BOPIS fraud leaves merchants puzzled, fraudsters rich

BOPIS fraud leaves merchants puzzled, fraudsters rich

 

As Buy Online, Pick-Up in Store (BOPIS) shopping becomes significantly popular, RISK IDENT’s Dustin Clinard gives insights into the unique type of fraud that is coming along with it

Much like consumers have learned to shop around for the best deals on goods, they’ve learned to shop around for the smoothest purchasing experiences. As such, “Buy Online, Pick-Up in Store” – otherwise called BOPIS – shopping has become more and more common. But just as it has become a hot trend for consumers, it has become a hot target for fraudsters.

The benefits of BOPIS shopping

BOPIS shopping allows for consumers to browse online without the crowds, pay for their purchase without having to stand in long lines and pick up their goods directly from the store – the latter of which is nice when a customer doesn’t have time to wait for delivery, if home delivery isn’t possible or if it presents an inconvenience. This type of shopping, according to a 2017 JDA Consumer Survey, has increased by 44% in the last two years and shows no sign of slowing down.

But it’s not just good for consumers. BOPIS shopping benefits retailers because it drives online traffic to brick-and-mortar locations, where there’s a high chance the consumer will purchase other goods, as well. In fact, 40% of shoppers who come into a store to pick up an item purchased online will make additional purchases once inside the store.

With the potential to heighten both customer satisfaction and store sales, BOPIS shopping has proven to be a win-win for consumers and retailers alike. Unfortunately, it has also proven to be a win for fraudsters. Bad actors have picked up on the popularity of the BOPIS shopping trend and are taking advantage of its structure: they use a stolen credit card or stolen account credentials, place an order online, pick up the goods at a store, and then either keep the items or resell them for a profit.

Why criminals love the click-and-collect shopping structure

One of the most attractive things about BOPIS shopping is that it allows consumers quick access to goods. Many retailers allow for in-store pick-up within an hour of a purchase being made online. This short time frame is great for legitimate customers, but it leaves an extremely limited window of time for manual review of suspicious orders to take place – and fraudsters have learned to take advantage of that weakness. By the time a fraudulent order can be detected, the goods are already gone.

Another thing that attracts fraudsters to the BOPIS shopping structure is that it eliminates one of the key pieces of information fraud prevention systems use to detect suspicious orders: the comparison of the billing and shipping addresses. Many traditional fraud prevention programs heavily rely on this information to determine transaction risk. Meanwhile, more sophisticated programs use delivery address information in combination with other data points (such as a computer’s IP address) to detect the probability of fraud. Not having the ability to compare the billing and shipping addresses of an order can dramatically reduce the ability of any fraud prevention program to determine transaction risk.

Other reasons BOPIS fraud creates a headache for merchants

Lack of a delivery address and reduced time for manual review are two pain points when it comes to detecting BOPIS fraud. But there is a number of other reasons this type of crime is proving to be a nightmare for retailers and fraud prevention specialists:

  • The transaction is done online, but the goods are picked up offline, and merchants often use two fulfilment systems that don’t talk well to each other.
  • Pick-up is usually done with a driver’s license, which is a piece of identity that is easy for fraudsters to fake it.
  • Fraudsters can make last-minute cancellations of the charges online (from the parking lot, for example) and quickly pick up the goods before the store has been notified of the payment cancellation.
  • Fraudsters can easily hire mules who have no idea what’s going on to pick up illegally-acquired goods, therefore reducing their.

What merchants can do to reduce BOPIS fraud

While retailers’ instinct may be to implement screening methods for pick-up orders, this is not the best way to reduce BOPIS fraud. After all, one of the things consumers love so much about buying online and picking up in the store is that it reduces the time a customer has to spend on acquiring goods. Adding friction during the pick-up process defeats the purpose of offering such a service in the first place.

A better way to go about reducing BOPIS fraud is prioritizing BOPIS orders so that they appear at the top of the manual review queue. This ensures that fraud managers are given the most amount of time possible to look at the orders and halt fraudulent BOPIS purchases.

Another helpful BOPIS fraud reduction tactic is implementing smart software that can examine multiple data points to deduce whether or not a transaction is fraudulent. Successful systems are able to look at a wealth of insightful information – such a user’s previous shopping habits or his/her behaviour on all pages of the website – to prevent fraudulent transactions from taking place, whether BOPIS-related or not.

The important thing merchants should remember when attempting to bop out BOPIS fraud is to never lose sight of the customer experience. Consumers who gravitate toward click-and-collect shopping do so because it’s a quick and easy way to acquire goods. Ruining that experience in the name of BOPIS fraud prevention is a quick and easy way to lose them.

See the article published by The Paypers here.