How Luxury Retailers Can Fight CNP Fraud Smarter

March 20, 2017         By: Rafael Lourenco

Retailers who sell luxury products face unique, high-stakes challenges in combatting CNP fraud. Celebrities, influencers, and other well-to-do shoppers want the best jewelry, handbags, and designer clothing — and so do fraudsters. Combine expensive products, customers who expect flawless service, and determined thieves, and you face a real test of CNP fraud prevention. Here’s how upscale retailers can protect their revenues and their relationships with legitimate customers.

Why fraud prevention is such a challenge for luxury retailers

To understand the complexities of fraud prevention in this sector, we first need to look at the fraud landscape. Fraudsters target luxury goods because they’re popular and easy to resell. Designer items like jewelry, leather goods, and handbags are small and easy to ship, and their high retail prices send bargain hunters searching for discount deals, even from dubious outlets. Not only do CNP thefts cost luxury retailers revenue, they also fuel competition that undercuts their prices.

Luxury retailers have fewer chances than mass-market retailers do to get fraud screening right. That’s because high-end merchants typically process fewer transactions at higher ticket values than mass-market sellers do. After all, how many people will buy a $5,000 handbag in a given month? That means that every transaction matters. Even one chargeback can represent a significant revenue loss and a skewed chargeback ratio.

On the other hand, the low number of transactions means premium retailers can’t risk alienating legitimate customers with too-stringent or off-target fraud rules. False declines can dramatically damage luxury sellers in two ways. The first, of course, is lost sales. Losing a $10,000 necklace sale is bad enough. Losing that customer’s business for the next decade or two is worse, and many well-heeled customers who are mistakenly declined never shop with that retailer again. False declines can cause reputational damage, too. Celebrities and social media influencers expect excellent customer service and they let their followers know when they feel mistreated by a retailer.

Best practices for luxury-goods fraud prevention and customer service

Because the expectations for customer service are so high among luxury-goods shoppers, retailers must make every aspect of fraud screening match those expectations. One best practice is to initiate phone contact with customers to verify their orders in a non-threatening, relationship-building way. That means having a pleasant customer-service staffer calling at the appropriate time of day, speaking the right language, and making customers feel cared for rather than interrogated.

Automated declines based on assumptions designed for mass-market retailers are not recommended for luxury retailers, in part because they eliminate the opportunity to reach out to customers by phone, and in part because so many high-end shoppers have lifestyles and habits that send up “red flags” from the mass-market perspective. These include having multiple home addresses, ordering from locations around the globe as they travel, using hotel addresses for order delivery, and carefully guarding their personal data.

Upscale shoppers also differ from mass-market shoppers by treating online as just another point of contact during their purchase process. That means luxury sellers should understand these purchases as omnichannel interactions and adjust their fraud programs accordingly. The buying cycle for luxury-goods consumers is typically slower and more multifaceted than the mass-market online buying experience. Upscale shoppers tend to visit shops in person to look at the products they’re thinking of buying. While there, they may get a business card from a sales clerk and then call later to ask product questions.

These customers may order online or over the phone while they’re talking to a clerk. Telephone orders present a special challenge for fraud screening. These CNP transactions, which carry the same fraud risks as online orders, take place outside the merchant’s online fraud-screening system. The merchant must have a way to screen these purchases without the fraud-screening data points they typically collect from site navigation.

Best practices to reduce telesales fraud risk include screening against data points that are independent of site navigation (such as external data and internal fraud databases), possible manual review of each transaction, and system integration that allows sales clerks to manually insert telesales orders into the merchant’s e-commerce platform for fraud review.

A fraud prevention program that factors in luxury shoppers’ habits, effective telesales screening, comprehensive transaction review, and excellent customer service can protect high-profile merchants from the fraudsters who target them. By applying these best practices to their fraud-screening programs, luxury retailers can also build stronger relationships with good customers and grow a stronger business.

Rafael Lourenco is the VP of US Operations at ClearSale, a Card-Not-Present fraud prevention operation that protects e-commerce merchants against chargebacks. The company’s flagship product, Total Guaranteed Protection, is an end-to-end outsourced fraud detection solution for online retailers. Follow on twitter at @ClearSaleUS or visit