Fraud Prevention

How to Have a Fraud-Free Black Friday

November, 24, 20214 min Read

Resurgences of COVID-19 in many parts of the world continues to affect supply chains, disrupting offline sales. As a result, consumers will continue to rely on digital channels for their Black Friday shopping. This means there will be ample opportunities for fraudsters to take advantage of the increased traffic on online retail platforms 

Black Friday is generally viewed as the beginning of a hectic commercial period for retailers. However, since financial uncertainties are still prevalent, consumers have become more discerning and are looking out for value and deals. 

That said, there seems to be no decrease in their spending as nearly 72.4 million adults in America are expected to shop on Black Friday this year. It is estimated that Black Friday sales through digital channels will likely reach $17 billion, a rise of nearly 20% over last year. The National Retail Federation expects a moderate increase ranging between 10.5% and 13.5%. 

Greater Opportunities for Fraud and Online Abuse

On Black Friday, consumers look for great deals and discounts, whereas retailers look to expand their business through new customer acquisition. They offer deals, discounts, and welcome bonuses to attract consumers. Further, in an effort to expand business through new customer acquisition, online retailers make the onboarding process simpler and more lenient. This results in greater customer activity – as well as fraud – during the holiday period. 

Fraudsters have many tricks up their sleeves that they can use to take advantage of the increase in digital shoppers this holiday season. Being one of the biggest sales events especially in the US and the UK, it is also the most ‘profitable’ season for fraud and online abuse. 

Automation is one weapon that fraudsters use aggressively. To scale up their attacks quickly and cheaply, fraudsters use bots and automated scripts. This enables them to register hundreds and thousands of fake new accounts and launch credential stuffing attacks that power account takeover attempts. In addition, bots can outpace genuine customers to score deals, especially on expensive items that can be resold at a premium later on. Fraudsters use bots to hoard inventories, which robs legitimate customers of the ability to look for discounts on the items they wish to buy. Bots also enable fraudsters to drop malware and ransomware to help extort money from affected businesses. 

Existing Fraud Mechanisms Fail to Contain Fraud

Fraudsters are aware that this period is particularly challenging for online retailers, who need to strike a balance between user experience and fraud prevention amid heightened digital traffic and user interaction. Using a combination of bots and human click farms, fraudsters try to game the existing fraud defense mechanisms. The widespread availability of advanced bots that can mimic human behavior make it rather easy for fraudsters to bypass traditional bot mitigation solutions. All these activities can disrupt customer experience forcing customers to switch over to competing businesses. 

Therefore, the responsibility of ensuring security of their customers lies with digital retailers. They need fraud-prevention solutions that can detect and stop fraud without disrupting good user throughput. However, should they choose to increase authentication hoops, it can add to user discomfort. On the other hand, lenient verification mechanisms can give freeway to fraudsters. Therefore, online retailers must use friction judiciously so as to pin down bad actors while allowing good users to continue with their festive shopping unhindered. 

This rules out legacy bot solutions such as CAPTCHA and purely data-driven fraud solutions that rely on clear ‘trust’ or ‘mistrust’ signals. Manipulated digital identities and evolving consumer behavior is causing digital signals to increasingly fall into the gray area. Unfortunately, most retailers are ill-equipped to analyze these gray signals, which means the balance of power is tilted heavily in favor of fraudsters. 

A Fresh Approach to Tackling Fraud

Does that mean digital retailers must absorb fraud losses as cost of doing business? Definitely not. Instead, they can adopt a fresh approach to fighting fraud that keeps customer interest at the forefront. 

Arkose Labs helps online retailers to accurately understand the true intent of incoming users such that fraudsters are stopped right at the entry gates. Instead of blocking users, the Arkose Labs platform shifts the attack surface from the business network to its own where using targeted friction fraud is eliminated from its roots. On the basis of real-time risk assessment of every user, proprietary 3D challenges are presented, which the user must clear. 

Genuine users find the challenges fun, whereas bots and automated scripts fail instantly. Persistent, malicious humans are kept engaged through incrementally complex challenges. This wastes their time, effort, and resources, which makes the attack economically non-viable, forcing attackers to abandon the attacks and move on. 

To learn how Arkose Labs helps leading online retailers maximize sales while maintaining the seamless user experience they are known for, please book a demo now.