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What’s Worse than Coal in your Stocking? High Holiday Fraud & Chargeback Rates

posted on: Fri Sep 08 2017

A new report from eMarketer shows that sales for the 2017 holiday season are expected to increase 15.8 percent from last year. We know from our recent survey that retailers are already behind when it comes to fully protecting their mobile offerings. Factor in the additional negative effects of post-holiday season chargebacks, and the stage is set for merchants to be as disappointed as a child with a lump of coal. Holiday Cash

Chargebacks are a huge issue for merchants after a busy holiday retail season. And many merchants won’t know if they were victims of higher fraud during the holiday season until the end of Q1. By the time chargebacks get fully reported for the 2017 holiday season, merchants are 60-90 days or more down the road. Not only will you have missed the chance to stop fraud, but an audit to identify the cause of that fraud will be expensive and difficult. In fact, it may be impossible to learn enough from those aged transactions to prevent a future attack by the same methods.

Furthermore, the lag in chargeback reporting means your financial reports will show a distorted picture of your company’s performance. Those great sales and profits you thought you had in December could actually turn out to be ugly losses in February, March, and April and set you back in 2018.

Retailers can prevent being susceptible to fraud and losses due to chargebacks by adopting solutions that evolve faster than fraudsters. Here are essential tips for curbing chargebacks and remaining fraud-free throughout the busy holiday retail season:

  • Identify the type of mobile device being used. The first rule is the most simple, and one that all merchants should already be able to determine. iPhones, iPads, Android devices, etc. all have different fraud profiles. Knowing the type of device allows you to screen accordingly.
  • Speed is king. Fraud systems need to react as quick as possible to limit delays for the customer. Kount’s solution provides an easy-to-use interface and is friction-free during the checkout process, reducing manual reviews and chargebacks all in less than 300 milliseconds.
  • Maximize the use of AI. In order to truly capitalize on all that AI and Machine Learning have to offer, fraud solutions must implement a combination of four pillars, which Kount has dubbed Real Intelligence: patented, proprietary technology, vast amounts of data, AI to make sense of all of that data and to identify anomalies, and finally, human intelligence. AI by itself is not enough – the key is the addition of the human element to calculate specific tolerance and risk levels for each specific business to provide real intelligence for retailers.
  • Reduce Manual Reviews. Manual review of orders should be a last line of defense when fighting online fraud. The process is slow, resource intensive, and not scalable for company growth. In addition, making your customer wait for approvals can cost you sales and brand reputation. Automating the transaction review process can eliminate costs and speed up order acceptance while maintaining a high-quality customer experience. With Kount, businesses can reduce the time for a manual review by 90%.
  • Use Order Linking and Personas. Capabilities like Order Linking and Personas use hundreds of variables to construct a definitive link to online purchase behavior—either directly or indirectly—to help reveal fraudulent activity. How does it work? Kount’s patented technologies such as Dynamic Scoring™, Multi-Layer Device Fingerprinting™, and Proxy Piercer first assess over 200 variables and report in real-time on potential risks. When these variables are compiled and evaluated, a Persona is created. Examples of attributes that make up a Kount Persona are:
    1. The number of credit cards linked to the Persona. A single Persona may be associated with dozens of credit card numbers issued to different individuals that have been used to make purchases within a short time span.
    2. The number of email addresses associated with a Persona making a purchase.
    3. The actual location of the individual device making the purchase as determined through Proxy Piercer technology.
    4. Discrepancies in the customers self-divulged information and actual information as determined by Multi-Layer Device Fingerprinting information.
  • Recognize if the phone number being used is a forwarded number. Fraudsters forward calls from a stolen or compromised account to their own phone.
  • Optimize rules. Every business is different and there is no universal setting for rules within your fraud platform. Using Kount, businesses can uncover hidden insights and optimize performance of their fraud platform. After reviewing specific business goals and objectives, merchants should make sure their fraud platform conducts an analysis of currently active rules and their overall effectiveness to best make recommendations, along with an assessment of future performance gains.

Stick with these tips and enjoy the upcoming holiday season without fear of ugly losses due to fraud. To learn more, check out our eBook "Beat Those Post Holiday Chargeback Blues".

Ebook: Beat Those Post-Holiday Chargeback Blues