Black Friday and early holiday shopping are known for good deals, a kick-start to the holiday season – and often transaction fraud. E-Commerce is at particular risk, as the busy holiday season offers increased opportunities for fraudsters to hide their activities amidst the massive volume of daily transactions. Online holiday sales have steadily increased since 2019, according to Mastercard SpendingPulse™, and our analysts predict the trend will continue in 2022. Inflation, however, may bring more bargain hunters while predators try to slip through the cracks of fraud prevention. With AI models enriched with global transaction intelligence, acquirers can identify honest shoppers from fraudulent ones earlier in the payments process.
Anticipated growth of retail shopping, both in-person and online
For the last two years, people stayed home and had smaller holiday celebrations with their families. In 2022, as they put away the ghosts of holidays past, many are looking forward to in-person gatherings which means dressing for parties, gift giving and travel with friends.
November and December retail sales in the U.S. (excluding automotive) are forecasted to increase 7.1% year-over-year, according to the Mastercard SpendingPulse™ annual holiday forecast. E-Commerce is predicted to grow 4.2% over 2021 sales, a whopping 60.2% over 2019.
With inflation impacting consumer wallets, bargain hunting is expected to be in full force this holiday season, and, as a result, increased spending over smaller but more frequent transactions.
“This holiday season, consumers may find themselves looking for ways to navigate the inflationary environment – from searching for deals to making trade-offs that allow for extra room in their gift-giving budgets,” says Michelle Meyer, U.S. Chief Economist, Mastercard Economics Institute. “New job creation, rising wages and lingering savings should have many consumers ready and able to spend.”
Transaction fraud is expected to keep pace
In December 2021, PYMNTS.com reported that 93 percent of acquirers were seeing more fraudulent transactions. While transaction fraud can occur in both card-present and card-not-present (CNP) situations, CNP is the biggest threat.
When shopping volumes are higher, it presents more opportunities for fraud to go unnoticed. The data shows that CNP fraud accounted for 7 in 10 fraud losses to merchants and acquirers in 2020, totaling $19.43 billion worldwide. With projections of increased sales in 2022, the losses could be devastating for many small merchants.
Many fraudsters are sophisticated pros
Gone are the days worrying about hackers in internet cafes. They have been replaced by today’s professional fraudsters using sophisticated technology with access to large amounts of data, often purchased or sold on the dark web.
Sophisticated software using AI algorithms are launching fraud attacks that are more difficult to detect. Global crime rings are working together, creating stronger units.
These more advanced ways of committing crime also enable fraudsters to quickly adapt their schemes, evolving fraud to evade detection. Financial institutions need technology that can detect, learn and adapt in real time.
Sophisticated fraud requires sophisticated solutions
One-quarter of acquirers still rely on legacy rule-based solutions. Others have AI solutions that could be more effective at detecting increased, sophisticated fraud.
Evolving fraud requires self-learning AI and ML to stay ahead of trends. But imagine if a market-ready AI solution trained to recognize fraud globally could be launched in time for the holiday season.
Trained with Mastercard’s global network intelligence, Brighterion’s Transaction Fraud Monitoring detects the most difficult to catch fraud before it enters the payments ecosystem, increasing accuracy and approvals. It can be used alone or combined with existing transaction fraud solutions to strengthen or augment their effectiveness.
It doesn’t matter where in the world customers are shopping or where in the world the attacks are coming from, AI with global network intelligence is superior to protect banks, merchants and consumers. The ghosts of future holiday fraudsters are exorcised by self-learning AI that updates with each transaction, evolving as new schemes are identified.
Download our Ebook, The power of today’s market-ready AI to reduce transaction fraud, to learn more about how turnkey solutions solve fraud and transform your data into actionable insights.