Fraud Strategies to Help Capture More Revenue During Peak Season

October 30, 2018
Read time: 7 min
Cathy Hill
Cathy Hill
Cybersource | Sr. Director, Risk Certification

Peak shopping season is right around the corner, and that means getting your ducks in a row now, because once the orders start piling in, you’re not going to have the time or resources to test, revise and adjust your operations.

Chances are, you already have a list of priorities you are attending to, including staffing to review and fulfill orders, as well as refining your website and other sales channels to handle the influx of orders.

There’s one more area you may want to revisit as you gear up for peak season: fine-tuning your fraud tolerance to prioritize revenue and your customers’ experience.

Achieving balance


When determining your fraud tolerance, the goal isn’t to push your fraud rate to zero. Doing so might reduce chargebacks, but it also penalizes legitimate customers who get falsely flagged as fraudulent purchasers, driving them and their revenue away. The resulting loss in revenue can outpace the operating costs associated with mitigating fraud. Furthermore, chasing a too-low fraud rate can deprive your business of critical insights into what separates fraudulent from legitimate purchases, making it difficult to improve your screening process moving forward.

The ultimate goal is a balance that reduces fraud loss, keeps operating costs as low as possible and maximizes revenue. Where exactly that balance point falls is obviously going to vary from business to business, sector to sector and geography to geography.

Looking across eCommerce as a whole, the average fraud loss rate is 0.9 percent. And the average rejection rate—purchases rejected due to suspected fraud—is 2.9 percent. While many of those rejected purchases are going to be fraudulent, a significant number also will be legitimate purchases falsely identified as fraudulent. These false positives have an immediate negative impact on revenue, and can have rollover effects in depressing customer loyalty, retention and future sales. Among merchants who attempt to track them, it is estimated that up to 10 percent of rejected orders are, in fact, genuine.

Looking at the bigger picture


Rejecting legitimate purchases and upsetting your customers are things you want to avoid, even during quieter times of year. Cart abandonment, customer loss and negative word-of-mouth can cost substantially more in the long run than preventing a small amount more fraud. This is even more the case during peak season, when you’re inundated with orders. If you can accept a slightly higher fraud loss rate in exchange for more revenue and a better experience, particularly for your best customers, it’s probably worth it.

Tactics to consider


Loosening your fraud net to maximize sales and deliver a better experience to your customers is all well and good, but how do you go about doing it? The answer is going to differ for every business, which has its own dynamics and considerations to take into account. However, here are a few tactics you can incorporate as you lean toward maximizing revenue and customer experience:

Prioritize Identity Over Destination – Account takeover is a growing concern, and monitoring shipping addresses is one common way to detect and counter various forms of fraud. During peak season, however, customers are often purchasing gifts and shipping to unfamiliar locations, which can trigger false positives. Consider loosening shipping address screening and focus on verifying identity over destination.

Clear the Path for Your Highest Value Customers – Look for ways to ease fraud restrictions on your known customers, repeat customers, and items that rarely ping for fraud. Whitelisting those transactions you know are legitimate, or very likely to be so, can help reduce false positives and also allow your manual review team to more tightly focus their efforts during a busy season.

Embrace Risk as an R&D Tool – It’s tempting to think of any chargeback as a bad thing, but that can be a shortsighted view. If you’re never getting chargebacks, it’s a sign that your fraud tripwire is too sensitive. It doesn’t have the inputs to learn which flagged orders are actually legitimate, and this can impact how it evolves and optimizes. By embracing risk as an opportunity to gather intelligence, you can better identify the traits that separate fraudulent from legitimate purchases, so you can better refine your fraud management operations moving forward.

Play it Again, Sam – One more powerful way to find the sweet spot that maximizes your revenue is to utilize Cybersource Decision Manager Replay. By testing different combinations of fraud rules against historical transaction data, you can get a sense of how tweaking specific rules changes your exposure to not only fraud, but also potential false positives and lost revenue.

Changing the Mindset


In business, it’s tempting to view any form of risk as something to be minimized, if not stamped out entirely. Such a defensive posture can limit your exposure to fraud, but conversely it can limit your opportunities to improve conversion rates and reinforce customer loyalty. By striking the right balance, and embracing the right amount of risk, you can capture more sales and improve customer experience during the most critical shopping period of the year.

Want to learn more about how you can best position your business for peak season? Explore our resources.