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GUEST OPINION Retailers must prepare for fraud this Christmas

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Christmas is always a time of giving, increasingly unwittingly to online fraudsters. As more shoppers turn to mobile and social this season Michael Norton, Managing Director of looks at what retailers should be doing to combat the associated rise in fraud in the run up to Christmas this year

As the online retail industry continues to go from strength to strength it is expected that consumers will do more shopping than ever online this Christmas, with a study by the Centre for Retail Research forecasting a 17% increase in sales in the last six weeks of the year. Currently £1 in every £10 is thought to be spent through e-commerce, and this could grow further as mobile and social media commerce start to take off. However, are retailers ready to take advantage of the new opportunities available during the festive season?

Last year it was estimated that £67 million worth of fraud took place at Christmas, and despite measures being put in place by retailers to try to combat this, it is thought 2011’s figure will be just as high. According to the study, ‘Gangsters’ Paradise or Shoppers’ Delight?’ the expected impact of e-commerce fraud on the UK economy means it will rise by 18%, from £165.2 million in 2011 to £195.3 million in 2015. Shopping on a mobile phone or a favourite social media site is the next big thing in e-commerce, but criminals are likely to capitalise on poor awareness of the risks by consumers and retailers alike.

IBM is predicting that shopping via mobile devices will reach double figures this year, as consumers look for quicker and more convenient ways to avoid the crowded shops during the holiday season. We all know how stressful the high street can be, so online retailers must be prepared to take advantage of the influx of sales and ensure that their websites, both traditional and mobile, are able to sustain such an increased level of traffic. Last year retailers experienced an increase of around 300% in visits to their mobile sites during the Christmas period, suggests eConsultancy, and this year should be no different.

With figures potentially peaking on “Cyber Monday,” the busiest online shopping day of the year, which this year falls on November 28th, online retailers should look to make the most of this increase in demand by providing a safe, secure and reliable shopping experience.

It is understandable that retailers wish to engage with customers via new channels, and capitalise on the new ways to spend, but it is vital to remember that taking payments through a mobile device or a social networking site brings a whole range of new issues which retailers must confront., with the Cebr, has forecast that the number of internet users purchasing products via their mobile phones will rise by five million, to 10.5 million, by 2015, while social media is also expected to be a significant growth area, with an additional 2.9 million users making shopping purchases through these channels in four years time.

However, this boost to the e-commerce market has a downside, bringing with it a far greater fraud risk. These new channels will not have experienced such high levels of traffic and demand before and therefore may be more susceptible to potential fraudulent activity. Many of the fraud management approaches currently being used by retailers will not be able to keep up with the pace of development, and currently mobile fraud is poorly understood. Retailers with mobile offerings need to prepare themselves to field considerably more fraud chargeback requests than they may be used to.

What is worrying is that despite increased awareness about fraud risks retailers may not have an adequate plan in place to deal with this new fraudulent activity. It is imperative that all retailers take measures to protect themselves against fraud in order to make the most of the Christmas boom especially since it has been proven that the risk of fraud can significantly keep retail sales at a lower value than they would otherwise be. While retailers have made good headway in tackling fraud over the last few years they’re now on the back foot when it comes to new shopping channels because many haven’t planned ahead.

So to ensure a prosperous and fraud free Christmas here are our top tips for online retailers:

• Ensure there is a robust fraud prevention strategy in place for the traditional e-commerce platform before expanding to new channels

• It is important that retailers have a real time view of the payments coming in or out of their business across all of these new avenues. It’s advisable that this information can be accessed from one central place so potentially fraudulent transactions can be spotted quickly

• Retailers may wish to consider outsourcing their online payment platform to an expert as this will enable them to focus on their core business offering at the busiest time of the year, while removing the hassle of monitoring e-commerce fraud

• Accept that investment in fraud protection could prove costly, while these new shopping channels are in the early stages of adoption. The returns will come as consumers will begin to gravitate towards safer, less risky brands.

Further tips are detailed in the Gangsters’ Paradise or Shoppers’ Delight? report

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