On the verge of the holiday shopping season, an online fraud-fighting expert warns that retailers too often let down their guard during their busiest times out of fear that fraud prevention might block too many valid transactions. The situation worsens the closer it gets to Christmas. "Fraudsters know retailers are running scared to make their sales numbers during the last days of the holiday shopping season," says Jeff Foster, executive vice president of credit card processing and fraud-prevention firm Retail Decisions U.S.A. "They know that buying $600 worth of electronics during the last week before Christmas is a lot easier than at any other time of the year."
At the same time, he adds, retail employees are often more likely to make mistakes during the busiest shopping days, making it more likely that a fraudster will slip through usual security policies. Such policies include calling a cardholder to confirm personal information when, say, a large order requests overnight delivery to an address not the same as the cardholder’s known billing address.
"If you’re a merchant usually doing 1,000 orders a day with three or four people on the phones to review orders, maybe you can keep control of risk and what’s going out the door," Foster says. "But if you have 10,000 orders a day during the holidays and your staff is overworked, you may be approving orders that would normally require first getting the cardholder on the phone."
Foster suggests retailers use systems that automatically alert them to high-risk transactions, such as the eFalcon scoring service from Fair Isaacs, which uses neural networking technology to score the risk level of pending transactions. At the same time, he warns, criminals are getting more sophisticated in finding weak sites. "Many fraudsters are doing a better job of targeting sites they know are vulnerable," he says, "and they’re doing a better job of sharing that information with other fraudsters."
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