Holiday gift-givers aren’t the only ones who flock to online shops between Black Friday and Christmas Day. Fraudsters know it’s a great time to scam, because merchants—especially smaller ones—are often too busy filling orders to spot fraud attempts.
But even sellers who are paying attention can get ripped off by fraudsters who manipulate the order delivery process.
Here are two shipping fraud schemes to watch out for this holiday season plus some tips for protecting your store year-round.
Prevent Package Rerouting Scams
First of all, what is shipping fraud, and why do people commit it? Shipping fraud is a way to beat merchants’ fraud controls, which flag orders with shipping addresses that are known to be associated with fraud or that raise other concerns.
For example, if a fraudster has stolen a consumer’s payment and address information (thanks to a data breach or account takeover), they can enter that consumer’s delivery address so the order won’t raise fraud flags.
Of course, the thief won’t get the goods if they go to the victim’s house so they need to change the address in a way that won’t tip off the merchant that something’s up. That means dealing directly with the shipping company.
There are two common ways thieves manipulate the shipping process that you need to watch out for.
1. One is straightforward—the thief contacts the shipper while the package is in transit and asks for the package to be sent to a different address. The merchant may not even know that what’s happened until the victim files a chargeback, by which time the thief and the merchandise are long gone.
To prevent this type of rerouting scam, ask your shipping partner to note your account so that all your customers’ rerouting requests have to go through you. That way you can screen the new delivery address for fraud indicators before you approve the delivery change.
2. The other rerouting scam is easier to prevent. If a customer places an order and then asks you to use their preferred shipping service instead of the one listed in your shop, you can simply refuse. This is a common way for fraudsters to get items shipped with a company that they know will reroute package for them after the order is approved.
Find Help Now for Rush Order Fraud-Screening
In 2016, the last day for regular Christmas delivery and the last day for express delivery saw spikes in fraudulent orders. Thieves count on merchants spending less time screening for fraud when there are lots of last-minute orders in the queue and lots of customers expecting those packages to arrive on time.
The selection of rush delivery can itself be a flag for fraud, because thieves want to get their stolen goods before the fraud is uncovered so the delivery can’t be canceled. But during the holidays there are plenty of good customers requesting rush delivery, too, because they’re strapped for time to get gifts to their friends and family.
When you’re backed up on last-minute orders, you really don’t have time to carefully screen them all yourself and follow up to verify questionable orders on the phone. So what do you do?
Get help. Even if you can handle your own order screening the rest of the year, the holidays are a time when it makes sense to invest in professional fraud-screening help.
When you’re looking for a service, find out if there’s a minimum service period, what their rates are and how they’re calculated, if the service scales up for sales peaks, and whether they cover the cost of any fraudulent chargebacks that get through their system. Find out also if they provide customer service reps to contact shoppers whose orders could be fraudulent, or if they simply kick out all orders that look like they might be fraud (which could end up costing you good orders and customers).
Follow Shipping Best Practices Year-Round
If you’re not already doing these things, now is a good time to start. They’ll help protect your store during the holidays and beyond:
1. Use the address verification system provided your bank or payment service to verify billing and delivery addresses before orders are approved. By checking addresses (and other data like the Card Verification Value on the back of the customer’s card) you can screen out some obvious fraud attempts.
2. Ship all orders with a tracking number so you can verify delivery. This can help your store avoid “friendly fraud,” which happens when a customer falsely claims they didn’t get their purchase and files a chargeback. Tracking numbers and other data can provide the evidence you’ll need to get the chargeback claim dismissed.
3. Make sure your shipper won’t reroute packages without talking to you first. This can reduce your risk of shipping fraud.
4. Make a policy to only use the shipping companies you choose, not those requested by individual customers. This cuts your fraud risk and saves you time dealing with unfamiliar shippers.
5. Collect as much transaction data as possible, including customer phone numbers in case you need to call to check the validity of their order.
6. Keep tabs on the riskiest zip codes for e-commerce fraud. Orders originating from or going to those areas need extra screening. Experian updates this information each year, and while the exact locations can vary from one year to the next, port cities in general are riskier than other areas because it’s easier to get stolen merchandise out of the country from those locations.
7. Start researching third-party fraud screening services now to find one to help out during the holidays and other sales peaks.
8. Make sure your store’s web hosting service protects you from data breaches and fraud with malware scans and removal, strong server firewalls, and physical server security.
Protect Your Online Store From Fraud This Holiday Season
Start your holiday retail season right by protecting your store against fraud. And get your store ready for holiday shoppers with these tips.
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Casey Kelly-Barton is an Austin-based freelancer who enjoys writing about business development and marketing, e-commerce payments and fraud prevention, and travel.