Study: Holiday season has a dark side

Retailers had better watch out, as ’tis the season for fraud — especially in an age of omnichannel retail.



Omnichannel retailing opens up new avenues for fraudsters — especially during the holidays, according to the “Annual Holiday Fraud Index” from Radial. The study, based on data from hundreds of clients and billions of data elements, reveals Europay, Mastercard, Visa (EMV), cross-border, and digital gift card trends that could put retailers’ bottom lines at risk.



Card-not-present (CNP) fraud garners the largest share of criminal activity with 30% increases — a rate that jumps sharply across electronics, entertainment and jewelry market segments. While home and sporting goods categories are impacted the least, they are still on thieves’ radars, the study revealed.



E-commerce attacks are also on the rise during the holidays, especially as cross-border commerce increases. Venezuela has the highest cross-border e-commerce attack rate at 17.04%. At the other end of the spectrum, the U.S. Virgin Islands has one of the lowest at 0.06% attack rates, as well as the highest order approval rate at 99.77%, the study said.



Interestingly, these cross-border attacks drop significantly on Cyber Monday. With retailers approving up to 98.59% of cross-border e-commerce orders on Cyber Monday, fraud attack rates dropped over 33% on Cyber Monday compared to the rest of the holiday season, the study said.



Digital gift cards are also a target, however these losses often happen after Dec. 25. Specifically, e-gift card fraud attacks are 10 times more likely during the holiday season compared to other delivery methods. That jumps to almost 25 times more likely the week after Christmas. Even fraudsters take a break on Christmas Day, when attack rates hit an all-time seasonal low.



“We’re heading into our second holiday season with more retailers EMV-ready, which means CNP fraud becomes a lot more attractive to organized and tech savvy criminals,” said Stefan Weitz, chief product and strategy officer at Radial.



“Combine that with the increased prevalence of data breaches and retailers are faced with the daunting challenge of approving as many orders as possible, while minimizing fraud,” he said. “Bottom line for most retailers if you are managing fraud yourself, the Grinch will be stealing your holiday.”