3 Fraud Prevention Strategies for Retailers to Consider

Over the next four years, global card transactions are expected to reach more than 1 trillion. That’s a whopping 43 percent increase from 2024, which saw 776 billion transactions. Furthermore, purchase volume on major cards like American Express, Discover, and Mastercard reached $10.773 trillion in 2024, a number likely to only increase over time.

The next obvious question is: Where will consumers be shopping with their cards?

They now have thousands of online retailers to choose from at their fingertips. As a result, securing wallet share and customer lifetime value (CLTV) has never been more important (and difficult) for retailers.

The challenge is how do retailers strike a balance between offering superior customer experience without introducing risk of fraud or abuse. Let’s take a look at what online retailers should keep in mind to get the best of both worlds.

1. Fixing Online Friction

Friction during the online shopping process can make or break a sale. Have you ever been so frustrated with a complex checkout process that you just gave up? You’re not alone: More than three-quarters (78 percent) of U.S. consumers are likely to abandon their online shopping carts if the process is too difficult or time consuming.

Securing wallet share in the highly competitive online retail market requires businesses to offer a fast and hassle-free shopping experience. Unfortunately, many online retailers will intentionally add friction to stop fraudsters from getting through checkout. While this is a sure-fire way to stop fraud, it’s also a great way to turn away legitimate customers.

So, what’s a retailer to do? By knowing the identity behind every transaction — whether a loyal customer, newcomer or fraudster — retailers can intelligently apply friction to untrustworthy shoppers while offering a seamless experience to their good customers.

Related story: Staying Secure: Making Returns Friction-Free Year-Round

2. Prioritizing Perks

With so many retailers to choose from, it’s no surprise that many consumers are enticed by loyalty programs and perks. In fact, 72 percent agree that loyalty programs influence where they shop. But consumers aren’t the only ones eyeing these programs; bad actors actively target online accounts with stored points and rewards in order to steal them. These heists (or account takeovers) often go unnoticed by retailers and their customers until it’s too late.

Sought after perks also include hassle-free returns. Eighty-nine percent of consumers said that return policies are important in deciding where to shop. Unfortunately, these policies are often abused, leading to a rise in wardrobing (i.e., using and then returning merchandise) and item-not-received scams. This ruse has become a billion-dollar problem for retailers. But merchants are stuck — if they apply policies that are too strict, they create a poor customer experience. However, policies that are too generous result in a significant revenue hit and lost profit margins.

While many retailers may be quick to pull back on loyalty programs and perks in an effort to stop fraud and abuse, they’re doing so at the expense of millions of good customers. Businesses can continue to invest in these programs as a meaningful driver of CLTV, so long as they put the proper security controls in place:

• Preventing account takeovers requires businesses to have real-time monitoring and detection at sign-in and at other critical points before a transaction is initiated. This will allow them to pinpoint unusual profile modifications, loyalty point withdrawals and transfers before it’s too late.
• To stop policy abuse, retailers need visibility into the identities behind every transaction in order to detect, flag and block repeat abusers at checkout and post-purchase. This ensures they can stop abuse at the source while loyal customers always get a positive experience.

3. Leaning Into Consumer Preferences

It’s no secret that each generation has different preferences when it comes to shopping. However, if brands don’t keep up with these expectations, it can have major impacts. According to estimates from Qualtrics, failing to meet customer experience demands could cost companies up to $3.8 trillion in 2025.

Payment preferences are a huge part of customer experience. Alternative payment methods like digital wallets and buy now, pay later (BNPL) are growing in popularity, especially among younger shoppers. But convenience brings complexity. Treating digital wallet payments exactly like standard card-not-present transactions can backfire on retailers.

For example, traditional fraud checks may rely on transaction information that a retailer isn’t getting from digital wallets. For example, a single physical card can be added to up to nine Apple Pay devices. This means retailers need new ways to spot patterns, like how often the same card is used across multiple wallets, to identify and block fraudulent purchases.

Prioritizing the security of these payment methods will help businesses offer a modern, convenient checkout that keeps customers happy and the bottom line healthy.

Customer experience and expectations are continuously evolving, and something that works today may not work next year or even next month. By focusing on core strategies like minimizing friction, prioritizing perks and leaning into consumer preferences, brands will be set up for long-term success.

Doriel Abrahams is the principal technologist at Forter, the leader in Identity Intelligence for digital commerce.