The newest audience flocking to omnichannel shopping is the one no one invited—fraudsters.
Attempts at fraudulent transactions for items purchased online and picked up at stores in the 2015 holiday shopping season rose 47% compared with a year earlier, according to new data from ACI Worldwide.
The volume of items sold online for pickup at a local store is still relatively small, but it’s growing fast as retailers step up omnichannel strategies to streamline e-commerce sales, experts say. Best Buy, Apple Inc. and Walmart are among retailers now offering options to buy merchandise online and pick it up immediately—in some cases within an hour of purchase—as competition intensifies in online and mobile commerce.
Fraudsters are capitalizing on the trend, and drove the rate of fraud attempts on items sold online for store pickup to an estimated 2.8% of all e-commerce transactions between Thanksgiving and Dec. 31, 2015, compared with 1.9% during the same period in 2014, ACI said.
Watches, handbags, vacuums and makeup were among the high-ticket items fraudsters obtained most often by scamming stores across channels, according to ACI’s data.
To be sure, e-commerce sales are booming—overall online sales rose 21% during the 2015 holiday shopping season from a year earlier, ACI said. But the rate of routine attempted fraudulent transactions rose only 8% in 2015, the Naples, Fla.-based company’s data suggests.
Omnichannel strategies to improve consumer convenience and sell more goods are still evolving, but if present trends continue, merchants are likely to see continued rising fraud rates on transactions that begin online and conclude at a store, Erika Dietrich, global director of payment risk management for ACI’s ReD Shield, predicts.
The shorter window of transaction time for items sold online for store pickup tends to increase merchants’ fraud exposure by reducing the points along the way where merchants typically monitor fraud, Dietrich said. And transactions that begin online and conclude at a store often leap from one data stream to another, opening up opportunities for fraudsters, she explained.
"A retailer’s fraud solution for online transactions might be housed in one silo, and its solution for in-store sales is in another silo, so the red flags for a potentially fraudulent online transaction aren’t visible to systems for the in-store pickup side," Dietrich said.
Merchants can offset the risk of fraud by adding more layers to authenticate online-to-offline pickup transactions, but they cannot encroach too heavily on customer convenience, noted Michael Grillo, an ACI Marketing Line director.
“The dilemma retailers face is making it easy and smooth for trusted customers to buy online and pick up merchandise at stores—which saves time for consumers and can cuts inventory and shipping time for retailers—while building up systems to catch fraudulent transactions in that mix immediately,” he said.
The high number of data breaches in recent years that continue to expose sensitive consumer information has been a major contributing factor to rising e-commerce fraud in all channels, Dietrich said. Although some industry observers have predicted a rise in card-not-present fraud connected to the U.S. EMV liability shift in October 2015, Dietrich said it’s too early to speculate whether that specifically affected the increase in e-commerce fraud during the recent holiday season.
Online fraud continues to rise along with e-commerce, although the average fraud ticket value decreased by $12 in the 2015 holiday shopping season over the previous year. In the recent holiday shopping season, one out of every 67 transactions was an attempt at fraud, compared with one out of 72 in 2014, ACI said.