As Black Friday and Cyber Monday approach, retailers are gearing up for one of the busiest shopping weekends of the year. More and more businesses are joining these events, offering various discounts and deals to their customers. However, along with the increase in sales volume, there is also a rise in fraud risks. High transaction volumes create an environment where fraudsters can hide their fraudulent activities among legitimate transactions.
A study found that during the 2023 holiday shopping weekend in November (from Thursday to Monday), 3.6% of all global e-commerce transactions were identified as potentially fraudulent. This indicates that out of every 100 online purchases worldwide during this period, approximately 3 to 4 were flagged for suspicious activity.
For businesses, this surge in fraud can lead to significant financial losses and operational strain if they’re not adequately prepared. In this article we’ll highlight the top payment fraud risks to watch out for on Black Friday and Cyber Monday weekend (a.k.a. Cyber Five), along with practical tips on how to protect your business and minimise fraud-related losses.
Common fraud types during the Cyber Five
Card-not-present (CNP) fraud: This type of fraud occurs when a fraudster uses stolen credit card information to make online purchases, where the physical card is not required. During Black Friday and Cyber Monday, with so many online transactions, it becomes easier for fraudsters to hide among legitimate buyers. The increase in transactions makes it harder to detect unusual activity, and since the card isn’t physically present, merchants may miss warning signs of fraud.
Account takeover (ATO): Fraudsters use stolen login credentials to access customers’ accounts, often to exploit saved payment information or access loyalty points. With more customers logging into accounts to make purchases during these events, the risk of ATO fraud increases. Account takeover not only results in fraudulent purchases but can also lead to damage to the merchant’s brand reputation and customer trust if personal information is compromised.
Friendly fraud (chargeback fraud): This happens when a customer makes a legitimate purchase but later disputes the charge, claiming they didn’t receive the item or didn’t authorise the purchase. Some buyers may take advantage of Black Friday and Cyber Monday to get “free” products through chargebacks. Friendly fraud can be hard to prove as intentional, leading to costly chargebacks for merchants who may struggle to provide enough evidence to counter these disputes.
3 tips for protecting your businesses
- Implement Strong Customer Authentication (SCA) and Address Verification for CNP transactions. Requiring two-factor authentication (such as OTPs sent to the customer’s phone) and using Address Verification Service (AVS) can make it more challenging for fraudsters to use stolen card information. AVS compares the billing address provided with the one on file with the card issuer, flagging any mismatches. For high-value orders or suspicious transactions, you could use manual verification, such as confirming details with the customer via email or phone directly.
- Enhance account security to prevent account takeovers. Require strong, unique passwords and consider implementing multi-factor authentication (MFA) for customer accounts. These measures can deter fraudsters from accessing accounts even if they have stolen credentials. Monitor for unusual login behaviors, such as multiple failed login attempts or logins from unfamiliar IP addresses and set alerts or temporary locks for accounts showing such activity.
- Establish clear policies and maintain strong documentation to combat friendly fraud. Having transparent policies for returns, refunds, and delivery timelines (including clear messaging about potential delays due to increased purchase volumes) reduces the likelihood of disputes. Additionally, maintaining documentation (such as order confirmations, tracking information, and delivery receipts) allows you to provide evidence in case of chargebacks. Send proactive communication to customers about order statuses and delivery times to reduce claims of “item not received.” You could also use descriptor messages in transaction statements (e.g., “YourStore Black Friday Sale”) to remind customers of their purchases.
Another valuable tip – implement a robust chargeback management system for your transactions. It’s an effective tool for managing and reducing fraud levels not only during Black Friday and Cyber Monday but throughout the entire year. Want to know more about chargebacks and how PAYSTRAX handles that? Read our blog post “Chargeback management: turning payment chaos into smooth sailing” and find out more!
