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Prevent Payment Fraud: Your Guide to Prepare for Peak Retail 2022

Retail sales saw significant growth in 2021, with U.S. retail sales reaching $6.6 trillion, the highest recorded in a calendar year thus far. Unfortunately, rising sales mean more risk for fraud, higher returns, and increased business expenses. Moving into peak season for the retail year, we’ve curated best practices to help enterprises avoid mishaps with payment processing outages and bad actors to best prevent payment fraud.

Unsurprisingly, higher overall retail sales have translated into higher holiday sales and an increasing number of post-holiday returns. Sales saw 17.9% growth from 2020 and a massive 52.6% increase from 2012, when total U.S. retail sales were $4.3 trillion. Businesses need to get ready now with a streamlined payments processing system that enables flexibility and efficiency while prioritizing transaction security.

How do you prevent payment fraud?
As fraud risks advance and become stronger, combating them can consume significant time and resources. By integrating a security-first payment system, organizations protect customer information and insulate infrastructure from security risks and fraud. At OLS, our innovative and secure technology drives all forms of payments commerce, reduces your PCI scope, and protects your payment systems.

Businesses are Seeing an Increase in Gift Cards and Holiday Returns

This past holiday season saw record numbers, with total holiday retail sales reaching $886.7 billion. Overall year-over-year (YoY) holiday sales increased 8.5%, producing the largest annual increase in 17 years, and e-commerce sales increased 11% compared with 2020 and 64.1% compared with 2019.

Gift cards are among the most popular holiday purchases. In 2021 gift card spending was expected to total $28.1 billion, the highest since $29.9 billion in 2018, with shoppers planning to buy an average of three to four cards with a value of nearly $50 per card, with most gift card purchases occurring between Black Friday and Christmas.

But gift card spending isn’t the only increase during the holidays. Returns are also increasing. While consumers returned an estimated $428 billion in merchandise to retailers in 2020, representing approximately 10.6 percent of total U.S. retail sales, consumers returned an estimated $761 billion in 2021, accounting for about 16.6 percent of total U.S. retail sales.

Avoid Holiday-Related Payment Processing Outages

Payment processing outages can be inevitable but minimizing them can help further prevent payment fraud. Network issues, third-party systems latency, and many other scenarios can bring POS interactions to a grinding halt. Payment processing outages increase customer frustrations and lead to cart abandonment, resulting in many lost sales opportunities. Businesses can mitigate or eliminate the harmful effects of these occurrences by utilizing offline processing.

Offline processing options, which include stand-in processing and store and forward, allow merchants to continue to accept electronic transactions, even while one or more points along the process flow prevent the transaction’s standard processing. Businesses may find this ability particularly useful during the busy holiday season.

Consider this scenario: over a 5-day holiday period, one merchant activated 8.9 million gift cards. Of those gift cards, 0.15% needed stand-in processing, accounting for approximately 13,700 activations. Of those activations that needed stand-in processing, 36 percent cleared within 5 minutes, 61 percent cleared within 10 minutes, and 100 percent cleared within 15 minutes.

Without stand-in processing, the merchant would have missed out on that revenue. Holiday gift cards make good candidates for offline processing because they are generally purchased as gifts for someone else, meaning it will be some time before the card is redeemed.

Detect Fraud During Peak Times

A survey found that for every $100 in returned merchandise, retailers lose $10.30 to return fraud. According to the Nilson Report, credit card fraud losses reached 28.58 billion worldwide in 2020 and are anticipated to reach 49.32 billion by 2030. With the U.S. accounting for a greater percentage of global card fraud than total card volume, measuring 36 percent of international card fraud in 2020 while only producing 22 percent of card volume, merchants need powerful and flexible technology to protect cardholder data and prevent payment fraud.

With access to the most recent tokenization and encryption security updates and compliance with the latest PCI and PA-DSS requirements, OLS helps businesses help secure and protect cardholder data and personally identifiable information. Through the use of encryption and tokenization, OLS can help merchants reduce their PCI scope and provide relief from breach notifications.

OLS Can Help Businesses Prepare for Peak Retail 2022

With OLS Payments, you get a best-in-class payments partner who helps you expand your payment capabilities to reduce complexity, prevent payment fraud, and provide consumers with a payment experience that is as frictionless as possible. Contact us today to learn how OLS Payments can help you prepare for the peak retail shopping season.

Key Takeaways

  • Businesses need a partner to help them avoid holiday-related payment processing outages and prevent payment fraud.
  • Increasing sales mean more risk for fraud, higher returns, and business expenses.
  • Avoid holiday-related payment processing outages with offline processing.
  • Holiday gift cards make good candidates for offline processing.
  • OLS helps businesses help secure and protect cardholder data and personally identifiable information in their payment system.