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Holiday scams: How to safeguard your business and customers

Learn how to protect your business with our essential tips.

This Christmas it is forecast by UK Finance that the UK will see 200,000 cases of payment fraud, amounting to losses of up to £100 million.

As the holiday season fast approaches, businesses face a significant risk from fraud. It's crucial that small business owners understand the most common holiday fraud schemes and how they can effectively mitigate the risks they pose.

Common holiday and Christmas scams

In this article we’ll tackle each Christmas scam one-by-one so you know what to look out for and how you can prevent your business from falling victim to them. Read on to learn how to safeguard your business.

Phishing scams

Phishing scams involve attempts to obtain sensitive information by fraudsters pretending to be a trusted person or organisation.

They are incredibly common – the government calculates that 84% of businesses in the UK experienced phishing attacks in the last year (gov.uk).

These scams are particularly prevalent during the holidays when online shopping peaks. Holiday phishing scams are used by cybercriminals to obtain sensitive information about your business or its customers. They can lead to financial losses and damage to your reputation through compromised customer data.

Email account takeover and online account takeover

Email account takeover and online account takeover refer to unauthorised access that is gained to an email address or online account. In 2024, such fraud is projected to cause £47.4 million in lost revenue across 121,650 cases (UK Finance).

This type of fraud is most common in e-commerce businesses, where stolen credentials are used to make fraudulent transactions or to access customer accounts for further exploitation, especially during high-traffic periods like the holiday season.

Card payment fraud

Card payment fraud is the unauthorised use of a credit or debit card to make transactions. There are two types of this fraud: card-not-present fraud and card-present fraud.

Card-not-present fraud happens when a criminal uses stolen card details for online or phone payments without having the card. This is the most common form of card fraud, especially in e-commerce. Merchant Savvy documents that 81% of all UK card fraud is card-not-present.

Card-present fraud occurs when a physical card is used fraudulently, after being cloned or stolen.

Both types of card fraud result in financial losses, chargebacks and potential reputational damage for businesses.

Return fraud

Return fraud is when customers abuse return policies to receive refunds for goods that they never purchased or haven’t returned.

An alarming 91% of UK retailers reported an increase in returns fraud over the past year (Yahoo Finance).

Typically, the holiday season leads to more instances of it as retailers handle high volumes of returns during this time.

Chargeback fraud/friendly fraud

A chargeback happens when a customer contacts their card issuer to dispute a transaction and get their money back, instead of contacting the business they made the purchase from for a refund. Sometimes, customers can wrongfully use chargeback to avoid paying. This is called chargeback fraud (or friendly fraud).

It's forecast that this type of fraud will cost businesses $28.1 billion by 2026 (Expert Market).

This fraud peaks during the holidays when overspending can occur, and many purchases are regretted.

How to avoid holiday scams

Understanding the scams that are likely to target your business this holiday season is essential.

What you need to know is how to avoid falling prey to scams and to recognise them as soon as they occur. Here’s a practical guide to preventing, identifying and dealing with each holiday scam.

Educate employees about phishing scams

Train your employees to identify how phishing attempts may appear and what they look like. Emphasise the importance of keeping sensitive information secure. Raising awareness will help you prevent these attacks from compromising your business systems and the data they hold.

Implement two-factor authentication (2FA) and strong passwords

A simple way to protect your customers’ accounts is to require them to use 2FA and to insist on strong passwords being used. Your second factor of identification could be a code sent to an email address or a verified phone number. Passwords can be strengthened by insisting on 8+ characters, and a mix of upper and lower case, symbols and numbers.

Use fraud detection tools

Worldpay's fraud prevention solutions leverage machine learning to analyse transaction data and identify transactions that are suggestive of fraudulent activity. This gives you a way to quickly investigate any suspicious activity.

Establish strict return policies

Fraudulent returns spike during the holiday season, so make sure you have in place a strong returns policy that verifies a purchase has been made and the return received. At the same time, it’s important to avoid punishing good customers. Along with good customer service, how you handle returns impacts on customer retention. See our article on rethinking returns for more.

Leverage chargeback management tools

Chargeback fraud harms your profits. Worldpay’s dispute management tools simplify the process, offering comprehensive analytics that improve win rates, helping to protect you from fraudulent chargebacks.

Regularly update security protocols

Keeping your security measures up-to-date and any software you use refreshed to the latest available version will help ensure any legacy vulnerabilities cannot be exploited.

Conclusion

With the holiday season fast approaching your revenue is threatened by an increase in fraud that mirrors the increase in sales.

Now is the time to put in proactive measures to reduce your potential exposure to scams.

You can follow our practical suggestions to combat fraud during the festive period and explore the solutions we have available for small businesses to make reducing fraud easier.

Learn more about fraud prevention solutions.