As the retail landscape continues to evolve, businesses are finding innovative ways to appeal to consumers’ need for online convenience while still attracting brick-and-mortar traffic. How? One solution is to implement buy online pickup in store (BOPIS), which allows shoppers to reserve products online for easy pickup at a nearby location.
It’s a proven way to engage shoppers online, attract in-store shopping and drive impulse purchases. In fact, the National Retail Federation reported that 32% of omnichannel retailers adopted buy online pickup in store in 2016.
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The downside? Fraudulent transactions are approximately three times more likely to occur, challenging omnichannel retailers to take proactive steps to combat theft and profit loss. While BOPIS offers convenience to customers, it also leaves major loopholes for fraudsters:
The Multiple Identities Criminal: Many retailers use separate systems for internal and online purchases that don’t communicate with each other, limiting a retailer’s ability to verify customer identities and pinpoint fraudulent orders. For example, an in-store employee may have no way of knowing that a customer bought 50 identical items, with 50 different identities and plans to pick up at a variety of retail locations.
The Reverse Engineer Criminal: Additionally, savvy criminals reverse engineer the fraud detection systems that retailers use and work around review thresholds (i.e. purchasing items below $499 if $500 is the review threshold). Fraudsters also limit purchases according to known retailer velocity thresholds (i.e. purchasing less than 10 items at once) to fly under the radar of security checks.
The Holiday Criminal: While risk of fraud is ever-present with BOPIS orders, retailers are at even greater risk during certain times. Jamon Whitehead, senior manager of payment and risk operations at Backcountry, says timing is everything when it comes to preparing for fraud risk. “The volume of risky orders goes up tremendously during holidays and requires us to think about risk thresholds,” Whitehead said.
To combat the risk of fraud for BOPIS orders, it’s imperative to take proactive steps to address omnichannel risk. Straightforward solutions like requesting identification if the credit card chip is damaged (this is a common scam to allow use of counterfeit stripe cards in face-to-face store transactions) can cut down on counterfeit fraud in person. Criminals using account takeover tactics (using a stolen username and password) use buy online pickup in store as a workaround to avoid fraud filters; by not changing the shipping address they avoid flagging the fraud department.
Retailers therefore need to take extra precautions when account elements have been edited and check identification in store if they suspect fraudulent intent. It’s important to examine identity elements that have changed, like a new email address or phone number, in the BOPIS use case. Identity verification is one of a few key ways to detect and deter identity theft and account takeovers.
Many omnichannel retailers realize the serious and growing risk of fraud and are turning to third-party fraud prevention platforms for more comprehensive vetting and security. It’s precisely why anti-fraud tools are supplementing their services with identity check solutions to triangulate many attributes of a person’s identity and check the linkages in a simultaneous search.
In the click of a button, these tools can validate a phone number while checking to see if the number is linked to the applicant. The tools also check for an address, email and IP address from which the online account was created.
As the retail landscape and consumer behavior continues to change, retailers also must change the way they protect themselves and their customers from fraud. Taking a more comprehensive approach by validating more identity elements and verifying identity linkages makes fraudsters less successful and preserves convenience for online shoppers.
Tom Donlea is Vice President of Marketing for Whitepages Pro