Deck the Halls and Defend the Data: A Retailer's Guide to Holiday Fraud Prevention

The holiday shopping season brings more than just increased sales. It also ushers in a wave of sophisticated fraud attempts that can leave retailers vulnerable. Last year's VISA warning about increased scam activity across both card-present (CP) and card-not-present (CNP) transactions was just the beginning. Now, with artificial intelligence making impersonation attacks more convincing and cybercriminals deploying increasingly creative schemes, traditional fraud prevention measures are showing their age.

The stakes have never been higher for retailers to protect both their bottom line and their customers' trust during the peak shopping season. Success requires moving beyond conventional safeguards to implement a truly comprehensive security strategy.

The Rise of ‘Friendly Fraud’

One of the most pressing concerns during the holiday period is the rise in "friendly fraud," where seemingly legitimate purchases result in disputed transactions post-delivery. This type of fraud increases significantly during the holiday season, as some customers dispute valid charges. Retailers can protect themselves by implementing address verification services (AVS), maintaining detailed proof of delivery records, and collecting comprehensive transaction data to support their cases in disputes.

Combating Account Takeover

Account takeover has emerged as another significant threat, with criminals increasingly targeting customer accounts. One common signal of this fraud is suspicious address changes. Modern prevention methods include implementing two-factor authentication for address changes and monitoring for unusual login patterns. Successful retailers are now building detailed customer behavior profiles that allow them to spot anomalies quickly, while also implementing systems to block suspicious IP addresses and unrecognized devices.

Managing BNPL Risks

The growing popularity of buy now, pay later (BNPL) services has created new opportunities for fraudsters. While these services offer valuable convenience to customers, they require careful management to prevent abuse. Successful fraud prevention in this area involves careful applicant vetting, consistent monitoring of purchasing patterns, and partnerships with PCI DSS-compliant BNPL providers. Particular attention should be paid to multiple purchases originating from the same device, as this often signals fraudulent activity.

Evolving Gift Card Threats

Gift card fraud has evolved considerably, with sophisticated AI-driven attacks becoming more common. Modern prevention requires regular monitoring of transaction patterns, implementing balance inquiry limits, and maintaining strong encryption protocols. Retailers should ensure their point-of-sale systems are updated with advanced security features to combat these increasingly sophisticated attacks.

Building Your Holiday Fraud Command Center

Success against sophisticated fraud requires strategy, not just tools. Rather than playing an endless game of whack-a-mole with fraudsters, smart retailers are taking a unified, data-driven approach to prevention.

The real power of modern fraud prevention lies in breaking down organizational walls. Too often, valuable customer intelligence sits isolated in marketing databases while fraud teams work with limited visibility. By bridging this gap, retailers can transform everyday customer behavior data into a powerful fraud detection system. Those familiar patterns of how legitimate customers browse, buy and interact become your first line of defense against imposters.

This isn't about implementing every security measure at once. Rather, it’s about building smart, strategic layers of protection. Start with foundational safeguards, then expand methodically. Think of it like decorating a Christmas tree: you need strong branches (basic protections) before adding the ornaments (advanced security features). Risk-based authentication can help maintain the frictionless shopping experience your customers expect while still guarding against fraud.

Remember, building a robust fraud prevention program is a journey, not a race. Focus first on the patterns that matter most: identifying suspicious behaviors, monitoring known risk indicators, and adapting your defenses as new threats emerge. This measured approach helps protect your business without creating unnecessary barriers for legitimate holiday shoppers.

Bill Bruno is the CEO of Celebrus, a provider of customer data and fraud prevention solutions.