Navigating peak season fraud: A merchant's guide

Optimize and maintain: There's no need to panic if you already have a robust fraud prevention system. Your focus should be on optimizing for peak-season shopper behavior rather than overhauling your existing setup. A good fraud set-up results in a high authorization rate and a low fraud/chargeback rate, which you can monitor through your payment insight dashboard.

Review velocity rules: During peak season, shoppers may make multiple purchases for family and friends. To accommodate this, consider loosening velocity rules. For instance, if your normal rule allows only 2 or 3 transactions within a limited timeframe, increase this limit temporarily.

Relax consistency rules: Consistency rules are designed to match delivery and billing addresses, and shopper and issuer countries. However, during peak season, these checks might trigger false positives as people send gifts to different addresses. Reduce the stringency of consistency rules and lower their blocking thresholds.

Shopper DNA flexibility: In Shopper DNA, where we look at risk from a shopper level rather than transactional, it is preferred to loosen up the rules and let shoppers make more than 1 or 2 transactions in a limited period of time. If you also have strict thresholds on the authorized amount within a specific period of time, it could be beneficial to allow a higher amount to be transacted during that time period. 

Create a peak season profile: We recommend creating a new risk profile based on your existing one but with more lenient settings to implement these rule adjustments. During the peak season, assign this relaxed profile. If you suspect unusual behavior, it's easy to revert to the old risk profile.

Here’s a summarized checklist you can use: 

• Maintain existing fraud set-up; focus on shopper behavior.

• Good set-up = high authorization rate and low fraud/chargeback rate.

• Focus on increasing conversion and authorization for loyal shoppers.

• Adjust velocity rules to be more lenient during peak season.

• Relax consistency rules to avoid false positives.

• In Shopper DNA, prioritize shopper-level risk assessment and relax restrictions on multiple transactions within a limited time frame.

• Create a different lenient risk profile for peak season, easy to revert if needed.

Understanding 3D Secure: Adyen uses 3D Secure for two-factor authentication in the European Economic Area (EEA) and the UK. While this provides fraud protection and a liability shift, it can add friction to the payment process, potentially lowering your authorization rates.

Leverage exemptions: To boost conversion during peak periods, take advantage of exemptions available through Adyen. Skip strong customer authentication for low-value transactions (under 30 EUR) or when a transaction is deemed low risk. You can also request exemptions for loyal shoppers and low-risk scenarios.

Monitor for unusual behavior: Keep a close eye on transactions that benefit from exemptions. While they can improve conversion, they also carry a degree of risk. Continuously monitor for any unusual or suspicious activity during this period.

Here’s a summarized checklist you can use: 

• Understand the impact of 3D Secure on conversion and liability shift.

• Leverage Adyen's exemptions for 3D Secure.

• Skip strong customer authentication for low-value transactions (e.g <30 EUR) or low risk.

• Request exemptions for loyal shoppers and low-risk scenarios.

• Monitor for unusual behavior and risks during exemption usage.

Learn from the past: Before the peak season hits, review your performance from the previous year during the same period. Analyze chargebacks and fraud notifications received in January to identify areas for improvement.

Real-time monitoring: During the peak season, closely monitor refusal rates on your Risk and Dispute Dashboard. Determine whether authorization rate issues stem from issuer refusals, fraud refusals, or 3D Secure.

Adjust as Needed: If you're experiencing excessive fraud refusals, investigate which rules are causing these refusals and make adjustments accordingly.

Stay alert: Keep a watchful eye on incoming fraud notifications and chargebacks. Remember that post-peak season, in January and February, is when you might see slightly higher fraud and chargeback counts, which is expected given the increased holiday traffic.

Here’s a summarized checklist you can use: 

• Review previous year's peak season performance for insights.

• Analyze chargebacks and fraud notifications from January last year.

• Monitor refusal rates on Risk and Dispute Dashboard.

• Identify factors affecting authorization rate (issuer, fraud, 3DS).

• Adjust rules causing excessive fraud refusals.

• Pay attention to incoming fraud notifications and chargebacks.

• Expect higher post-peak season fraud counts; ratios normalize later.

By following this checklist, you'll be well-prepared to handle peak season fraud while ensuring a smooth shopping experience for your customers. Remember, the key is to strike the right balance between security and convenience. Good luck!