Research reveals growing concern about fraud threat to multichannel and online retailers

A new Transactis-Retail Knowledge survey of leading loss prevention professionals shows that 88% see retailers placing a greater focus on fraudulent goods lost in transit (GLIT) claims than they were two years ago, and the same proportion view returns fraud as a similar or greater risk. The research also indicates that lost deliveries and returns fraud is no isolated problem: 81% of the experts surveyed see a correlation between GLIT and other types of loss, while 94% see a link between any opportunist fraud and other types of fraudulent activity.

The survey, carried out by Transactis at a recent Retail Fraud Conference organised by Retail Knowledge, shows that the vast majority of loss prevention professionals also support the idea that sharing data is critical to thwarting this type of first-party fraud: more than 90% believe data from other retailers about losses due to opportunist fraud would be valuable to those seeking to prevent it and other types of fraudulent acts against their own organisation.

Other findings indicate that most retailers have a long way to go to put in place the methods and infrastructure necessary to do so, as only:

  • 13% of loss prevention experts believe retailers can distinguish between legitimate and false GLIT claims without alienating genuine customers
  • 19% believe retailers have in place a defined process to record and track all GLIT claims
  • 44% see retailers utilising claims histories in their anti-fraud processes
  • 31% believe retailers are aware of the gross margin loss caused by GLIT claims

This new research builds on the findings of a survey of more than 1,000 UK consumers commissioned by Transactis last October indicating that, in the era of ecommerce and Big Data, most people have quite a clear idea of how and when retailers use their personal information – understanding that it can be used to benefit them. The study also revealed, however, that consumers take note when data is used irresponsibly, sloppily or not at all – seeing this as an indicator of poor competency.

The study showed that many, in fact, see failure to use data properly to track their actions or behaviour as an invitation to take advantage. Where there is opportunity to "get away with it", these consumers will go for it: roughly half will keep an extra item if a retailer mistakenly delivers two instead of one, and close to two-thirds will keep a loyalty reward bonus they hadn't earned or a mobile upgrade they were not entitled to. In fact, a significant proportion will even take their chances when there could be dire legal consequences – nearly a fifth would not return a wrongly awarded state benefit, while a quarter would retain a mistaken tax credit.

Dave Webber, product and professional services director for Transactis, notes: "The challenge today is in identifying opportunistic fraudsters and taking action to stop them when individual companies may only sell to most of these 'customers' once or twice a year – so they have little opportunity to see a pattern that, when analysed, would indicate potential fraud risk.

"The ideal scenario is to bring together all available loss data on multiple types of interaction from an array of companies, so that suspicious patterns of behaviour could be identified. The retailers can then recognise common MOs and unusual trends based a broader view of trading history. And it's not just the individual in various guises who needs to be identified – the address is vital and provides critical information that should be factored in too.

"The more data from different sources, the wider the scope for true behavioural profiles. It not only helps to identify fraud risk early in the process – when simple and cost-effective actions such as added security questions and signed acknowledgment can be taken – but it steers retailers away from putting unnecessary barriers up for good customers with genuine issues."

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