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'Tis the season for giving...and for scamming!

Author: Serpil Hall


The holidays are a busy time for everyone, especially online retailers – but with increased traffic comes increased opportunities for fraud and scams. As a retailer, it's important to be aware of the increased risk of fraud during the holidays and take steps to protect your business. Here are some tips on how to prepare for holiday fraud and scams:

Know the types of fraud and scams to look out for

During the holidays, online shopping increases significantly, and unfortunately so does fraud. In a typical holiday shopping season, retailers must be extra vigilant for several types of fraud, including what’s known as "friendly fraud." There’s also an increase in "cybercrime," which is when criminals use technology to commit crimes such as identity theft, phishing, and hacking. Finally, payments fraud, especially BNPL, also rises significantly during the holidays. Be on the lookout for these types of fraud and scams so you can protect your business.

Friendly Fraud

This is when people make fraudulent claims and charge-backs against retailers, such as returning items they never purchased, or dishonestly claiming they never received goods.

Here are some steps retailers can take to prevent friendly fraud:

  1. Collect and store detailed order shipment and receipt data.
  2. Have an effective system to keep shipping/postage records on file.
  3. Document every touchpoint of the order process and the customer journey.
  4. Use tight measures to document proof that customers signed for packages.
  5. Ensure you receive clear billing descriptions.
  6. Apply AVS (Address Verification Services) checks to ensure the credit card billing address matches the address the card’s issuing bank has on file for the card.

Identity theft

A cybercriminal who steals personal information and uses it under false pretenses is committing identity theft. During the holidays, fraudsters take advantage of the high volume of transactions in hopes their activity won’t be caught in time to stop them. Retailers can help protect themselves and their customers by following best practices:

  1. Monitor transactions carefully and verify all important information during a transaction, such as shipping address, IP address, amount, and date. This helps keep track of transactions and reduces the chances of any important detail being altered without being noticed.
  2. Encrypt transactions and communications so the data can’t be manipulated or altered.
  3. Use strong authentication procedures to ensure the person logging in, or making a purchase, is actually who they say they are.
  4. Capitalize on behavioral biometrics to further authenticate/verify identity – telltale behaviors like mouse movements, touch pressure, and even swipe direction can mean the difference between accepting a fraudulent ID or catching it before the fraud is accomplished.
  5. Activate anomaly detection and link analysis to identify potential fraud signals.


BNPL (buy now, pay later) fraud is a growing problem for retailers, especially during the holiday season. In addition to using fake identities to create BNPL accounts, scammers take advantage of BNPL offers to make big purchases and then default on the payments, leaving the retailer stuck with the bill. There are a few things retailers can do to help prevent BNPL fraud:

  1. Carefully vet all BNPL applicants to make sure they're legitimate.
  2. BNPL fraudsters often use stolen or fake IDs, so be on the lookout for suspicious ID activity.
  3. Keep an eye out for red flags like excessive purchase amounts, multiple BNPL accounts in the same name, or ship-to addresses that don’t match the customer’s billing address.
  4. Make sure your BNPL providers are PCI DSS complaint to ensure customer data is properly protected and reduce the risk of data breaches that can enable identity theft.
  5. Be aware of common scams. BNPL fraudsters often try to return items they never purchased, so be sure to keep track of all returns and refunds.
  6. Set up fraud monitoring and alerts, to quickly identify and shut down any fraudulent activity.

Payment fraud

In retail, payment fraud is always top of mind during the busy holiday season. Not only is there an increase in sales during this time, but also an increase in payment fraud attempts. There are several steps retailers can take to prevent payment fraud and keep customers safe:

  1. Always use updated software, including point-of-sale systems and security updates on your website. This helps to protect against any potential breaches or vulnerabilities in your system.
  2. Stay up-to-date with current payment fraud trends and scams, such as phishing emails or counterfeit credit cards, and provide training for employees.
  3. Stay vigilant and monitor for unusual activity, such as multiple purchases from different locations within a short period of time, or changes to shipping address and not billing address.
  4. Take extra precaution with international or high-value purchases.
  5. Offer payment options that have built-in fraud prevention measures, such as virtual wallets or EMV chips.
  6. Require CVV (Card Verification Value) checks to confirm the customer has the card in their possession prior to making an online purchase

To fight fraud, retailers need to know their customers well. This means building a complete digital footprint using all digital interactions (transactional + non-transactional), both pre and post login. A layered fraud solution that provides a true 360-degree view of the customer is the best possible fraud prevention tool. By taking these precautions, retailers can help discourage scammers and ensure fraud doesn't ruin the holidays for themselves or their customers.

Don’t forget about the customer experience

Retailers must find the balance between fraud prevention and customer experience. According to the TransUnion 2022 Consumer Holiday Shopping Report, “…consumers increasingly expect online retailers to deliver safe and seamless shopping experiences as they have less patience for errors and inconvenience.”

Moving from fraud detection to fraud prevention enables retailers to intervene before the fraud occurs, creating a much more positive customer experience. It also helps to greatly reduce false positives by building an in-depth customer identity graph. In the same TransUnion report, consumers showed a willingness to accept additional protective measures when they feel the retailer is safeguarding their financial wellbeing. Most consumers would far rather a verification step than a fraudulent charge or worse, shutdown of their account. By using a platform fraud solution, retailers can enhance existing fraud technologies to lower false positives, reduce fraud, and deliver a frictionless customer experience.

The holidays are a wonderful time of year, but they're also a prime time for fraud and scams. As a retailer, it's important to be aware of the increased risk of fraud during the holidays and take steps to protect your business and your customers. By knowing the types of fraud and scams to look out for, implementing fraud monitoring and alerts, and maximizing the benefits of a fraud prevention platform, retailers can help keep themselves and their customers safe this holiday season.

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