The impulse buy will be hallmark of the 2021 holiday shopping season.
Supply chain snarls mean we’re all on the hunt for the things we want — maybe even need — to fill online baskets, with increasing urgency, and perhaps panic. After all, that Xbox, that Lego set, that sweater that would be perfect for that finicky uncle won’t wait around forever.
As Featurespace Founder Dave Excell told PYMNTS’ Karen Webster, the traditional ramp up of spending during the holidays may prove especially lucrative for fraudsters this year, as the bad actors have the technical tools to set up phony online storefronts promising that the coveted goods are in stock. They’ll grab the consumers’ card payment (or even sensitive data) and make off with the money — then promptly close shop.
Consumers are flush with cash in the bank, buoyed in part by stimulus payments and other disbursements, and they are shopping more than ever across online channels. PYMNTS’ own research shows that 87% of U.S. consumers intend to shop online this holiday season — up from 77% last year, and at least 50% of those respondents will start shopping before Thanksgiving.
Read more: 87% of Consumers Will Shop Online for Holiday Gifts, Half Will Start Before Thanksgiving
Excell said of the holiday shopping mindset in 2021: “If there’s a deal out there, I have to go and get it — otherwise I’ll miss out. And that’s a perfect storm for the scammers.”
The rush of commerce and fraud attempts, he predicted, will become most pronounced during retailers’ Black Friday and Cyber Monday — and last-minute shopping will only compound the risk.
Gift and prepaid cards may seem like a simple solution: click, buy or otherwise take your chance that the item you’re paying for may not arrive. But Excell said they represent a particular point of vulnerability this season as well-meaning consumers send them out in lieu of sold-out items. And gift cards extend the holiday season for consumers and fraudsters alike.
The ripple effect — and it’s a negative one — will reverberate across the commerce ecosystem.
The legit merchants lose the sale, consumers lose money, and banks and issuers get ensnared in disputes and chargebacks, which costs time and money. The cardholder must give information over to the bank and prove that the ordered (and paid for) goods never made it to their destination. The dispute process then winds through finding out whether a legitimate merchant has the funds on hand to be returned to the consumer — or if the bank itself must foot the bill.
The scams are brazen, noted Excell. In the bid to steal data and money, fraudsters can go so far as to send notifications that delivery has failed and that order “details” need to be re-entered. In other cases, they set up sites that look just like trusted retail brands in an attempt to lure unwitting shoppers to transact.
“There can even be ‘sub’ sites,” he told Webster, that offer users the chance to “jump the queue and buy that Xbox — but all you’ve got to do is hand over sensitive information.”
Excell noted that there is a lot of work to do on the front end as financial institutions (including acquirers) seek to validate legitimate businesses. Otherwise, he said, “We’ve got a lot of cleanup to do later as an industry.”
All too often, there’s a rush to onboard new merchants in order to capture their transactions, he said.
The Proactive Approach
Amid the holiday rush, said Excell, banks and merchants can work to educate consumers — letting them know that if a deal looks too good to be true, it almost certainly is.
Proactive outreach can also cement loyalty between consumers and the brands that they already use in everyday commerce, without jumping ship to unknown sites. He said merchants should strive to “help keep the consumer alert in spotting scams and being able to do that ‘comparison’ between the site that they’re looking to buy from versus the place where they’ve got that brand and loyalty and reputation from where they’ve shopped previously.”
Drilling down a bit into proactive approaches that can take place behind the scenes, Excell said added due diligence on the part of the acquirers can eliminate avenues that allow fraudsters to set up phony businesses to trick banks and consumers. This can include looking at sites’ domain names and how long those domain names have been registered — and even if sites have reused logos and verbiage to mimic other well-known sites.
A proactive approach is critical, too, in alerting consumers to what is legitimate, said Excell — say in the case of an overseas merchant that needs payment to clear customs and ship a gift to the U.S. A cautious consumer might think such an alert is a scam, missing out on the order entirely, thus needing an additional layer of reassurance. Excell said that apps from trusted brands that are installed on users’ devices can be especially helpful for providing reliable communication.
Of course, the scammers are onto those same tactics, so as Excell said, “there’s a fine balancing act for merchants and FIs to tread.”
According to Excell, Featurespace’s ARIC Risk Hub takes insights from banking and credit union partners and can examine and identify suspicious transactions — then especially pinpoint “anomalous movement surging into newer merchants, who we have not seen before.” In other words, examining both the money flowing in and out of the ecosystem can spotlight transactions that should be stopped before the proceeds reach the criminals.
Flagging the transaction can give the bank the chance to reach out to the consumer to ensure they were trying to make the payment.
And, as Excell said, “then the bank can have a conversation with the consumer in order to point out the site, which could be a very different one than the merchant [that] the consumer thought they were buying from. That’s a good way to stop fraud from taking place, and it’s a way to make sure the shopping experience is positive.”
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