Last updated: You’re a mean one: How to curb holiday retail fraud

You’re a mean one: How to curb holiday retail fraud


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Whether big-box, mom and pop, or upscale chain, the holiday season always means retailers are planning promotions and stocking inventory set to fly off the shelves. That being said, there is one issue that doesn’t deliver holiday cheer: Fraud linked to store branded cards. So, how can businesses curb holiday retail fraud?

Store-branded cards are nothing new, and date back to the early 1900s when stores offered regional “charge plates” to shoppers.

Since then, they’ve grown hand over fist in popularity – Synchrony Financial, provider of store brand cards for top retailers, grew purchase volume 17% year over year as of 2016, and continued its growth to $34.3 billion in Q2 of 2018.

However, this increased spending only really pays off if stores can keep holiday retail fraud to a minimum.

The Who’s down in Whoville: How top retailers stack up

Saying that store branded cards are important for driving sales and profits is quite an understatement. According to Morgan Stanley data, here’s how much store-branded cards contribute at top tier retailers:

Macy’s: 39% of profit in 2016, adding up to a massive $1.9 billion, and significantly higher than the 26% from 2013.

Kohl’s: 35% profit in 2016, a big increase from 23% in 2013.

Target: 13% of earnings, a small bump from 11% in 2013.

These brand credit cards can have a big impact on retailer bottom lines, but the issue of fraud is starting to take its toll.

Why holiday retail fraud is on the rise

Having employees promote store branded cards is a key strategy for retailers to increase revenues, making it imperative that they take action to keep fraud at bay, especially during the busy holiday season.

A central issue with regard to holiday retail fraud is how most retailers carry out customer authentication when a card is not present, thereby opening them up to fraudulent charges.

Let’s explore the specifics:

Previously, if a shopper didn’t have their store-branded card in their wallet at checkout, they were out of luck, and had to pay another way or abandon their purchase. Now in-store employees have faster computers and tablets, allowing them to look up customers so they can pay using a store account. Therein lies the problem, because store employees have few ways to verify that the account they’re looking up truly belongs to the person in front of them.

Retailers like Nordstrom require two factor authentication to minimize the possibility of fraudulent changes. This involves the store associate looking up the shopper’s account, the customer having the store app, and verifying their identity using a QR code or SMS.

Though better than previous solutions, fake QR codes and SMS code interception hacks can make these security measures equivalent to putting a Band-Aid on a large wound. In addition, referrals sent from issuers to POS clerks in order to check shopper identification slow down checkout lines, ruining consumer experience and employee checkout efficiency.

So what are retailers to do?

Harnessing ingenuity: Make customer authentication safer with ultrasonic authentication

In order to verify shopper identity, retailers must carry out customer authentication securely, accurately, and seamlessly. One innovative means of accomplishing this is through ultrasonic authentication.

Shoppers might forget their store branded card or ID at times, but leaving their smartphone at home is much less likely. In order to implement this solution, retailers integrate ultrasonic data transmission software in their existing apps, requiring only standard microphones and speakers for use.

This allows retailers to authenticate shoppers with inaudible communication between the store employee’s POS and the shopper’s mobile device. Transactions are verified based on device proximity confirmation and utilizes their device’s biometrics and security measures, adding extra layers of security to the process.

Holiday sales can represent up to 30% of a retailer’s total yearly sales, so getting to the bottom of fraud is essential to improving sales and the customer experience simultaneously.

Whether a retailer chooses ultrasonic authentication or some other method, securing payments will protect customers and bottom lines.

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