As merchants work hard this holiday season to make shopping experiences easier for customers, they may be making it easier for bad actors to commit fraud too. Each year, merchants lose billions of dollars to fraudsters, many of whom unintentionally benefit from streamlined services such as expedited shipping and in-store returns for online purchases. In an age when the customer is always right, it’s more important than ever for merchants to make sure they’re dealing with the right customer.
Between the second quarters of 2018 and 2019, Forter’s Fraud Attack Index found that fraud for Buy Online Return In Store (BORIS) and Buy Online Pickup In Store (BOPIS) transactions rose 23 percent. For customer loyalty programs, another favorite target of fraudsters, fraud attacks rose by 89 percent in the same period. Loyalty programs, in-store pickups/returns for online purchases, and expedited shipping are seen by merchants as critical to delivering great service. As the Amazons and Walmarts of the world have raised the bar for customer convenience to new heights, merchants need to extend the same levels of customer service to stay competitive.
That flexibility, however, comes at a cost. In bending over backwards to serve customers, merchants sometimes find themselves bending the rules. It could be a call center agent helping a frustrated “customer” retrieve their password for loyalty points or an in-store employee accepting a return without a receipt. Fraudsters know how to use heightened customer service to their advantage, and merchants, in their zeal to provide a great customer experience, are experiencing higher levels of fraud as a result.
In some ways, merchants are a victim of their own success. Security mechanisms such as multifactor authentication and user behavioral analysis have made it harder to commit fraud. Fraudsters, in turn, have been forced to become more creative. They may purchase a product online with a stolen identity and change the shipping address slightly so that the product ends up being held at a location near them, where they can easily pick it up with few questions asked. Or they may purchase a product online with a stolen identity and have someone who looks like the victim pick up the item at a nearby store.
Faced with anti-fraud technology that has grown increasingly intelligent over the years—and which stands to become even more intelligent as AI and machine learning evolve—fraudsters are focusing where merchants are most vulnerable: their desire to accommodate customers. On the one hand, customers expect great experiences that are personalized and secure. Yet customers want frictionless security and personalization—that is, they don’t want to be continually prompted for passwords or personal information. Fraudsters know this and they know how to exploit it. They circumvent authentication (“I lost my password,” “I’m traveling and using a different phone”), express frustration (“I just bought this here last week, do you think I’m lying?”) and count on merchant’s cooperation to make the “customer” happy.
So how can merchants make it harder for fraudsters to turn great customer service against them? They can make sure that call center agents and employees are informed about fraud tactics and have policies in place to address issues such as lost passwords, misplaced receipts and suspicious shipping changes. They can secure loyalty programs just as they would any other financial account information, with strong account protection. And they can protect their business with automated, real-time fraud detection that blocks fraudsters without adding friction to the customer experience.
After all, you don’t want to stop delivering great customer service. You just want to stop the wrong people from taking advantage of it.