The holiday season is a prime time for shopping. Unfortunately, it’s also peak season for credit card fraud. With increased transactions both online and in-store, fraudsters have more opportunities to exploit vulnerabilities — and they are getting better at it every day.
To protect your business and customers from fraudulent activity, it is essential to stay vigilant and take proactive measures. Here are some practical strategies for preventing credit card fraud during the upcoming busy holiday period.
Implement Multilayered Authentication
A robust multilayered authentication process is crucial for fraud prevention, especially during the holiday rush. Take the following steps to safeguard transactions:
- CVV verification: Require the card verification value (CVV) for all transactions.
- Two-factor authentication (2FA): Enabling this adds an extra layer of security by requiring users to verify their identity through another device or app.
- 3D Secure technology: Adopting this protocol offers an additional layer of authentication, requiring cardholders to enter a password or use biometrics before the transaction can be processed.
Monitor Transactions for Suspicious Activity
Keep an extra-keen eye on transactions during the holiday shopping season and immediately flag any irregular activity. Signs of potential fraud may include:
- Unusually large orders: Fraudsters often test high-value purchases to see if stolen card information works. Pay special attention to first-time customers making large or multiple purchases in a short time. Multiple transactions from the same IP address, especially in quick succession using different cards, can indicate fraudulent activity.
- Shipping and billing discrepancies: Be cautious when the shipping address is different from the billing address or when orders are rushed to unfamiliar locations.
Using fraud detection software to automatically flag these types of behavior will save time and help prevent potential issues.
Educate Customers on Safe Shopping Practices
Remind your customers of how they can protect themselves from fraud during the holidays. Simple tips include:
- Shop only on secure websites: Encourage them to check for the padlock icon in the browser and use trusted sites.
- Don’t use public Wi-Fi for transactions: Public networks are more vulnerable to hacking, so it would be much safer for them to do their online shopping from home, rather than at Starbucks.
- Beware of holiday phishing scams: Remind them to avoid clicking on suspicious links or sharing sensitive information via email.
Use Advanced Fraud Detection Tools
There are several advanced fraud detection tools that you can integrate into your payment processing system. Consider using tools that:
- Leverage machine-learning algorithms: These tools analyze past purchasing patterns and customer behavior to detect anomalies in real time.
- Provide real-time fraud scoring: This evaluates the risk level of each transaction based on multiple factors like geolocation, device fingerprinting and user behavior.
These tools help you stop fraudulent transactions before they go through.
Update Software and Security Systems
Prior to the holiday rush, it’s a good idea to ensure that your payment gateway, shopping cart and any other software for handling transactions are up to date as well. Security patches often fix vulnerabilities that fraudsters exploit. Set up automatic updates wherever possible and encourage your customers to update their browser or app to the latest version as well.
It’s also important to keep your PCI DSS (Payment Card Industry Data Security Standard) compliance up to date; compliance is essential for protecting cardholder data. Regularly review your compliance status, especially before the holiday season when transaction volumes rise.
Limit Manual Transaction Reviews
Manual transaction reviews can slow down the purchasing process and frustrate legitimate customers during a busy shopping period. However, manual review may be necessary for large or high-risk transactions. Limit manual reviews to only those transactions by relying on automated tools for low-risk purchases.
Set Up Alerts for Unusual Account Activity
Set up real-time alerts for unusual account activity such as:
- Multiple failed login attempts.
- Changes to billing or shipping addresses.
- Purchases that are unusually large or uncharacteristic for a specific customer account.
These alerts can help you take immediate action before a fraudulent transaction is completed.
Offer Payment Methods With Fraud Protection
Encourage your customers to use payment methods that offer robust fraud protection. Options like digital wallets — e.g., Apple Pay, Google Pay — use tokenization and encryption to protect sensitive payment information. These payment methods are less vulnerable to fraud than traditional credit-card processing.
Educate Your Employees
Make sure your staff is trained to spot fraudulent activities, especially during the holidays. Red flags can include:
- Multiple transactions on one card.
- Failed purchase attempts for high-ticket items.
Ensure that your employees are aware of the protocols for handling suspicious transactions and that they know how to report fraud immediately.
Review Refund and Chargeback Policies
During the holiday season, fraudsters may exploit refund or chargeback policies. To prevent this, review and tighten your policies by:
- Requiring proof of purchase for all returns.
- Limiting the time frame for refunds or exchanges.
- Using tracking and delivery confirmation for shipped goods to prevent chargeback fraud — when customers claim they didn’t receive a product they actually did.
Fraud prevention during the holiday season requires a combination of proactive strategies and real-time vigilance. By strengthening your authentication methods, monitoring transactions and using advanced fraud detection tools, you can significantly reduce the risk of credit card fraud and ensure a secure shopping experience for your customers. Implement these measures early in the season to safeguard your business and maintain customer trust.
Jonathan Corona has two decades of experience in the electronic payments processing industry. As chief operating officer of MobiusPay, Corona is primarily responsible for day-to-day operations as well as reviewing and advising merchants on a multitude of compliance standards mandated by the card associations, including, but not limited to, maintaining a working knowledge of BRAM guidelines and chargeback compliance rules defined in both Visa and Mastercard operating regulations.
