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Merchant Fraud In A Post-Pandemic World

As the world yearns for a better year in 2021, and hopefully an end to the pandemic, both merchants and customers are just as eager to get back to business as usual. Unfortunately, the sudden spike in fraud activity that was experienced in 2020 is expected to only increase just as rapidly, with no signs of tapering off. 

The key to avoiding the devastating effects of fraudulent activity against an online business is to be prepared and continue to keep loyal customers happy this year. 

What The Fraud Trends Are And What To Do About Them

Account Takeover Fraud

Account Takeover Fraud (ATO) is not new to the scene of fraudulent activity. In fact, this type of fraud has been a problem well before 2020. However, it has become more of a threat this year since there was such an explosion of “new customer account creation” in 2020. As a result, there were many credentials that were stolen and the lack of experience with these new online customers means that passwords were easily guessed for fraudsters to steal. 

According to Tech Republic, Q2 2019 to Q2 2020 experienced an increase of ATO fraud attempts by 282%. The Buy Online and Pay In-Store feature has increased by 55% in 2020. Fraudsters managed to abuse “trusted customer” accounts to get goods within hours or even minutes. 

So what is the solution? Merchants must determine every order location. They must then compare that location to the country of origin for the specific card or account. Other helpful strategies include analyzing the behavioral biometrics, the customer’s purchase history, and the velocity on the account. 

Friendly Fraud

Friendly fraud is also no stranger to the growing fraudulent trends. Card issuers and merchants witnessed that friendly fraud was also increasing. Some customers, without prior knowledge, may call their credit card directly for a refund if they received a product or service that did not satisfy, instead of approaching the merchant for a possible solution.  

Other types of friendly fraud are driven by customers who want to get merchandise for free. They will do so by filing a chargeback, stating that the merchandise was not delivered as stated, they will then gain back the original value spent plus keep the merchandise. 

A solution for friendly fraud could be to dispute the chargebacks immediately. A fraud prevention system you choose should analyze both customer behavior and purchasing history to avoid these friendly fraudsters. You can also look into securing a fraud service that provides chargeback insurance or a chargeback prevention guarantee. 

Merchants Must Have a Game Plan For 2021  

Clearly, customers demand a seamless online shopping experience. This means merchants should have two objectives. First, merchants should do all they can to avoid false declines as this can potentially repel customers. Another objective is that the merchant must constantly be improving and fine-tuning their current fraud prevention tools to protect the business effectively for the coming year. 

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