'Tis the Season for Greater Fraud Protection

The holiday season beckons eager shoppers in search of the ideal year-end deals. It's a period synonymous with joyous celebrations, one that merchants eagerly await in anticipation of the revenue windfall it promises. Yet, amidst this atmosphere of prosperity, a lesser-discussed narrative unfolds: the intricate challenges posed by fraud and chargebacks. As 2023 draws to its conclusion, experts forecast an unprecedented transformation in the retail landscape, emphasizing the imperative need for merchants to grasp and address these emerging complexities.

With 2023’s end in sight, an exhilarating milestone awaits the retail sector: an anticipated volume growth of a whopping 100 percent. Such meteoric growth, though lucrative, brings with it an array of intricacies. A deep dive into TransUnion’s data provides clarity: digital fraud attempts, especially during the shopping window spanning Thanksgiving to Cyber Monday in the previous year, skyrocketed by nearly a staggering 130 percent for U.S.-based transactions.

So, what's fueling this surge? Look no further than the dynamic digital realm, burgeoning with state-of-the-art payment solutions, artificial intelligence-orchestrated sales tools, and the widespread adoption of digital wallets. While these innovations promise enhanced customer experiences and operational efficiency, they inadvertently thrust merchants into new terrains teeming with fraud risks.

Another alarming trend is the rise in CNP (card not present) transactions, a byproduct of the global e-commerce renaissance. Time and again, these transactions have been soft targets for malicious entities. As the scales tilt towards online shopping, especially during festive times, the responsibility squarely falls on merchants to bolster their defenses. Data reinforces this need, spotlighting the surge in chargebacks in the telecommunication and retail domains during 2021 and 2022’s holiday seasons. A significant catalyst behind this trend is the extended 120-day window accorded to cardholders for disputing transactions. This leniency often extends the financial aftermath of holiday chargebacks well into the following year.

Additionally, the meteoric rise of online shopping, especially during holiday seasons, exerts significant pressure on merchant systems. Without timely upgrades and optimizations, these systems can falter, becoming breeding grounds for potential fraud.

For merchants to successfully navigate this labyrinth, a robust and adaptive strategy is paramount. A fortified verification system, specially tailored for CNP transactions, serves as an effective bulwark against fraud. The integration of advanced tools, ranging from CVV checks to two-factor authentication and the Address Verification Service (AVS), can be instrumental.

Furthermore, crystal-clear communication, encompassing every facet from product specifications to delivery timelines, can preemptively quell many customer reservations, thereby curtailing chargebacks. In the ever-evolving digital ecosystem, agility in conflict resolution, harnessing AI’s power for real-time transaction surveillance, and imparting comprehensive training to customer service personnel are pivotal. Lastly, the importance of transparency, especially concerning recurring charges and lucid return policies, is irrefutable.

Overall, the holiday season, while offering a treasure trove of opportunities, also presents a slew of challenges for merchants. Yet, with a harmonious blend of technological ingenuity, customer focus, and proactive measures, these challenges can be transformed into stepping stones towards success. With this, well-prepared merchants can confidently stride into the festive season, ensuring a symphony of joy, customer satisfaction and robust financial health.

Damo Sampathkumar is chief product officer and general manager, India operations at Chargeback Gurus, the No. 1 provider of chargeback analytics and chargeback expertise.