How to avoid chargebacks after the holiday shopping season
Online fraud is now an everyday occurrence, but it’s no secret the hectic holiday season is prime time for cyber thieves looking to increase their activity. Fraudsters are exceptionally active during this time of year, because they know they can hide in the high volume of orders and transactions and blend in with the crowd. Whilst fraud activity peaks during Black Friday and Cyber Monday, the most active fraud day will be Christmas Eve when fraudsters target gift cards and other last minute gifts.
A study from Juniper Research suggests that online fraudulent transactions will hit £17.6bn in 2020, up from £7.4bn in 2016. E-retail is likely to account for 65% of fraud, or £11.4bn by 2020, with electronic gift cards as one of the most vulnerable areas. In addition, ACI Worldwide reports that online fraud attempts in Europe are higher than those in North America, South America and Asia.
In the UK, hoax promotions have been popping up all over social media, text, and email. Scammers are creating fraudulent e-gift cards and vouchers, supposedly from some of the nation’s biggest supermarkets and high street stores, to trick people into sharing personal data or install malicious software.
With safer chip-enabled debit and credit cards being introduced, fraud has shifted significantly to e-gift cards in recent years. E-gift cards are the new favourite target for fraud (3 out of 4 consumers buy gift cards during holidays), and the most attacked product category between Black Friday and Christmas. They’re simple to purchase, simple to convert to cash, and virtually untraceable.
Criminals steal balances by using a large number of bots to extract money from e-gift cards. The bots will try millions of gift card numbers on merchant sites until they find one with a balance. Another form of this attack is buying a new card with a stolen credit card number. Hackers can digitally sell those cards on gift card resale websites and take the balance in cash.
With the surge of holiday orders, the chances of merchants risking a cancellation of a legitimate order or getting chargebacks are high. The time it takes to notify a merchant of a chargeback could span several weeks. By the time e-gift card chargebacks get reported to the merchant, it’s 2018.
Merchants should, therefore, take every precaution to prevent e-gift card fraud as they head into peak holiday shopping season. We recommend taking these extra measures to prevent costly chargebacks and lost sales:
Best Practices to Fight E-Gift Card Fraud
- Design multiple checkout stages. Put obstacles and checks in place throughout the purchase path.
- Use non-human detection tools. Block and/or detect bots by using CAPTCHA that reveal non-human contact.
- Require account registration details. Fraudsters will abandon your site for easier targets if you slow them down.
- Build in two-stage password authentication. Ask for a second form of confirmation, by email or SMS text message.
- Deploy multiple fraud screening technologies. Screen multiple dimensions of every transaction with several technologies and analytics. The more barriers fraudsters have to overcome, the harder it is for them to hack the system.
- Be device neutral. Use the same security approach no matter how or from where the transaction originates.
- Clearly state your policies. Make your policies for customer refunds, returns, chargebacks, and stolen e-gift cards easy to find on your website.