Skip to main content

Four Fraud Prevention Techniques for Retailers This Holiday Selling Season

Retail fraud prevention teams are geared up for another holiday season as US holiday retail sales are expected to rise 6%–8% in 2022 to more than $940 billion. While nearly all consumers are planning to do at least part of their holiday shopping online, a majority voiced concern about ecommerce fraud. It’s no secret consumers have little patience for retailers not offering adequate protections. They also have high expectations for digital shopping experiences and will swiftly switch from retailers that disappoint.

No pressure…but retailers must continually adjust their fraud prevention systems to ensure good customers can transact easily and legitimate fraud risks are flagged for prioritized review.

Consumer sentiment points to a busy holiday fraud season

More than half (56%) of consumers said they planned to spend the same amount on holiday shopping this year as they did last year, while 26% planned to increase spending, according to the recently published TransUnion 2022 Holiday Shopping Report. Gen Z and Millennials led the way with 44% and 42%, respectively having said they plan to spend more this holiday season. 

Graph of holiday spending plans by generation

Consumers concerned about ecommerce fraud while holiday shopping

Nearly three-quarters of consumers stated they’re planning to do most of their shopping online, and 91% will do at least some of their shopping online. A majority (54%) of consumers indicated they’re concerned about being victimized by fraud this holiday season — a 17% increase from 2021. This concern aligns with consumers’ overall increased impatience with negative shopping experiences compared to last year. In every category of shopping experience, more consumers indicated they’d abandon their carts if retailers didn’t meet expectations — but especially in regard to fraud and website security.

Percentage Increase of Consumers Who Would Abandon Cart by Issue


Shipping costs

Payment issues

Fraud concerns

Poor website experience

Not enough security on the site







This aligns with findings from a previous global fraud research report in which approximately two-thirds of consumers stated they’d switch companies for a better digital experience. Clearly trust and convenience are paramount this holiday season.

Preventing fraud while letting good customers shop

During the holiday season, ecommerce and fraud prevention teams are under tremendous pressure to keep transactions flowing smoothly. They also need to quickly resolve potential fraud review investigations to keep customers happy, reduce costs and capture more revenue.  

With holiday shopping in full swing, retailers must stay vigilant because fraud professionals have an ally in holiday shoppers. A third of consumers said they were more concerned about being a victim of fraud or identity theft compared to last year (up from 25% in 2021), while only 4% reported being less concerned. Of those who reported being more concerned with fraud and identity theft, 79% indicated they viewed extra security measures positively, and additional security makes them more likely to shop with merchants.

To address increased risks and provide the secure shopping experiences consumers demand, there are four fundamental fraud prevention techniques retailers should use and improve:

  1. Digital risk assessment for new shoppers Use device-based risk models to ensure devices being used by unknown shoppers belong to them and aren’t associated with known fraud or fraud rings. One-time passcodes can add assurance when authenticating riskier transactions while maintaining smooth checkout experiences for the rest.
  2. Authenticate customers in every channel — Trust but verify. Ensure a seamless, omnichannel shopping experience by authenticating accounts across all touchpoints, including website, mobile app, contact center or even in-person stores.
  3. Monitor account changes — Identify suspicious account changes that may indicate potential account takeover fraud. Verify ship to locations. Protect your customers with multifactor authentication and set up authentication protocols for critical account details.
  4. Ensure transaction legitimacy — Test device, account and customer information during checkout and monitor for association changes that may indicate potential fraud. Compare names and ensure the payment instrument belongs to the account owner; use email, phone number and shipping address reputation services to determine if additional authentication steps are needed before completing transactions.

Improving the bottom line

At the end of the day, money dictates what type of fraud controls need to be in place. Deciding what’s best for your business requires understanding the risk based on the cost of fraud. Those costs include the value of stolen merchandise, chargebacks and administrative costs of investigations. At the same time, there are costs associated with flagging potential fraud, including inconvenience and lost sales to good customers.

Measurement is critical to understand your fraud program’s performance and your ability to identify trends that allow for tuning the system throughout the holiday season to maximize sales and combat fraud. During the holiday season, it’s important to measure and monitor these important fraud prevention metrics:

  • False positive rate: Percentage of times a legitimate transaction is flagged as fraudulent
  • False negative rate: Percentage of times a fraudulent transaction is passed as good
  • Fraud occurrences: Number of times fraud occurs
  • Fraud losses: Dollar value of merchandise lost for each case of fraud
  • Cart abandonment losses: Dollar value of merchandise abandoned due to false positives
  • Fraud investigation cost: Dollar value and time used to investigate each case of fraud 
Table of fraud prevention metrics used by ecommerce

These metrics should be further categorized by the fraud type (e.g., account takeover, friendly fraud, loyalty fraud, shipping fraud, return fraud) and where it took place (e.g., web/online, mobile app, in-person retail store, call center).

Deliver a holiday shopping experience customers trust

The holidays can be a stressful time for retail fraud prevention departments. While instances of fraud will most likely rise with increased online shopping, consumers are interested in protection. Retailers can offer thoughtfully implemented identity and fraud controls, along with authentication features to help foster customers’ trust, protect their businesses and maximize revenue.

Come back here for a flash of fraud trends following Black Friday and Cyber Monday.

Learn more about TransUnion’s retail fraud prevention solutions in this video

If you’re a consumer with questions or issues related to your personal credit report, drivers history report, disputes, fraud, identity theft, credit report freeze or credit monitoring services, please visit our Customer Support Center for assistance.

Business Contact Us

We're sorry, your request failed. Please try again in a little while.

This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.