Black Friday and Cyber Monday: A Shopping Season of Deals or Frauds?
November and December have become a critical period for global retail, marked by a series of major shopping events such as Black Friday, Cyber Monday, and in Asia, 11.11 (Singles’ Day) and 12.12 (Double 12). The holiday season typically contributes a substantial portion of annual sales, with retailers witnessing a surge in consumer spending as customers shop for gifts and holiday essentials.
In the United States, the National Retail Federation reported that a record-breaking 200.4 million consumers shopped online or in stores over the five-day holiday weekend from Thanksgiving to Cyber Monday, surpassing 2022’s 196.7 million.
The Black Friday to Cyber Monday period continues to be crucial. Bain forecasts U.S. retail sales will hit $75 billion, growing by approximately 5% year-over-year, with about 8% of holiday sales defined by Bain occurring during this time. These incredible transaction volumes underscore the appeal of these events for both consumers and fraudsters alike.
According to a report from Nasdaq, global losses from scams and bank fraud schemes reached $485.6 billion in 2023.
In this article, we will look into:
- Common Fraud Risks During Peak Holiday Shopping Events
- Challenges of Modern Businesses in Tackling Fraud Risk During Peak Shopping Seasons
- Transforming Holiday Fraud and Scam Risks into Long-Term Resilience
Common Types of Fraud Risk During Peak Holiday Shopping Events
As online retail sales surge, fraudsters capitalize on the increased transaction volumes and urgency of shopping events, using various tactics to exploit weaknesses in payment systems. Here are some of the primary risks:
- Account Takeover (ATO): Hackers use phishing and credential stuffing to access customer accounts, resulting in unauthorized purchases, data theft, and potential reputational damage for businesses.
- Identity Theft: Stolen identities are used to create fake accounts or make purchases under another’s name, leading to increased chargebacks and costly losses for retailers.
- Mobile Payment Fraud: The widespread use of mobile wallets has led to an uptick in fraud schemes involving compromised mobile devices, social engineering, and malware attacks.
- Fake Listings and Phishing Scams: Fraudsters set up fake websites and phishing schemes that mimic legitimate retailers, tricking shoppers into sharing sensitive information, which can lead to financial losses and stolen identities.
Challenges of Modern Businesses in Tackling Fraud Risk During Peak Shopping Seasons
Increased Transaction Volume
The surge in online and in-store transactions during peak seasons creates an ideal environment for fraudsters. As businesses process a higher volume of transactions, it becomes increasingly difficult to monitor each one for suspicious activity. The sheer scale of these events can overwhelm traditional fraud detection systems, leading to potential missed opportunities for fraud prevention.
Evolving Fraud Tactics
Fraudsters continuously adapt their methods to exploit vulnerabilities in payment systems and consumer behavior. During peak seasons, they often employ more sophisticated tactics, such as account takeover (ATO), identity theft, and mobile payment fraud. Businesses must stay ahead of these evolving threats by continuously updating their fraud prevention strategies, which can be resource-intensive.
Consumer Urgency and Behavior Changes
The urgency of the shopping experience during peak seasons can lead consumers to make hasty purchasing decisions. This urgency may result in a higher likelihood of falling for phishing scams or other fraudulent schemes. Additionally, legitimate customers may exhibit unusual behavior due to time constraints, complicating the task of distinguishing between genuine transactions and fraudulent ones.
Integration of Multiple Sales Channels
With the growth of omnichannel retailing, businesses must monitor transactions across various platforms, including online stores, mobile apps, and brick-and-mortar locations. Each channel may have different vulnerabilities, and maintaining consistent fraud prevention measures across all platforms can be challenging. The complexity of integrating data and security measures across multiple sales channels can leave gaps that fraudsters can exploit.
Limited Resources and Expertise
Many businesses, especially small and medium-sized enterprises, may lack the resources and expertise needed to implement comprehensive fraud management solutions. As fraud attempts escalate during peak seasons, the pressure on existing teams can lead to burnout and oversight, potentially resulting in significant financial losses.
Transforming Holiday Fraud and Scam Risks into Long-Term Resilience
- Real-Time Fraud Detection
During critical shopping events like Black Friday and Cyber Monday, transaction volumes can increase dramatically, making retailers prime targets for fraud. Real-time fraud detection uses advanced analytics and machine learning algorithms to monitor transactions and analyze customer behavior in real time, spotting deviations from typical patterns that could indicate fraudulent activity. This enables businesses to identify and mitigate fraud before it impacts the bottom line. Adopting advanced Fraud Management solutions can enhance your ability to recognize suspicious patterns in transactions, ensuring that legitimate sales efforts are protected during these high-stakes periods.
- Automated and Active Scam Calls Block and Alerts
With the rise in scam calls coinciding with peak shopping periods, it’s vital to have measures in place that actively protect consumers. Implementing a strategy that includes automated call screening can significantly reduce the risk of fraud during busy sales events. Our SCAMBlock solution offers real-time, data-driven decisioning to block high-risk calls before they reach your customers, fostering trust and maintaining a secure shopping environment.
- Proactive Revenue Management
Maintaining financial integrity during the busy holiday season, accurate billing and accounting practices are paramount to ensure proactive revenue management. An optimized revenue assurance strategy can help identify and reduce revenue leakage by ensuring that all revenue-generating events - from customer purchases to partner transactions - are accounted for correctly. Utilizing a robust revenue and business assurance solution can support this strategy, enabling precise charging and billing processes that maximize revenue potential.
- Predictive Credit Risk Management
With consumer spending fluctuating dramatically during peak shopping periods, implementing a comprehensive credit risk management strategy is essential. Businesses should assess and manage credit risks effectively to minimize potential losses. By leveraging data-driven insights and predictive analytics, retailers can make informed decisions that safeguard their revenue streams, ensuring stability during volatile times.
- Leveraging AI and Machine Learning
As fraud attempts peak during the holiday season, integrating AI and machine learning into your strategy can significantly enhance your defense mechanisms. Neural Technologies’ ActivML (AI/ML) combines structural profiling, anomaly detection, and predictive classification to provide in-depth analytics that support data-driven decision-making, allowing businesses to adapt their fraud detection systems in real-time, recognizing evolving threats and minimizing revenue loss while ensuring a seamless customer experience.
Neural Technologies’ Revenue Protection solutions not only addresses your immediate challenges but also anticipates your future needs, providing a comprehensive product portfolio that adapts to real-world fraud scenarios specific to your business.
