While you might be thinking that it’s far too early to be talking about the ‘other’ holiday season, our experience is that you can never be too prepared for the busiest part of the year – particularly if you’re in the retail environment where core business is increasingly being driven by seasonal buying from Halloween through Thanksgiving, Black Friday, Cyber Monday, to Christmas and the January sales.
Busyness powers the fraud business
Peak trading around the winter holiday season is vital for revenue, and many merchants across different sectors hit their annual numbers purely because of the huge uplift in sales they get in the fourth quarter of the year. But, the rise in sales volumes also bears warning, as it offers a perfect storm for fraudsters who look to exploit the busyness of the season, hiding their activities in the volumes of consumer traffic and the advantages of shipment cut-off dates and fast fulfilment options.
ACI data shows that while the number of overall transactions in the 2017 holiday season increased by 19 percent, fraud attempts in the period from Thanksgiving to December 31 increased by 22 percent on 2016 figures. So, despite the sales uplift (or maybe because of it), 1 out of every 85 transactions was a fraud attempt.
This consistent and alarming uptick in seasonal fraudulent activity demonstrates why merchants should proactively prepare for the onslaught of both customers and fraudsters who flood through their (virtual and/or physical) doors during this peak trading period. This means using every available tool to make sure that fraudsters are blocked while genuine customers are not.
Positive profiling – the newest tool in fighting fraud
Preparing for the peak season is just as much about who you’re letting in as it is who you’re keeping out. Imagine losing a new customer before they have even bought anything. If a new customer’s transaction is declined because it looks high risk, or if they abandon their purchase because of extra security measures that create friction in the buying process, that customer is unlikely to come back.
First impressions count, and during a busy holiday season when customers are looking for great deals and fast fulfillment, you can’t afford to make a mistake in rejecting their order just because they have no history with you.
Now let’s reimagine this buying scenario so that you could see that the same customer had ordered from other merchants multiple times, had good history (time on file) elsewhere and all their data matched up – you’d accept their order in a flash, securing their (present and hopefully future) business.
Screening the customer, not the transaction
The above scenario is exactly where positive profiling can serve up both a great customer experience and fraud prevention capabilities that put merchants in prime position for peak season. Powered by consortium intelligence and Big Data analytics technology, positive profiling can help merchants to successfully sort the good customers from the bad. By building comprehensive customer profiles based on detailed behavioral data from multiple merchants and externally confirmed fraud intelligence, merchants can screen the customer rather than just the transaction. Ultimately, by producing more accurate results, positive profiling can empower merchants to tailor the customer experience, improve conversion rates and maximize revenue – while blocking fraud in the process.
To paint the picture more clearly, we retrospectively applied positive profiling to data from one retailer’s 2017 peak trading transaction data and discovered that the real-time application of this approach would have reduced decline rates by 59 percent, resulting in $100k worth of additional good revenue each month. Think of the impact that can have on your business.
Failing to prepare is preparing to fail
The opportunity to ID customers as well as fraudsters can be invaluable for online merchants, especially during peak season when the fulfilment pace is faster, volumes are sky-high and revenue is most at risk from poor planning.
Positive profiling can help significantly with this identification process – supporting increased conversions through reduced friction and higher acceptance levels, as well as reduced fraud and chargebacks through highly accurate fraud decisioning.
Of course, it is important that positive profiling forms just one part of a layered approach to fraud prevention and KYC processes, working in sync with a full range of intelligence-driven tools and strategies that will ensure you can successfully reap the benefits that the holiday season offers.
ACI’s positive profiling capabilities are delivered via the Stream Analytics Engine component of our ACI ReD Shield fraud prevention solution. Check out this link for more information on the power of this capability.
ACI Fraud Management for Merchants 
