For any merchant, particularly those selling digital goods and services, the holiday season presents a significant opportunity for revenue growth. During this time, customers tend to make more purchases leading to increased sales volume but also leading to increased risk. The most prominent risk for merchants selling digital goods or services is scalable fraud, characterized by substantial spikes in transaction anomalies, a pattern that closely mirrors the surge in holiday season sales. This convergence of anomalies makes fraudulent activities harder to detect, posing a considerable challenge for businesses.
We’ve all read about how AI will fundamentally change our futures. What you may not realize is that fraudsters are already using it to steal digital goods and services at scale. To combat this new level of fraud we need a transformation. This transformation must make fraud more intelligent, automated, and autonomous. For instance, social engineering, traditionally targeting the elderly and prevalent in 'legacy' industries, has now infiltrated new-age sectors like cryptocurrency and gaming. Moreover, the manual nature of social engineering in the past, often carried out by 'call centers' in developing countries, did not exhibit significant fluctuations throughout the year. In contrast, this year, fraudsters can exploit user sentiments during the holiday season to orchestrate large-scale social engineering attacks using Generative AI.
So, how can online businesses maximize their revenue during the holiday season while ensuring security?
Here are five crucial steps you need to take to safeguard your revenue:
1. **Ditch the One-offs**: Relying on isolated transactions makes it nearly impossible to identify scalable fraud efficiently. To combat this, focus on analyzing the broader market activity to gain a comprehensive understanding.
2. **Construct Genuine Customer Profiles**: Understanding what legitimate transactions look like is just as critical as spotting fraudulent ones. Payment fraud transactions typically fall into three categories: 1. high probability fraud, 2. high probability genuine, and 3. grey transactions. Grey area transactions are the hardest to detect because they are inherently indecisive. While most fraud prevention solutions focus on finding hidden fraudulent patterns in that area, a small shift in focus like finding similar genuine ones can make a big difference.
3. **Target the Right Anomaly**: How can you find an anomaly inside of an anomaly? Given the anomalies of a complex holiday season, it's essential to specifically zoom in on anomalies in fraud indicators. This precision will allow you to concentrate on the most relevant indicators that matter for fraud prevention. Some of the key fraud indicators to zero in on are fingerprints, new buyers, recurring purchases, and changing payment methods.
4. **Embrace Behavioral Analysis**: Because it is largely automated, scalable fraud often exhibits distinct behavioral patterns. Detecting and characterizing the data points of various fraud types through behavioral analysis is a must. Incorporate multi-behavioral event tracking, including copy-paste actions, session duration, and the number of items in the cart.
5. **Don’t wait. Plan now**: As payment fraud prevention evolves, so does fraud itself. With the advent of Generative AI, one potential challenge is the automation of social engineering at a large scale. Be prepared for unforeseen developments in the fraud landscape. Having an in-house brainstorming on the current trends and how they may occur throughout the holiday season can raise many helpful points to prevent future damage.
To make the most of your holiday season sales while ensuring security, businesses need to leverage advanced AI capabilities. This entails not only ongoing development of payment fraud prevention solutions but also predicting what's on the horizon through extensive data analysis. Remember that threats are constantly evolving. By pushing your fraud prevention tools to the cutting edge of innovation and technology, you safeguard your business and maximize your revenue.
Recommend reading:
Top 3 AI Innovations You Need to Transform How Fraud Prevention is Done
The fraud prevention checklist guide for digital goods & payments
