This is a guest blog post by Riskified, a Demandware Certified Partner.
The calendar still says it’s summer, but it won’t be long before consumers start the mad rush of holiday shopping. That’s why now is the time for retailers to prepare their ecommerce teams and systems for the oncoming spike in orders – and the heightened risk of fraud.
Merchants rely on scalable solutions to ensure their business can handle seasonal spikes. Payment processors, shipping vendors and click advertising easily scale to support the increase in volume during the holidays. Most fraud prevention tools, however, are not scalable on-demand, leading to backlogs in the manual review queue and ultimately resulting in shipping delays and a less than optimal customer experience.
How can you start preparing fraud operations for the holidays?
Focus on approvals, not chargebacks. Chargebacks are the most visible cost of fraud, and fraud teams and systems are built to prevent them. A risk-averse fraud prevention strategy, while intuitive, creates a paradox: the orders that merchants decline due to weak indicators of risk also hold more potential revenue value than the actual cost of chargebacks!
Instead of focusing on avoiding chargebacks, your fraud team should aim to approve as many good orders as possible. When it comes to manual review guidelines, it is common practice that only senior analysts are permitted to approve extremely high value orders. However, many merchants allow anyone on the fraud team to decline transactions. We recommend setting limits to declines. It’s best practice to have a senior analyst review the orders junior analysts have planned to decline. This will allow inexperienced team members to avoid false positive declines and will ensure you don’t turn away good customers.
Align with marketing. Your marketing team is probably already planning this holiday season’s promotions and ad campaigns. They wouldn’t want to invest time, effort and budgets in new markets only to have orders declined due to fear of fraud. Since marketing campaigns will affect who arrives at your site, sync with your marketing team, learn which markets will be targeted and what sales and promotions are being planned.
Based on the input from marketing, you may want to research data sources and social networks in new countries and markets. You should also be sure to schedule fraud team shifts to cover peak buying time in the target markets, even if time zone differences mean you need to adjust work schedules. Knowing where your marketing team is sharing special holiday promo codes and with whom will allow you to determine if the codes are a positive indicator. Terms of your holiday sales and promotions may also affect the mix of shopping cart items, average order value, shipping costs and other factors that are worth taking into consideration as part of the fraud review.
Prepare to handle more mobile transactions. Investment firm Janney Capital Markets estimated that when mobile transactions are factored in, the year-over-year growth in online sales last holiday season was nearly 18%. And smartphone-based transactions continue to increase. However, despite the growing importance of mobile shopping, less than 50% of merchants surveyed in MRC’s 2015 Global Fraud Survey track fraud separately by mobile channel.
If you are selling via mobile, we highly recommend incorporating the data unique to this channel into your fraud management systems or order review process. GPS location, mobile carrier info, and advanced behavioral analytics can all be used to inform your decisions and boost your fraud detection accuracy. Preparing your fraud protocol for the 2015 holiday season may mean finding new vendors that can handle mobile specific orders or updating the training for your manual review team.
Take action now. There is still time to get ready for the 2015 holiday rush, but you should take action now. If you want to integrate a new fraud tool, data source, or solution provider, do your research and implement these solutions soon, especially if your company typically institutes a code freeze in the fourth quarter.
Also, take advantage of the extra time during the summer to update your fraud management strategy. Look at your historical transaction data to identify positive indicators that can help drive approvals. Talk with your fraud team and work together to devise better guidelines to improve efficiency and boost performance.
There is a wealth of resources available to you. Riskified hosted a 4-part webinar series focused on preparing ecommerce fraud operations for the holiday rush. Sign up now to register and learn more!