Fraud Can Kill your Holiday Shopping Season - Protect Your Q4 Revenues

Fraud Can Kill your Holiday Shopping Season. How To Protect Your Q4 Revenues


The largest shopping season is during the holiday months of October to December. In fact, several retail studies indicate that 2018 Black Friday and Cyber Monday sales are expected to break records this year. It’s also the time for a high number of ecommerce fraud claims and compliance issues. This, in turn, affects the viability of your merchant account – and securing additional accounts as your business grows. Unless you’re ready to tackle these issues – especially as a high-risk merchant – you could easily see Q4 being one of the highest loss periods for your business as well.

How do you prepare for the holiday shopping rush and protect your sales when this is your big-ticket season? You can ramp up in-house customer support with extra hands on deck. Plus, getting additional help with tweaking certain areas of your website (like your checkout page) can ensure you won’t lose business. Finally, contact your merchant services provider to help you put measures in place to limit holiday shopping issues such as fraud and chargebacks.

With high sales from online shopping also comes higher potential for losses from refunds and chargebacks. The level of these can significantly impact your merchant account. No one wants to be labeled a high-risk merchant and experience the limitations that come from this. (Learn more about high-risk merchants and why your business may be classified as one).

Record ecommerce sales expected for Q4 2018

The ecommerce sector has been steadily booming for over 20 years now. Black Friday and Cyber Monday have been two of the most profitable days in the holiday shopping season for online businesses. The Adobe Digital Insights Holiday Recap Report 2017 showed that online holiday shopping revenue in the US was 14.7% over the previous year coming in at $108.2 billion – a record high.

According to the National Retail Forecast, jewelry stores earned 28.1% of sales in the 2017 holiday period (November & December). This is excellent news for high-risk merchants in the luxury jewelry business as the forecast is for even higher sales in 2018. Electronic shopping accounted for 22.4% of their sales in Q4. Health and personal care saw over 17% of sales from these two months alone. Merchants specializing in nootropics can take advantage of this market, particularly since the New Year is a popular time to focus on wellness. The outlook for ecommerce merchants for Q4 2018 is excellent since the  National Retail Forecast is predicting that retail sales will increase by at least 4.7% over the past year.

If your company is in one of these sectors, including nutraceuticals and subscription marketing (along with monthly continuity), you can expect to see an uptick in sales this period. But, with the increase in sales, you must be mindful of the other side of the coin. These include fraudulent affiliates, plus refunds and chargebacks from credit card processing.

Holiday shopping – especially online – comes with seasonal chargebacks and refund requests. Not only will these take a bite out of your profit margin, but they can also negatively affect your merchant accounts. Refunds and chargebacks will carry high fees, which you will have to cover and will deplete your revenue. In addition to these fees, a high chargeback rate will affect your business fraud-to-sale ratios which is important for maintaining a clean processing history.

Is your business ready to take advantage of the 2018 holiday shopping season?

As you prepare for the influx of bargain hunters and holiday shoppers, you may be inclined to raise prices on high-ticket items and accept more international orders. You may ramp up affiliate activities welcoming new affiliates to boost sales to a broader market. Although, to make sure that all this works to your advantage, you need to consider certain market trends and security measures.

Pay keen attention and advise your customers of potential tariff implications, which can make your items costlier. Inputs for your products may also be affected. If you sell to other markets, duties in those jurisdictions may increase the cost of your products to your intended customers. Keeping track of these issues allows you to determine if it’s feasible to expand to new markets.

Beware of friendly fraud

Another thing to be mindful of is friendly fraud – these are customers who have buyer’s remorse after they purchase a product. These are usually high after this peak season as consumers spend more during this period. To minimize these, make sure to keep an open line of communication with your customers. Ensure the timely shipment of orders. Where there may be delays, act quickly to inform your customers. For tangible shipments, make sure you track packages. You may even consider adding 3D secure for international orders. This helps provide evidence to support your case if there is a chargeback dispute.

Whether you’re based in the USA or Europe, your website must be PCI compliant. Providing your customers with access to a secure customer checkout page is a crucial step in this process. Preventing fraud as holiday shopping increases is vital to securing your merchant account. Plus, as is inevitable, there will be requests for refunds. So, make sure your system is set up to issue refunds faster so that your merchant accounts aren’t compromised. Get your staff trained to prioritize and handle refunds quickly.

5 Tips to Limit Fraud, Refunds, & Chargebacks in The Peak Holiday Shopping Season

There are steps you can take now to make this your most profitable quarter.

  1. Review and update terms and conditions

    Ensure that your business terms and conditions, and especially your cancellation policies, are up-to-date. It should be comprehensive and clearly detail the number of days allowed for returns or cancellations. This is especially important when you work with digital products where issuing a refund is not feasible as you cannot recall the product.

  2. Track your orders more closely

    Pay close attention to all your orders and credit card processing and if necessary, blacklist countries with high fraud rates. To do this, you may need to employ seasonal workers or use customer service staff. You should also talk to your merchant services and gateway provider. They should be knowledgeable about which tools can be implemented to detect fraudulent purchases and limit chargebacks on accounts.

  3. Review suspicious purchases quickly

    The faster you notice suspicious purchases and cancel those sales, the better the outlook of your merchant account. To limit suspicious activity, look at implementing fraud analytics software and gateway fraud tools. Don’t forget to tailor the rules often to adapt to your changing business. A knowledgeable merchant services provider like DirectPayNet can recommend solid tools to help you.

  4. Improve security on your checkout page

    Yes, you want to reduce friction with consumers and make the buying process seamless. But, you also want to ensure that your checkout page requests essential details that will limit fraudulent transactions and chargebacks on your account. Always make information like mailing address and CVV/CV2 mandatory. More sales at the cost of your merchant account is not a win-win situation.

  5. Monitor new affiliates closely

    Affiliates can be a great way to drive traffic from your target markets. But, it’s not just about setting them up and watching the sales roll in. Ensure that you do your due diligence and vet new affiliates properly. You should also monitor them closely to determine that they are acting in accordance with your terms and conditions. Otherwise, this could negatively impact your business through no fault of your own.

    Screen sales activity by each affiliate to ensure they are increasing revenue and not fraud. Claw back commissions from affiliates for sales that resulted in a refund or chargeback. Also, paying affiliates on a delayed two-week schedule can allow you to review their orders before paying any commission.

Prep for Q4 now before it’s too late

When you rely heavily on Q4 revenue like most online vendors do, you can’t afford to leave money on the table. That’s what you do when your online payment system isn’t set up to limit refunds and prevent fraud. As a high-risk merchant, you need to be mindful of your company’s payment processing. There is a higher likelihood of chargeback and refund requests after the holiday shopping spree. Therefore, lowering risk and applying fraud prevention is essential.

A clean processing history requires high sales approval ratios and low chargeback rates. You need better and more effective merchant account management. Connect with DirectPayNet to drive a successful Q4 season that won’t put your merchant account in danger with your acquiring bank. Contact us today for one-on-one attention for getting your online business ready for the Q4 holiday shopping season.

About the author

As President of DirectPayNet, I make it my mission to help merchants find the best payment solutions for their online business, especially if they are categorized as high-risk merchants. I help setup localized payments modes and have tons of other tricks to increase sales! Prior to starting DirectPayNet, I was a Director at MANSEF Inc. (now known as MindGeek), where I led a team dedicated to managing merchant accounts for hundreds of product lines as well as customer service and secondary revenue sources. I am an avid traveler, conference speaker and love to attend any event that allows me to learn about technology. I am fascinated by anything related to digital currency especially Bitcoin and the Blockchain.