As businesses have increasingly leveraged online sales models and Internet-enhanced shopping experiences to appeal to consumers, there has also been a rise in criminality. In fact, a recent report found that the cost of fraud is up 7.3% from 2019. Every $1 of fraud costs U.S. retailers $3.36. Preventing these crimes is only becoming more imperative as retailers are seeing up to 10% of their bottom line disappear as a direct result of retail fraud.
The first step to retail fraud prevention is fixing common mistakes made by your organization that make it more vulnerable.
Relying on People to Prevent Fraud
Enacting meaningful policies that curb fraud at an individual level can certainly help companies reduce risks, but an insistence on leveraging people to protect business and consumer interests can create new stumbling blocks. For example, using human eyes to detect fraudulent activity makes your business vulnerable to error. IDs look different from state to state making it difficult to know what to look for.
Additionally, a lack of an explicitly defined loss prevention policy can blur the lines of ethics for even the most well-intentioned employees.
A proper policy helps by clarifying boundaries between acceptable and unacceptable behavior for employees. For example, a clear policy can express that both outright theft of cash and sharing employee discounts with friends constitute fraud.
Without a policy in place, personnel must be trusted to intuitively know what is allowed – a process that is prone to failure.
Budgeting too Little
Two-thirds of loss prevention budgets are being rolled back, even at a time when the retail sector is increasingly fraught with fraud. Scaling down preventive measures not only sabotages security efforts but may also inhibit growth plans as abandoning a defensive strategy against fraud opens the door for scams.
Just a few emerging forms of fraud currently plaguing the retail space include the following:
Buy-online, pick-up-in-store fraud- Criminals pick up a legitimate customer's purchase at one location, then sell it or return it to another for cash.
Gift card cloning- Snagging the magnetic strip details of one card to use once the card has been purchased by someone else.
Employee-abetted fraud- Offering unofficial discounts to friends, giving merchandise away, or assisting in more elaborate schemes.
Chargeback scams- Fraudsters dispute legitimate transactions to keep both the product and their funds.
Tackling the above requires retail businesses to remain on the defensive with anti-fraud initiatives meaning they will need to allocate sufficient capital to stay ahead of savvy thieves.
Poor Balance Between User Engagement and Security
Often enough, retail security objectives and customer effort expectations fail to match up, leading to insecure processes or an unappealing user experience. For online retailers, in particular, the use of industry-standard security techniques such as automatic account logouts can create friction for potential customers.
With that said, small things like account logouts are a necessary annoyance for customers as a little inconvenience can prevent outsiders from hacking into the system.
All in all, finding a happy balance between keeping customer transactions secure and minimizing obstacles for legitimate customers to complete their purchases involves adapting security measures that blend powerful verification methods with seamless usability from the start.
Not Utilizing the Resources Available
Retail fraud prevention efforts are often directed at the obvious sources of security oversight, such as camera coverage and careful footage monitoring. However, by leveraging the strong expertise already on offer from companies that specialize in security, your business can bring its focus back to satisfying customers directly without sacrificing safety.
Managing retail orders and transactions securely becomes trivial with the use of dedicated ID verification tools. Options such as those offered by Intellicheck allow legal IDs of various types to be authenticated with up to 99% accuracy and in a fraction of the time it would take a person to do the same.
Trusted by some of the top retailers in the world, Intellicheck's facial matching features can help detect close fakes quickly and precise scans decipher ID barcodes to provide a more complete verification.
Adopting a preventative stance towards retail fraud can curb criminality before it becomes a problem for your business or its customers– enlisting the help of Intellicheck is the first step.