In the holiday shopping season, there are a few, very intense days for retailers: namely Black Friday, and Cyber Monday. They are also, not coincidentally, two of the heaviest days for fraud prevention teams.
In the rush to earn as much revenue as possible during these days and the rest of the season, many online merchants fall back on excessively strict and blunt tools like blacklists. Though crude and guaranteed to mistakenly reject many legitimate customers, they are fast and thus can relieve pressure off of the analysts who are tasked with manual order review under a crushing tsunami of incoming orders. Although minimizing losses due to charge-backs is a necessary goal during this and other times of the year, these inadequate tools can incur even greater losses by turning away good revenue.
Safety in numbers
One big reason why is the fact that the percentage of all online orders which are fraudulent actually significantly decreases during the whole holiday season and on these high-volume shopping days in particular. There’s essentially “fraudster dilution” at work here: the absolute number of fraudulent orders remains roughly the same, but the huge influx of legitimate shoppers during this time further diminishes the already small percentage of fraud.
According to ecommerce fraud prevention vendor Riskified, adopting an excessively risk-averse card not present (CNP) fraud prevention mindset leads directly to lost revenue. Why? Because “solutions” like blacklists and other primitive automated solutions are much more likely to reject real customers than thwart fraudsters due to this dilution effect during Black Friday and Cyber Monday.
One for the money
But there’s another make-or-break ecommerce day which dwarfs both of them, although many consumers in the US have never heard of it: Single’s Day (November 11th), and it too can teach retailers valuable lessons about preventing ecommerce fraud.
A newcomer to the ecommerce calendar, Single’s Day is a big deal in China and originally started as a sort of anti-Valentine’s Day. Unlike Christmas which traditionally focuses on giving gifts to other people, Single’s Day is all about shopping for yourself. In fact, the date is “11/11” –solitary one’s all the way through. The band Three Dog Night may have been correct in singing that one is the loneliest number, but Single’s Day makes it also the most lucrative, since this year’s haul for Chinese ecommerce company Alibaba was $25 billion, more than both Black Friday and Cyber Monday.
Will Single’s Day catch on in the US like it has in China? There’s a good chance it will, given the many inherit problems for retailers (especially brick and mortar ones) which the adoption of Single’s Day would help solve.
Speaking of singles, there are some important things to know about single item carts, regardless of which day it is. For starters, single item orders are common for legitimate orders of consumer electronics products and cameras, which makes sense (what would a person gain by buying two Oculus Rifts?).
On the other hand, carts with single items of digital goods (like digital gift cards) are more likely to be fraudulent than carts with a single physical item. This actually highlights a common modis operandi of fraudsters: make a simple, quick purchase of a high-value item that can be easily resold on secondary markets. Single item carts of digital goods meet all those requirements.
When it comes to luxury fashion items, single item carts are safer than multiple item carts. The logic here is the same as with consumer electronics: legitimate consumers can only use (and afford) one of these items at a time. As the character Peter Gibbons in the movie OfficeSpace put it so eloquently, “What am I gonna do with 40 subscriptions to Vibe”. Fraudsters, however, are shopping with free money and don’t intend on actually consuming what they buy. They can make a nice profit from reselling each one of those 40 subscriptions.
The cost of a single assumption
Being aware of facts like these can help prevent your fraud prevention team from making wrong and costly assumptions about single item carts during crucial days like Black Friday, Cyber Monday, and even Single’s Day. Being informed by real data about CNP fraud is the first step to fewer falsely declined orders as well as lower rates of chargebacks.