a good order.
The holiday season doesn’t have to be a blur of unusual-looking orders and a mad scramble to decide whether or not to ship them. Instead, early planning and building a strategy that recognizes and reacts to the distinctive nature of fraud during the holiday season can ensure that you, as a retailer, realize the potential that the season brings.