With back-to-school, retailers are in the midst of the second-biggest spending season of the year, a sort-of dress rehearsal for the big show of the Christmas holidays.

The NRF reported that spending will reach $75.8 billion this year, up from $68 billion in 2015. Much of that spending, of course, will be online. During these peak shopping periods (on top of other important considerations) retailers must consider the impact that their fraud prevention techniques have on consumers’ all important checkout experience.

Gartner reported this year that, “Web commerce has shifted the role of fraud detection from the arcane back office loss prevention department to being front and center in the customer experience.”

Fraud prevention occurs at the precise moment of order completion, and traditional antifraud practices often intrude into that experience, as they rely on manual reviews and a rules engine that helps to filter orders. In the normal course of business, this results in delays in confirmation and fulfillment for orders which need review, as each review takes several minutes. It also means that some legitimate customers are rejected by rules that are too rigid to take any specific circumstances into account.

During the holidays, these problems are exacerbated. Even when ecommerce merchants take on extra reviewers, a flood of orders means extended delays. That isn’t good for customer experience or retention even during slow periods, but during peak periods it can often result in a lost sale. If a customer doesn’t receive order confirmation at once, they will go elsewhere.

Additionally, every holiday season is a little different, reflecting changing buying trends and needs. Rules, which already require calibrating in advance of the holiday period, are often slow to adapt to such changes once it has begun. The less tailored the system is to the reality of the shopping season, the more orders will be reviewed and mistakenly rejected.

It is, perhaps, even more of a challenge this holiday season, as consumers increasingly turn to mobile devices to shop. One study found that back-to-school shoppers this year are roughly evenly divided between desktop and mobile devices. Yet few merchants take a mobile-first approach to fraud prevention. And they need to be – a recent Forrester report discussed the particular problems posed by mobile, and recommended that when it comes to mobile, retailers “must be prepared to ask tough questions when evaluating vendors.”

Turning Customers Away at Checkout

False declines, the orders which are actually good but are rejected out of an over-abundance of caution, are more of a problem than many merchants realize. Business Intelligence recently reported that false declines are becoming a more costly problem than actual fraud. In 2016, US ecommerce merchants will lose over $2 billion more in falsely declined transactions than they’ll save in fraud they prevent!

Like other glitches in the fraud prevention system, false declines are especially problematic during the holidays. Overloaded reviewers are more likely to decline if they’re uncertain about a transaction, rather than spend time trying to verify it, and rules which aren’t entirely up to date are more likely to make the mistake.

It’s hard to blame the fraud team, considering the ingenuity of the fraudsters. Online fraud attacks grew 215% in 2015, and more fraudsters are moving online now that microchip cards have made “card present” fraud more difficult. Thieves can also get up to speed fast thanks to a sophisticated ecosystem that includes theft tools and easily-accessible stolen data.

You can’t compromise when it comes to fraud prevention. But what online merchants can and should do is shift their checkout from being fraud-focused to being customer-centered. What does that mean?

  • A high level of accuracy, which enables the system to treat customers as innocent unless proven guilty, rather than the other way around.
  • An end to manual reviews and rules. Machine learning, which gets smarter with every transaction, has made full automation of fraud prevention a real possibility.
  • Seamless scaling. Merchants who receive an exponential number of orders during holiday will no longer have to worry about coping with holiday fraud review. Automation means automatic, all the time.
  • Real time order confirmation. That means confirmation can be real-time, and fulfillment never delayed because of fraud prevention.
  • The complex buying scenarios common in today’s connected world, where people move between devices, ship to offices or hotels while traveling, and even share accounts, are accommodated, with false declines all but disappearing.

With back-to-school in full swing and the winter holidays just around the corner, it’s time for online retailers to start thinking seriously about whether their checkout is set to provide the ideal customer experience today’s consumer expects. If their fraud prevention is likely to prove more of an obstacle than a help to that goal, then it’s time for a new, customer-centered approach.