June retail sales (excluding autos and gas) were up slightly at 2.8% over last year and higher than May by 3.4%. Online sales were up 30.2% compared to last year and down from May by 1.5%. With online sales increasing, fraud is also rising for the digital channels. Forter, a company specializing in online fraud detection, has seen a 300% to 500% increase in fraud over the past few months.
Pick up of orders has nearly doubled since COVID-19
As the growth of online and curbside pick-up has grown exponentially since the coronavirus store closures, the volumes of both legitimate users and fraudsters have also increased significantly. Retailers are challenged with creating systemic processes for acquiring the maximum number of new honest customers but insuring that dishonest customers are prevented from engaging in fraudulent activity.
The issue with fraud prevention measures today is that the policy rules and algorithms all too often eliminate the honest customer, thereby impacting sales and profits. Michael Reitblat, CEO of Forter, said, “One of the biggest challenges is the number of new customers purchasing online which is now accounting for about 20-25% of total transactions.” Pre-COVID-19, new customers purchasing online comprised only 10% of transactions.
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Additionally, as more customers turn to online purchasing, new accounts are being opened. The decline rate for new accounts is 40-50% on average but within those declines are some legitimately desirable customers, so for retailers even a shift of 5% in approvals of valid customers can make a significant difference in terms of customer experience, increased revenue and loyalty. The costs of fraud detection are growing, especially online where many retailers have not yet built robust systems.
Source: Forbes