Black Friday is one of the biggest shopping days of the year, offering merchants an influx of customer interest and sales. Yet, with this increase in activity comes a heightened risk of fraud. Black Friday’s high transaction volumes, limited-time discounts, and frantic shopping environment create opportunities for fraudsters to exploit weaknesses in online and in-store systems. Merchants need to stay vigilant to protect both their revenue and their customers' experience.
Understanding the types of fraud that commonly occur during Black Friday, along with prevention and response strategies, can help merchants better prepare. This guide will outline how to identify common forms of fraud, assess the costs associated with fraud events, and implement strategies to reduce exposure to fraudulent transactions during Black Friday and other holiday sales events.
Black Friday, as well as Cyber Monday and the extended holiday shopping season, brings a noticeable spike in fraudulent activities. This trend is amplified by the growing popularity of online shopping, which has outpaced traditional retail sales. With more shoppers and sales moving online, the need to protect against fraud becomes more pronounced.
For merchants, understanding the specific risks associated with Black Friday and preparing in advance can reduce the impact of fraud on their business.
Chargebacks associated with fraudulent purchases add up, and merchants often cannot recoup these costs. The lost revenue in combination with the chargeback fees create a double hit on profitability.
To effectively counter Black Friday fraud, merchants must first recognize the primary types of fraudulent activity that increase during this time. Below are some of the most prevalent forms of fraud encountered during holiday sales events.
In online shopping, where physical cards are not presented, merchants are especially vulnerable to credit card fraud. Fraudsters use stolen card information to make unauthorized purchases, with merchants shouldering the cost when fraud is detected. As Black Friday promotions drive online purchases, instances of credit card fraud also increase.
Fraudsters may target customer accounts through account takeovers. Using phishing emails, social engineering, and credential-stuffing attacks, they gain unauthorized access to legitimate accounts. Once inside, fraudsters can exploit saved payment methods to make fraudulent purchases.
Gift cards are a common target for fraud. Fraudsters may purchase gift cards with fraudulent payment credentials to resell them later. The increased volume of holiday-related gift card purchases can disguise fraud by making large gift card purchases or purchases from first-time customers seem less suspicious.
Merchants often see a rise in returns after Black Friday, some of which may be fraudulent. Return fraud can be costly for retailers, particularly during the holiday season, when lenient return policies are more common.
With Black Friday promotions in full swing, fraudsters will exploit promotions and offers in any way they can. They may create multiple accounts to take advantage of new customer rewards or use bots to make the most of limited-time promotions. Abuse of promotional offers can lead to lost revenue and can impact genuine customers trying to access deals.
Friendly fraud occurs when customers file disputes for legitimate purchases to receive a refund while retaining the purchased item. While this may sometimes be unintentional, it can also be a way for bad actors to defraud merchants. Chargeback rates often increase during Black Friday, as customers may make impulse purchases they can’t afford and seek to recover their money through a chargeback without returning their purchase.
Implementing robust fraud prevention measures is key to reducing a merchant’s vulnerability. Below are methods that can strengthen defenses against fraud and help merchants better manage Black Friday risks.
To identify unusual purchasing patterns and block suspicious transactions, merchants can use multi-layered fraud detection systems. Combining machine learning tools with simple checks like AVS and CVV matching can provide a robust defense against many types of fraud. Advanced fraud detection systems analyze factors such as device location, transaction velocity, and account activity to identify irregular patterns, helping to stop fraud before it occurs.
Adding an extra layer of protection for customer accounts is a proactive way to prevent account takeovers. Multi-factor authentication (MFA) requires users to verify their identity beyond just a password, reducing the risk of unauthorized access. Encouraging customers to enable MFA and making it easy to set up can help merchants limit account takeover attempts during Black Friday.
Setting velocity rules allows merchants to limit the number or value of purchases within a set time frame, reducing the potential for fraud. For example, velocity rules can be set to block excessive purchases from the same account, IP address, or credit card within a short time period. By limiting the speed and frequency of transactions, merchants can more easily detect and block high-volume, fraudulent purchase attempts.
Examining fraud data from previous Black Friday events can help merchants spot patterns, high-risk areas, and transaction types that may be vulnerable to fraud. For example, if chargebacks were higher for certain products or in certain regions, merchants can tailor their strategies to address these patterns.
Taking lessons from each Black Friday, merchants can refine their fraud prevention strategies for the next season. Early planning allows time to review new fraud trends, implement updates, and address vulnerabilities that may be exploited. By preparing in advance, merchants can position themselves for a safer, more profitable Black Friday.
By understanding the types of fraud that commonly arise and preparing with multi-layered defenses and data-driven strategies merchants can protect their revenue and the future of their business. Strategic planning for fraud prevention ensures that merchants can focus on maximizing sales, confident that their business and customers are safeguarded.