Peak Periods of Fraud: Understanding Seasonal Trends

Identifying Seasonal Trends

Seasonal trends in fraud follow predictable patterns that can significantly impact consumers and merchants. It is crucial to understand these trends to anticipate when fraud is most likely to occur.

Certain times of the year, such as the run-up to Christmas, Black Friday, and Cyber Monday, consistently see spikes in fraudulent activity. An increase in consumer spending marks the holiday season, while Black Friday and Cyber Monday bring a heightened sense of urgency to “bag a bargain.” These periods create perfect opportunities for fraudsters to exploit the vulnerabilities of both consumers and merchants.

By identifying these high-risk periods and understanding what drives the spikes in fraudulent activity, everyone can better prepare and protect themselves against potential risks.

Factors Contributing to Increased Fraud During Peak Seasons

While merchants typically operate according to a standard business calendar, fraudsters have their own seasonal schedule and are ready to strike when the time is right.

Peak seasons see a rise in fraudulent activities due to various factors. Specifically, fraudsters exploit seasonal weaknesses or vulnerabilities in both consumers and merchants and strike when the iron is hot.

Consumers

In the run-up to Christmas, there is a significant rise in consumer demand and online transactions. As consumers navigate the shopping frenzy, they often become less vigilant and unintentionally let their guard down, making them more susceptible to fraudulent schemes and cyber-attacks.

Black Friday and Cyber Monday come with their own set of fraudulent activities. With the rising cost of living, consumers are on the lookout for enticing promotions and the exciting “deal of the day,” making them easy targets for scammers looking to capitalize on their urgency and excitement. Authorized Push Payments (APP) fraud is often used in these situations.

During the peak holiday season, consumers eager to find the best deals may also fall victim to fraudulent travel agencies, fake insurance providers, or illegitimate car rental companies.

Merchants

In the run-up to Christmas, merchants are also prone to letting their guard down. With heavy customer traffic, increased transaction volumes, and additional temporary staff (many of whom may not be fully trained to spot suspicious activities), this is an ideal time for fraudsters to strike.

Similarly, Black Friday and Cyber Monday see a surge in online transactions, opening up significant opportunities for scammers to target merchants. Identity theft and the use of stolen credit cards can easily go unnoticed.

“Friendly fraud” also becomes a significant issue for merchants during these times. Unrecognized transactions and impulsive purchases can result in buyer’s remorse, leading consumers to dispute legitimate transactions. This impacts the merchant’s revenue and adds pressure to customer service resources as they handle increased volumes of chargebacks and disputes.

Peak Fraud Periods: What Should Consumers Look Out For?

Fraudsters were once notorious for making frequent spelling and grammatical mistakes in their subject lines, emails, and offers. While AI is now a powerful tool in combating fraud, it has also been adopted by perpetrators. Fraudsters use AI to craft highly convincing messages, making it increasingly difficult for consumers to identify scams, especially during busy shopping periods.

To stay vigilant and see beyond seemingly legitimate texts, here are five top red flags for consumers to look out for:

• Being told there is limited time to purchase an item or respond to an offer—this is done to encourage the customer to hastily provide credit card details.
• Being told that there is a limited supply of an item—this creates a sense of panic and encourages impulsive buying.
• Be wary of links to counterfeit websites—fraudsters often mimic legitimate websites or businesses. Although these may look increasingly convincing, they can be identified by suspicious URLs or unfamiliar domain extensions.
• Emails claiming there’s an issue with a recent transaction and asking customers to re-enter their bank details are common fraudulent tactics. Scammers often reference large retailers and send these emails to tens of thousands of people. During peak shopping periods, many recipients may have recently purchased from these retailers, making the scam appear more convincing. Customers should avoid providing bank details in response to such requests.
• Emails displaying a tracking number—fraudsters often include tracking numbers in their emails. Many customers are tracking parcels during peak shopping, so scammers use this to their advantage. Once a tracking number is clicked, the customer’s device may be infected with malware, or they may be taken to a bogus page to input personal and bank details for more tracking information.

Peak Fraud Periods: What Should Merchants Look Out For?

It’s not only consumers who need to be vigilant against fraud during peak periods. Merchants must also stay alert to protect their businesses from potential scams. Fraudsters continually evolve their tactics, targeting merchants with schemes that can lead to financial loss, data breaches, and reputational damage.

Here are five key indicators for merchants to watch for during busy shopping periods:

• Unusual order patterns—although transaction volumes increase during peak shopping periods, look out for particularly large orders from new customers. This could signal a fraudster using stolen details to make off with a large amount, undetected.
• Mismatched information—if the shipping address doesn’t match the customer’s billing address, this is a strong indicator of potential fraud, likely involving stolen credit card details.
• Suspicious email addresses—be cautious with orders from email addresses that seem random, overly complex, or include strings of numbers, as these can indicate bot activity or a fraudulent account.
• High-risk locations—orders from regions known for high levels of fraud or from areas where you don’t usually receive orders should be reviewed carefully.
• Unusual payment requests—be aware of requests to change payment methods after an order has been placed, or to pay outside of the usual secure payment channels. Fraudsters may be looking for less secure payment methods to exploit.

Preventing Chargebacks: Best Practices

Managing chargebacks is crucial during peak seasons. Last year, shoppers lost over £10 million to fraudsters, with most losses attributed to online, unauthorized fraud. This rise in fraudulent activity can lead to high chargeback rates, which merchants must monitor closely. A sudden increase in chargebacks may signal a targeted fraud attack, and consistently high chargeback rates can harm a merchant’s account standing and reputation.

In addition to implementing the strategies outlined above, the most effective way to address fraud and manage chargebacks is to look ahead and develop a comprehensive prevention plan in partnership with a chargeback specialist.