COVID-19: Overcoming Challenges Fraud Operations Are Facing

COVID-19: Overcoming Challenges Fraud Operations Are Facing

We wanted to understand how the pandemic is impacting merchants and to address common challenges that have been aggravated by the pandemic.

It’s clear by now that eCommerce in pandemic times is nothing like the online space we’re accustomed to. And this is undoubtedly a challenge, because when shopper behavior and fraud patterns change and become unpredictable, it becomes all the more difficult to discern safe and risky orders, and operations are disrupted.

We wanted to understand how the pandemic is impacting merchants and to address common challenges that have been aggravated by the pandemic.


Industries like home goods, food, and pet suppliers, have seen a sharp increase in orders. The gift card industry has also picked up, with online orders in February up 40% from January figures. It’s evident that eCommerce has become the lifeline to many businesses, especially ones that saw their brick-and-mortar operations coming to a screeching halt. But what happens to fraud operations with such a drastic and unexpected increase in online sales? Well, the only other comparable situation is the holiday season, but in this instance, merchants had no time to prepare. 

For merchants relying on manual review, this pandemic has demonstrated that an automated solution is crucial for unforeseeable scenarios. This means relying less on staff to handle high volumes and implementing a solution that can easily scale and can mitigate the risk of CNP fraud. When things get so volatile, the last thing online merchants need is a fraud review scheme that will hold them back. 

False declines

Understaffed fraud prevention teams are not the only limiting factor. As customer behavior evolves, rigid rule-based systems may not be doing the job when it comes to recognizing these new patterns. For example, high cart values are often perceived as a risk indicator. Especially when it comes to highly fraudulent industries like precious metals. In March, there was a significant drop in silver and gold prices. This correlated in our data with a sharp rise in orders and order value; 90% increase in volume, 160% in value. To complicate matters for merchants, it was also combined with a similar increase for first-time customers. 

This influx of new customers, along with increased spending velocities could definitely raise a red flag for rule-based systems conditioned to pre-Coronavirus shopping habits. Another example is expedited shipping, which rose by 30% since January in the electronics industry (and can be attributed to people scrambling to set up home offices). This might be a potential blind spot for merchants. In reviewing some of our merchants’ declined orders, we identified a dramatic increase in this segment for the share of premium shipping orders in March. But our data revealed that March orders with premium shipping were actually safer than those with standard delivery. This will not necessarily be the case once the pandemic subsides, but for the time being this is a clear COVID-19 related trend that fraud systems may be mistaking as fraud.

Every order counts

Turning away good customers always impacts merchants’ bottom line, but for those with a decrease in eCommerce sales, declines are even more costly. Take high-end fashion retailers, who since the beginning of March saw a 40% drop in sales. With retailers closing their doors and consumers holding back on discretionary shopping, additional losses will cut even deeper into already thinning margins. So will true fraud that goes undetected. Then there’s brand reputation. Even if order volume is low, merchants need to be ready for the customers that do turn to them, especially in such stressful and uncertain times. If merchants fall short, there is even more at stake for customer lifetime value:

To avoid this fallout, merchants need to maintain the highest possible approval rates, while accurately distinguishing good shoppers from fraudsters in real-time. Not only will this have an immediate impact on revenue, but it will help promote more shoppers into returning customers, during and after the pandemic. 

Setting up for success

An operation that lacks the ability to scale, pivot in real-time, and maximize online sales will likely struggle to rebound once this is all over. That’s why the steps taken now by merchants to manage fraud are critical. Forward thinkers will leverage technology to quickly and accurately vet online orders. This will ensure that fraud management operations aren’t making matters worse, but pushing revenue goals and brand reputation forward. By automating fraud review, merchants can ensure their business will be prepared to handle whatever changes may lay ahead, no matter how drastic or unforeseen. For any questions, please reach out via email to