Fraud Prevention

Top 7 Fraud Predictions for the 2020 Holiday Shopping Season

November, 6, 20205 min Read

The holiday shopping season is always a busy time for commerce -- as well as for fraud. It’s where businesses see a massive rise in traffic, both online and to physical retail locations, and where much of the year’s revenue is generated.  But like most other aspects of life, Covid-19 has changed the outlook this year for the holiday shopping season. Old maxims no longer ring true, and new behavioral trends adopted this year will impact how consumers and businesses interact -- and how fraudsters attack. As we head next week into 11/11 -- Singles Day in China --, which is the unofficial start of the global holiday shopping season, here are seven fraud predictions for this most unique holiday shopping season. 

1. The End of Black Friday

Perhaps more than anything else 2020 will be remembered as a year that digital commerce truly exploded. From toilet paper to food to automobiles to booze and beyond, consumers -- even those who were previously technophobes -- jumped online to purchase all of life’s needs. What does that mean for Black Friday, that staple of holiday consumerism? It likely won’t go away, but it too will move online. The days of folks lining up outside big-box retailers at 4 a.m and stampeding to nab a plasma TV may soon be over…

2. No More Holiday Traffic Spike

Retailers have long planned for massive digital traffic spikes in the holiday season in recent years, as consumers look to get the best deals on gifts. But since lockdowns started in March, online businesses have seen traffic levels on a daily basis usually reserved for the holiday season. What do you do if every day is Cyber Monday? Fraudsters have taken advantage of this, using increased traffic levels along with sophisticated tools to “blend in” with good traffic. This trend will only intensify as we move into the busy holiday shopping season. 

3. Increased Chargebacks

Chargebacks and friendly fraud were a big issue at the beginning of the lockdowns, as many consumers facing economic hardships sought any financial edge they could get. Travel and hospitality companies also had to write off billions of dollars in chargebacks as cancellations poured in. Chargebacks could become a major issue for companies once again in the holiday season. Covid-19 has massively disrupted supply chains; if consumers do not receive orders in a timely fashion they will likely become impatient and cancel them. And many who are struggling financially may be pushed to take actions they normally wouldn’t by trying to “game the system” with friendly fraud. 

4. Getting the Right Balance

As noted, the Covid-19 pandemic created many so-called “digital debutantes” -- those who normally didn’t previously engage in digital commerce but were spurred to do so by lockdowns and then became adopters once they saw the convenience. Many of these consumers with little or no digital footprint are flocking to online retailers this holiday season. For businesses, this traffic could easily look suspicious or even fraud-like, since these consumers have no digital footprint. But you don’t want to decline transactions or outright block them and turn off a potentially long-term profitable customer. It will be especially critical for digital businesses to be able to accurately distinguish between fraud and good users this holiday season. 

5. A Spike in ATO Attacks

This rise in new digital debutantes means there are many more accounts out there for fraudsters to target. It’s no surprise that account takeover attacks have been a prime attack vector for fraudsters this year. The Arkose Labs network detected 1.6 billion ATO attacks in 2020 to date. Q3 alone saw 770 million credential stuffing attacks. Even the FBI has noted this trend and put consumers and businesses on notice regarding the spike in ATO attacks, especially targeting financial accounts. 

6. More Human Driven Attacks

The 2019 holiday season saw a marked shift from automated attacks to human sweatshop attacks. This is a fraud trend that has continued throughout this year and one that will likely continue in this holiday shopping season, as fraudsters employ low-cost humans to commit attacks that require human nuance and intelligence. This will especially play a role as individual online sellers -- such as eBay or Amazon merchants -- pay humans to write fake reviews at scale, seeking any edge. 

7. Need for a Robust Infrastructure

The massive spike in online traffic since March has massively tested the infrastructure of digital businesses. Those that already saw high levels of traffic dealt with massive spikes and businesses that had little or no online presence had to quickly create one. With the holiday season potentially pushing digital traffic to unprecedented highs, businesses’ infrastructures will be tested like never before. That’s why it is critical to work with a partner that can be the “first line of defense” in detecting and stopping fraud attacks, so internal teams are not completely overwhelmed. To learn more about how Arkose Labs can help protect your customers this holiday season, click here.