When is fraud not fraud?

Not everything that look like fraud actually is. For example, new customers who’ve never shopped online often stumble around at first and can be mistaken for fraudsters.

There’s an old saying that goes something like, “Things aren’t always what they seem – even salt can look like sugar.”

That can also apply to fraud. Not everything that look like fraud actually is.

For example, new customers who’ve never shopped online (there were a lot of those during the pandemic) often stumble around at first and can be mistaken for fraudsters. Why?

They aren’t used to entering credit card information online and can make multiple, repetitive mistakes.
They don’t necessarily understand the way online shopping carts work and often add and remove items from their carts in a suspicious way.
They might spend a small amount on their first transactions because they don’t necessarily trust the entire process.

All three of these scenarios can easily be mistaken for fraud.

Another example is during the holidays and sales promotions.

Customers often do a lot of shopping at once for the holidays, so they pull out their smartphones, tablets or laptops and “get it over with,” making large purchases that can seem unusual.

If your company is offering products at a deep discount, some customers will take advantage – such as a grandmother sending one of your products to each of her 12 grandchildren at different addresses around the country. That can raise an eyebrow as well.

Then there’s what happens when companies use deny lists (formerly called blacklists).

How deny lists work

Some businesses use deny lists to prevent chargebacks. They take all of the transaction information and add it to a filter set to automatically deny any future orders containing any of those data values. No exceptions. Simple, right?

That’s the problem: It’s too simple. People move, they shop on multiple channels, and their email addresses change. Not all transaction data is fraudster specific. Large apartment buildings, university dorms, shippers, and other multi-unit buildings share an address but include a large number of people. When you block those addresses, you can block everyone who lives there. That’s potentially hundreds of legitimate customers.

There’s also the consideration of account takeover fraud (ATO). Customers not only have to deal with being the victims of fraud, but they also are blocked from making any purchases because their name and/or address is on a deny list.

In today’s ecommerce environment, customers expect to be approved when making purchases. When companies deny those transactions, about 40% of those customers won’t shop with you again and about 34% of them will take their displeasure to social media.