Holiday Fraud: How to Protect Your Business During and After the Holidays

Sydney VaccaroFraud PreventionLeave a Comment

Holiday Fraud: How to Protect Your Business During and After the Holidays
A holiday fraud strategy should include preventing fraud from happening before the holidays and responding to fraud after the holidays.

Any merchant that has a seasonal sales boost during the holidays knows that preparation is vital for having a successful holiday season. To keep the revenue gained during the holiday rush, merchants should also be prepared to handle holiday fraud. Here is how merchants should prepare for fraud before and after the holidays.

Holiday Fraud Preparation

Front-end Fraud Checks

Front-end fraud filters are a tool used by merchants to help assess if a purchase is fraudulent. During the holiday rush, merchants may be tempted to lower their filter requirements to allow as many willing customers to purchase as possible. But merchants should stay still stay alert and try to prevent true fraud. True fraud disputes are not winnable for merchants. This means that when a fraudster successfully uses stolen credit card credentials, a merchant will receive an unwinnable dispute, a dispute fee, and possible loss of merchandise or services.

Instead of lessening the restrictions of the fraud filters, the merchant should analyze the previous holiday season's transactions. By tracking what purchases turned into true fraud disputes and which were valid can help merchants have the most accurate fraud filters.

Communication Between Departments

Another significant factor that will make fraud filters as accurate as possible is making sure departments are communicating with one another. For example, if the marketing team is targeting a new location with holiday marketing or they run a massive campaign where a high number of transactions will come in a short time frame, the fraud team will need to know. While these transactions will seem entirely reasonable for the marketing team if the fraud prevention team is unaware of the marketing efforts, the fraud filters may flag the incoming transactions as fraudulent.

Proper Staffing

An increase in transactions means merchants will need to increase transaction support. Merchants will need to grow the number of fraud analysts to handle manual reviews. This ensures that you’ll accept as many valid transactions as possible. The other type of transaction support that merchants may need to increase is customer service. By having fast and efficient customer service, merchants can improve customer experience and prevent both chargeback fraud and friendly fraud. If customer service is understaffed, it can cause customers to become frustrated with wait times or result in burnt-out staff members.

Operational Checks

Merchants can also take preventive measures to stop fraud by modifying and improving their operations. Merchants can make improvements to how they are communicating with the customers, make their return policy more flexible during the holiday season, make sure their merchant descriptor is easy to recognize, or any other improvements that can prevent confused or frustrated customers from disputing a charge instead of turning to the merchant for help.

After the Holidays Fraud Response

After the holiday rush is over, merchants still need to handle fraud proactively. While the pre-holiday preparation was aimed at preventing fraud and disputes from happening, the goal of post-holiday work is to regain your hard-earned revenue. Here is what merchants can do:

Responding to Disputes

The holiday rush brings an increase of transactions that naturally translates into more disputes to handle. Merchant must respond to a dispute within the allotted time frame, or else they will not have a chance to regain their revenue. To create a winning dispute response, merchants must provide the specific, compelling evidence based on the disputes reason code.

Why Respond?

While true fraud disputes (the ones that slip past your fraud filters) are not winnable, merchants can still win friendly fraud and chargeback fraud disputes.

Friendly Fraudsters

Friendly fraud is when cardholder mistakenly disputes a charge. This type of fraud can stem from simple forgetfulness, an unclear merchant descriptor, or a family member making unknown purchases. During the holidays, cardholders are making many purchases in a short time frame and shopping at places they usually wouldn't. Holiday shopping can create a perfect scenario for friendly fraud happen.

Chargeback Fraudsters

Chargeback fraud is when a cardholder maliciously disputes a charge in an attempt to get their money back while still retaining the goods or services. Holiday shopping can also spur chargeback fraudsters. For example, the cardholder didn't pay attention to the return policy and now can only get store credit, so they dispute the charge. Or they didn't stick to a budget with their holiday spending and have buyer’s remorse, so they are trying to get their money back.

Both friendly fraud and chargeback fraud disputes are winnable for merchants with a well-crafted dispute response. By making sure you have a large enough team that is equipped with the necessary tools to quickly and effectively to respond to disputes after the holidays will put you in the best position to regain the holiday revenue.