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Written by: Mike Yang

Black Friday is looking particularly black for many retailers this holiday season. Though sales are expected to spike, as shoppers begin preparing for the holidays, retailers can also expect a spike in fraud losses.
black-fridayWhile physical and online security has improved immensely over the years, the phone channel has remained a weak point in retail security. Retailers who take orders over the phone risk chargeback fraud, which occurs when a fraudster places an order using a stolen credit card. The cardholder disputes the charges and gets a refund, while the fraudster gets the purchased goods. When chargeback fraud occurs, the merchant loses not just the cost of the merchandise, but also shipping and administration costs. The merchant also risks increased transaction fees if payment processors begin to deem them a high risk.
Pindrop customers report that before instituting a phone fraud detection system, up to 5% of all phone orders result in a chargeback. For the most popular brand name products, like iPhones, chargeback fraud can run as high as 50%. For a major retailer, this can translate to an annual phone channel fraud loss of over one million dollars.
Retailers can reduce their chargeback fraud risk by implementing a phone fraud detection solution that can determine whether a calling number has a history of reported fraud attempts, or has other risky characteristics. For example, Pindrop research has proven that true customers rarely, if ever use Voice Over IP (VoIP) to place calls to banks and retailers. Yet, more than one third of fraud calls are placed over VoIP lines.
Pindrop Security’s Fraud Detection System (FDS) identifies call spoofing and other attempts to defraud retailers by providing a highly accurate call risk score. It verifies location and call type and matches it against Caller ID or ANI data to identify spoofing. It also creates a unique phoneprintTM for the caller and compares the phoneprint to a database of known fraud rings and repeat fraudsters regardless of the real or spoofed number they are using.
Check back on Cyber Monday as we discuss how fraudsters are targeting consumers directly over the phone.