With the leaves falling from the trees and Halloween decorations appearing everywhere, it’s impossible to ignore the start of the holiday season — the most crucial period in the commerce year. Luxury retailers are finalizing every detail, perfecting the customer experience to achieve the quality that luxury buyers expect.
There’s one area to which many online luxury merchants pay too little attention, not realizing its dramatic impact on online and mobile checkout: Fraud prevention.
Stealing in the Lap of Luxury
Luxury goods are evergreen favorites with criminals, and online criminals in particular. Being high in value and easy to resell, they present the ideal target for a fraudster who keeps a sharp eye on his personal ill-gotten bottom line.
These desirable products become even more popular with fraudsters during the holidays. With more people shopping, it’s even easier for fraudulent buyers to hide in the rush. With more people looking for gifts, it’s even easier to resell what they’ve stolen. Some fraudsters even steal to order, making the sale first and committing the theft afterwards to fulfill it.
Luxury merchants understand this risk, of course, which leaves them caught between a rock and a hard place. They must guard their business from loss to fraud, but equally manage to prevent fraud without negatively impacting the shopping experience for their good customers.
This challenge is particularly problematic during the holiday period.
All Cats Look Gray in the Holidays
There are certain signs that fraud prevention teams rely on during the year to flag a potentially illegitimate buyer. During the festive season, however, real buyers often demonstrate the same characteristics that online merchants have learned to look out for in fraudulent ones.
For example, rush shipping is a classic fraudster sign, since they need to hurry to get their goods before the victim catches on and blocks the transaction. But during the holidays, it’s perfectly normal behavior for someone who wants to be sure that they’ll get their gifts ready in time.
Similarly, omnichannel shopping is beloved by fraudsters who use the channel hopping to conceal their tracks, and like to use buy-online-pick-up-in-store options to allow them to buy with someone else’s credit without needing to navigate complex shipping and reshipping arrangements. But omnichannel is equally appealing to good customers who are fitting seasonal shopping into their busy schedules.
Enthusiastic shoppers, too, will often purchase more than one gift from a web site during the busy holiday season. But these will often be separate purchases, sometimes quite close in time — evidence that the hurried customer is shopping in their spare snatched minutes. Unfortunately this is exactly the same pattern as a fraudster who is hurrying to use his stolen credentials to the max before he gets caught and stopped.
The Traditional Antifraud Solutions
All of these factors and others like them highlight the already egregious problems with the traditional methods of fraud prevention. Delay-inducing manual reviews and rigid rules which turn away good customers are a problem at every time of year — but even more so in the holidays.
The delays caused by manually reviewing a transaction to determine if it is fraud are bad at any time, but potentially disastrous during a sale, or when customers need fast confirmation of something they’re purchasing for a specific date. If they don’t feel confident in the order process and know the sale window is closing, they’ll go to a competitor. If they aren’t sure the package will arrive by Christmas, they’ll look elsewhere.
False positives fall into the same category. A recent report from Business Intelligence reported that more money is lost to sales mistakenly declined than is saved through fraud prevented. That’s a lot of insulted customers. Being rejected by a web site that thinks your behavior is suspicious isn’t exactly an experience filled with holiday cheer.
All of this is particularly problematic during the fourth quarter because many customers are especially open to trying new stores during the holiday period. A great experience can gain a site a customer for life, not just for Christmas.
Why It Matters Even More for Luxury Merchants
These concerns are shared by all online retailers, but they’re particularly pressing for luxury goods merchants. It is an essential part of luxury shopping that not only the product purchased but the purchase experience itself be exceptional.
That means that a poor customer experience, such as a friction-filled checkout, a mysterious lack of order confirmation, a delay in fulfillment or even outright rejection of the order, actually devalues the luxury experience in the customer’s eyes, and by extension the product and the company as well.
Friction-Free Fraud Prevention for Frictionless Shopping
Until recently, there was no solution to this problem. Manual reviews, rules and a risk-averse approach were essential components of effective prevention of fraud. Fortunately, that’s no longer the case. New technology has made frictionless fraud prevention a possibility. For luxury merchants, that means it’s a must.
Full automation of fraud prevention is now an option, and with it comes real-time decisions that remove all the delays that have traditionally been so frustrating for customers. Machine learning combined with fraud domain expertise and experience mean that rules can be replaced by an approach which treats each customer on their own merits. The result is that antifraud can now be about the customer, rather than about loss limitation.
Automation is naturally scalable, so the pressures which made the holiday period more difficult to handle than the rest of the year no longer apply. Dealing with the festive rush need no longer be any more stressful, from the fraud prevention perspective, than any other time of year. More importantly, customers will receive the same swift, smooth service during the holidays that they expect during the year.
Bring Fraud Prevention in Line with the Luxury Program
Now that it is possible to have accurate, highly effective antifraud without accompanying customer experience disadvantages, it is incumbent upon luxury merchants to start exploring this new technology and implementing what it can do for their business.
Luxury customers expect not only luxury products but a luxury shopping experience to go with it. Fraud prevention has always been a fly in the ointment as far as that ideal process is concerned. It no longer has to be that way — and it’s time that luxury merchants started bringing fraud prevention in line with their wider business goals.
The holiday period is always an intense one in the retail year. Fast-moving merchants will be able to upgrade their fraud prevention to reflect the potential of the new generation of technology for the coming season. Others should use this year to assess their current process, be honest about the problems fraud prevention causes and start planning how to make the year to come a better one for both sales and customer experience.
Liron Damri is cofounder and chief operating officer at Forter.