BOPIS fraud is up 250% in 1 year. Can retailers protect their profits without losing customers?

shopping mall
BOPIS fraudsters are multiplying. (Pixabay)

As "buy online pickup in store," or BOPIS, grows in popularity for consumers, it is also becoming an enticing platform for fraudsters. Retailers are facing a new set of challenges with click-and-collect services that many are not prepared to handle.

Although it is hard to compare the rates of fraud in BOPIS to other channels, it is apparent that such fraud is on the rise, according to Riskified’s senior fraud analyst, Emilie Grunzweig.

"Just a year or two ago we would have told merchants that BOPIS sales were extremely safe," Grunzweig told FierceRetail. "They had a fraud rate a fraction of regular e-commerce orders. That’s no longer the case. We’re seeing effective rates of fraud in BOPIS for some of our merchants that are 250% higher than they were in the last year."

Grunzweig points out that this pattern is not new to e-commerce. Typically, as a product, category or method of fulfillment becomes popular with consumers, merchants move to fill it. And simultaneously, fraudsters move to take advantage of it. 

RELATED: Half of retailers find BOPIS adds fraud concerns

BOPIS fraud is similar to any other e-commerce fraud as in the fraudsters use a stolen credit card, place an order online, pick up the goods at a store, then keep the items or resell them for profit. 

"In all cases, the issue is that the merchant receives a fraudster’s order, fulfills that order and— when the order is charged back as fraudulent—loses the revenue and the goods," she said. 

As with any type of online fraud, it's hard to verify a BOPIS shopper.

"BOPIS fraud is particularly difficult because it removes data points that merchants often rely on for verification," Grunzweig said.

For example, a delivery order with a different billing address from a shipping address could be a red flag for a merchant, but BOPIS orders don't have shipping addresses.

So what can retailers do to protect themselves from BOPIS fraud? 

RELATED: BOPIS up 44%

Grunzweig says that this is where the balancing act comes in. On one hand, merchants can require more information online, or check IDs or verify credit cards in store, but that can take away from the customer experience. 

And this added friction not only affects that customer but also the merchants, as verification requires more employees, creates a line in the store, etc.

"A high-friction route may deter some fraud, but it comes at significant cost," Grunzweig said. "We strongly believe that the best approach here is to implement really smart fraud prevention for the online order. Good systems will look at the shopper’s patterns—including prior purchases, behavior on site and links across other orders—and prevent the fraud before the order is placed. This way, merchants are much better equipped to protect their bottom line while providing their shoppers with a great experience and differentiating themselves from online-only retailers."

Moving forward, Grunzweig does not see any signs of BOPIS fraud slowing down, at least until a new platform becomes popular. So putting the necessary fraud protection in place is critical in order for brick-and-mortar retailers to continue to offer this platform in a competitive environment.

"Consumers choose BOPIS so that they can get their stuff quickly, easily, and on their own terms. If merchants go so far toward fraud prevention that they ruin the experience, then they’ve lost their differentiator. We recommend letting technology do the work to provide a great customer experience that’s safe for the merchant," she added. 

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