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Blog / Fraud Analytics
Ecommerce this Christmas will be record-breaking. Struggling merchants push for miraculous holiday sales while others prepare for overwhelming order volumes - fraud prevention may not be the priority, but it shouldn’t be overlooked this year.
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Christmas 2020 will be different. Instead of coal in your stocking, you might find a novelty face-mask and hand sanitizer. And with many elves still furloughed, Santa is relying on Amazon next-day delivery drivers to help, as it is set to be the busiest holiday for online retail in history.
With lockdown restrictions impacting many countries across the world, millions of customers are doing their Christmas shopping online. And as physical stores suffer from reduced footfall and insufficient trading time before Christmas, ecommerce is taking on the extra load.
As online merchants turn their attention to boosting sales and meeting demands, fraud risks could easily be ignored - but if fraud is left unchecked this holiday it could push struggling businesses over the edge.
It’s unclear whether total holiday retail sales will increase or decrease from last year overall, but one thing is certain: ecommerce will skyrocket.
Covid caused a huge increase in ecommerce volumes worldwide. In April 2020, a third of the world’s population experienced some form of coronavirus lockdown, and in the UK, online retail order volumes rose by over 200% on some products. Globally, ecommerce is still operating at well above pre-pandemic levels.
Christmas is always a busy time for merchants, so there is now set to be a peak within a peak. Deloitte predicts that US ecommerce holiday retail sales will grow between 25% to 35% from November through January, reaching $182 billion to $196 billion in total.
And in the UK, it’s forecasted that online retail sales will increase by 58.2% in the 6 weeks before Christmas compared to 2019. The online Christmas shopping frenzy began early, as transaction volumes were up significantly starting from October.
The predicted spike in online transaction volumes will put merchant operations under huge pressure, creating more opportunities for problems to arise. From minor stock issues and delivery delays, to customers receiving the wrong parcels or experiencing theft in the supply chain, these mishaps will be more frequent, harder to control and easier to miss.
Just look at Amazon’s release of PS5 in November. A number of customers who pre ordered the much-awaited PS5 were disappointed when coffee machines, foot massagers, and cat food arrived in its place.
In some cases, customers accused the delivery drivers of theft- perhaps a reflection of the current economic climate. Frustrations ran high after an already intense race to the checkout - minutes after the sale went live, stocks completely sold out.
If problems from huge transaction volumes can even trip up ecommerce giants, they could be crippling for lesser prepared ex-brick-and-mortar sellers.
Christmas 2020 is make or break for merchants at risk of closure. It’s been a tough year, and thousands of businesses have filed for bankruptcy or shut up shop, with around 14,454 store units closing (up from 9,879 in 2019).
And the situation may be worse than it looks, as BDO’s David Berliner suggests, there is a seasonality to bankruptcy filings: “If you don’t file by Labor Day, you can’t do your going-out-of-business sales before Christmas, which typically takes 90 days...It’s October now and I think a lot of on-the-edge retailers are saying, ‘Let’s get one more holiday season under our belt. Maybe we can get a good holiday somehow.’”
As merchants are increasingly desperate to boost sales this Christmas, they need to ensure their online shopping experience is frictionless, and many are avoiding SCA (strong customer authentication) to prioritise conversion rates. We all know that poorly-executed SCA can lose customers, but without it, businesses are at risk.
Fraud risks are usually high at Christmas. In ex-fraudster Alexander Hall’s experience, the majority of fraudsters gear up for the holidays, attacking merchants when they are most under pressure and fraud barriers are low. Removing all fraud defences could be detrimental to businesses on-the-edge.
With fewer families able to meet in person this year, many customers will send gifts to loved ones directly from seller websites, changing the shipping address. This may cause headaches for fraud teams who flag different billing/shipping addresses as suspicious. Fraud teams will either get loads of false-positives, or will have to adjust their thresholds and possibly risk allowing fraudulent transactions. Outdated fraud prevention tools will hold businesses back this year more than ever.
There are a few things you can do to keep on top of fraud risks and transaction volumes this year. Firstly, make sure your customer services team is fast and friendly to preserve customer relationships if something does go wrong.
Secondly, we don’t know what 2021 will bring, but it’s likely to be another turbulent year, so take stock of the current landscape, learn from it and plan. Remember that businesses in Europe will be unable to avoid SCA next Christmas when PSD2 regulations kick in, so think ahead on how to balance sales and fraud prevention effectively - the key to surviving and thriving next year.
For more information on how covid has impacted fraud this year, take a look at our Fraud & Payments Survey 2020.
Grace Proctor, Content Writer
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