As e-commerce and the retail industry continue to grow, so does the number of fraudsters who take advantage of the flexible and customer-friendly methods crucial to their success. An astonishing $100 billion was the price U.S. retailers paid in 2023 alone. How is this happening and increasing over time? More importantly, how can these fraudsters be stopped?
The contact center continues to be their primary path for entry. Shawn Hall, VP of Global Business Intelligence at Pindrop and former Director of Global Fraud Operations at E*Trade, has extensive experience developing, implementing, and modeling effective online, call center, and transactional fraud applications and solutions.
According to the research done by Pindrop Labs, 1 in 99 calls at a large U.S. retailer are fraudulent. In comparison, the fraud rate across Pindrop’s customer base is 1 in 600 calls, meaning fraud is almost 6-7 times more prevalent in retail than in other verticals.
Agents do their best, but as new technology has emerged, it’s become increasingly difficult to spot unusual behaviors and patterns. Here are three steps to protect your call center from retail fraud in the coming year.
Step 1 — Shut down fraudulent accounts.
Fraudsters target 264 U.S. retailers in various categories, including electronics, clothing, home decor, and even pet foods. They understand these retailers’ return policies and are equipped with tactics to exploit them.
Nearly 17% of retail returns are expected to be fraudulent, an extensive range for fraudsters to hide in. While retailers are worried about this, good customer care policies are the lifeblood of their business.
A whole network of fraudsters works together to exploit businesses in these categories. For example, there are fraudulent service channels with tens of thousands of members offering complete fraudulent returns services for a fee. Pindrop’s data leverages those prolific fraudsters in organized formats, making them easier to stop and catch.
>>This paper reveals that a network of refund abusers is targeting over 264 retailers (and growing) in the U.S.
Step 2 — Use multifactor authentication.
Pindrop’s multifactor platform includes voice, device, behavior, and several other data elements that create a risk profile of the caller produce a risk score on every call in real-time. In addition, Pindrop has developed and operationalized a new feature called “Negative VoiceID” to identify when a single fraud voice attacks multiple times over a given period.
This feature compares the current caller’s voice characteristics to a set of negative voice profiles trained based on confirmed fraud cases. This technology identifies fraudsters even when they change or mask the calling device, location, or phone number.
Step 3 — Be on high alert around high retail call volume times.
The period between Black Friday and Christmas is a bonanza for U.S. retailers, as it contributes over 13 percent of all retail sales. E-commerce returns are believed to be 20 percent to 30 percent (2-3x of traditional retail returns), with 14 percent of those returns estimated to be fraudulent.
The latest Black Friday sales numbers for 2023 show that expenditure for this shopping holiday surpassed analysts’ forecast to hit a record $9.8 billion. This marked a 7.5% annual rise, the largest in three years, and was more than sales figures on Thanksgiving, which totaled $5.6 billion.
Final Thoughts on How to Mitigate Refund Abuse Fraud
Ideally, eCommerce continues to grow while maintaining a high standard of customer service. According to a Capital One Shopping Research Report, eCommerce’s average retail return rate is 16.6%, and 16.4% for in-store purchases. In 2022, consumers returned $212 billion in merchandise from online sales and $603 billion from in-store sales.
Customers shouldn’t be punished, and businesses shouldn’t slow down good business practices due to increased refund abuse fraud. There’s got to be a better way, and Pindrop has technology that works as a multifactor platform.
To relieve customer service agents’ pressure, check out the only solution to spot deepfakes. Read more in our case study, Empowering eCommerce Call Centers, to see how we helped a top eCommerce call center reduce fraud losses by 3X.
