Evan Schuman is a guest contributor to the Sift Science blog.
With purchases soaring this time of year, it’s comforting to remember that the fraud rate doesn’t increase just because overall transactions rise. But there’s some other calculus to keep in mind: although the fraud rate doesn’t go up in December, shoppers’ verification tolerance plunges.
In other words, consumers will tolerate less friction and inconvenience during their shopping experience in December than they will in March. One part of this trend is due to the holiday rush—rushed people will tolerate fewer aggravations of all kinds—but a much bigger factor is that shoppers will often visit sites during the holidays that they never visit otherwise.
Why? A couple reasons. First, visitors are shopping for other people. That means that someone who’s never baited a hook in his life may find himself browsing the website for Phil’s House Of Fish Lures. Secondly, special holiday sales will lure shoppers (sorry) to sites they may never normally visit.
Holiday shoppers offer a big opportunity
There is a subset of shoppers who only pop up during the holidays. From the merchant perspective, this is the classic opportunity. How many of these new visitors can you delight and make them want to return in March? In spreadsheet terms, how much of the holiday spike in traffic can you hold over into the Spring? Can you convert a chunk of these once-a-year visitors into once-a-month regular customers?
Customer experience plays a key role in converting these customers, and overly aggressive fraud verification checks run the risk of alienating them. Merchants already calculate—to the second and to the keystroke—how many hoops they can force a shopper to jump through before they are likely to abandon the site and never return. Alienate them enough and they could badmouth you on social media and hurt your revenue far beyond that one customer’s shopping cart. (A new customer is interested? They search and Google will point them to that new social post. Uh-oh.)
Adjusting your fraud approach for the holidays
The unfortunate truth is that merchants rarely modify their fraud vs. customer experience calculations during the holidays. But there are a lot of things that can change that may incorrectly set off the “fraud” alarms: shoppers may spend more then they typically do, have multiple transactions, buy from unusual locations while traveling.
Given that shopper tolerance drops during the critical holiday season, what is an e-commerce merchant to do? One course is to slightly increase your fraud tolerance threshold. That will reduce the verification you put shoppers through, at the cost of allowing that much more fraud to go through.
Or you could simply focus on new site visitors and treat them with the proverbial kid gloves. (Note: If you actually sell kid gloves, please write to me and I’ll offer a different cliché.) But what I’m really saying is: treat any 100% new customers with the utmost care. These shoppers will not have accounts to use and they are also likely to opt for the “guest login” route. Slightly increasing your fraud tolerance for those customers only might strike the right balance – maximizing your chances of seeing them again in March (and at any time of the year).
Read more tips on holiday fraud prevention, from fraud and risk experts on the front lines.