Sharpen Your Peak Season Fraud Management Strategies

September 27, 2018
Read time: 5 min
Cathy Hill
Cathy Hill
Cybersource | Sr. Director, Risk Certification

The fraud management challenges that come with peak season sales hardly change from year to year, but that doesn’t mean our approach should remain the same.

We can, and should, keep honing our strategies to make the season more successful. Read on for five effective ways to approach the rapidly approaching, peak-season surge.

Since you know your manual review rate will rise sharply, plan now


If your fraud management strategy requires manual review of orders, how will you review a much higher number, while also ensuring customer satisfaction? For example, if your manual review rate is 10 percent, are you prepared to manage 10 percent of all orders over Black Friday weekend? To make sure you’re ready, review the steps below to limit your manual intervention surge. If necessary, staff up well ahead of time so that you have enough people to manage the increase in orders requiring review.

Reconsider your fraud tolerance


It may be time to reexamine your target fraud rate to ensure that it’s allowing you to provide optimal experiences and help maximize revenue. For example, if your fraud loss tolerance is so low that your tight screening is turning away good customers (and upsetting them), the long-term cost of that super-low fraud rate may be too high—especially when you’re dealing with massive quantities of orders.

The average fraud rate is 0.9 percent, but some merchants get upset about half that rate. It’s important to balance your strategy; we aren’t looking for zero fraud. The goal is to balance conversion rates with operational costs. We like to refer to this balance as a triangle between minimizing fraud loss, reducing operational costs, and maximizing revenue. If you can accept a little bit more fraud loss in exchange for more revenue and a better customer experience over the holidays, it’s probably worth it.

Deploy screening that favors your good customers


One example of overly conservative fraud screening that stems from a low fraud tolerance is when companies reject orders because the shipping address doesn’t match the billing address on file with the card issuer. Especially during peak season, we recommend that merchants apply a lighter screening to these known customers.

This is important year-round since so many move and forget to update their payment information, but especially during the holidays when so many people are paying for gifts and shipping them to recipients, it really pays to lighten this particular screening tool. Take this lens to your entire fraud strategy and make sure that you’re applying a lighter filter to repeat customers.

Make sure you’re not marketing to fraudsters


It’s important to revisit your database to ensure that you’re not sending emails to people who have already completed fraudulent orders. Having an online presence is important, but too many merchants fail to regularly update their databases. The result is that a large percentage of companies are actually marketing to fraudsters, inviting them to return and complete more fraudulent transactions. Scrub your marketing database regularly to ensure you aren’t inviting customers on your negative list to come back and shop.

Hire enough people to process returns and exchanges


Too often, while merchants are focused on getting orders out the door, they don’t think enough about whether they have sufficient staff to process returns and exchanges after the holiday season. Delays in processing returns and exchanges can result in chargebacks, so make sure you’re equipped to process them efficiently.

Contact us with questions about handling peak season order volume.