In 2017, 16.4 percent of total UK retail sales came from the internet. As the world becomes increasingly more digital, luxury retailers need to better understand their greatest fraud pain points and the potential impacts these may have, not only on their customers but on their bottom line.
According to Forter’s Fraud Attack Index 2018, fraud attacks against the jewellery and luxury industries increased by 38% since last year. Retailers serving these industries tend to be common targets for fraud, as the high ticket items they sell can mean huge payouts for online criminals with just one attack.
With an increase in online buying comes an increase in fraud attempts. Fraudsters are growing increasingly more clever and advanced, focusing their efforts effectively to exploit new areas of the customer journey, beyond just the point of transaction.
Jewellery and luxury retailers are no exception to the e-commerce boom — in order to stay competitive, these retailers will need to closely integrate e-commerce with brick-and-mortar business models. Whilst jewellery and luxury brands cater to highly specific clientele who are willing to pay a premium for their products, and even more so for superb customer service, these industries will not be immune from the growing capabilities of customer care and service that omnichannel models offer. Instead, these industries will need to upgrade their online offerings and augment their online Know Your Customer (KYC) processes to mimic the in-shop experience their clientele have come to expect.
Pain Points
One of the most interesting findings of Forter’s Index uncovered how fraudsters are shifting the means by which they attack. This year highlighted the growing trends of policy abuse, return abuse, account takeovers (ATOs), and loyalty/point programme abuse. Whilst in the past retailers have been focused on the point of transaction and checkout, fraudsters now have discovered various other vulnerabilities within the customer journey. Retailers have overlooked unprotected points on the path to check-out that they didn’t even know fraudsters were capable of exploiting.
According to Forter’s recent research, popular attack methods retailers should be on the lookout for include:
Policy Abuse: When individuals cheat merchants through inappropriate use of discount codes, reward programmes or multiple account creation. Forter saw more than 200K policy abusers in 2017, with repeat offenders attempting to conceal their identities and strike again.
Return Abuse: When shoppers return goods after using them. This attack method has increased 119% since the beginning of 2017.
Account Takeover (ATO): When a fraudster passes as a return customer by hacking into an online account using stolen personal information like a password or e-mail. The 2017 Equifax breach likely contributed to a 53% increase in ATO attempts in Q3 2017.
Preventing New Methods of Attack
Customers of luxury retailers expect a seamless shopping experience whether offline or through online digital channels. Brands must alleviate fraud pain points without adding friction to the shopping experience in order to deliver the luxury service their customers deserve.
Manual fraud reviews, or rules-based systems of fraud prevention, simply no longer offer a holistic enough view of customer information, especially given the rich and complex lives consumers have online — spanning multiple devices, locations, and payment methods. Luxury brands are especially vulnerable to clunky manual review processes due to high order values. A call from a customer service representative or a delay in order fulfilment could ruin the customers’ shopping experience.
The best strategy for preventing fraud combines man and machine. For example, Forter, a leading e-commerce fraud prevention solution, has a team of experts feeding complex data into machine learning systems. The machine learning models are so sophisticated that they are able to differentiate between spoofed locations, devices, or identities, ensuring that retailers know their clients and their customer journeys are kept safe, regardless of whether they reach the point of checkout.
To learn more about the latest fraud trends, download Forter’s 2018 Fraud Attack Index.
Author: Aaron Begner, Director of Strategic Partnerships, UK
If any Walpole members would like to learn more about Forter or be introduced to Aaron, please contact Keri Beak
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