Yes, Fraud Rates Go Up During the Holidays. But Not How You Might Expect.

Payments fraud is an unfortunate reality for online merchants and their payments technology partners. Knowing how fraudsters operate is an important key for online retailers to manage fraud, says ETA member and e-commerce payment facilitator Stripe.

In a recent study to identify fraud trends and behaviors, Stripe found that fraud rates increase during “quiet times” – off-hours when a business is closed.

“Fraud rates follow a stark reversed pattern, peaking late at night and flattening out during the day,” the report said.

Not surprisingly, fraud rates also go up during busy retail seasons like the winter holidays and end-of-summer back-to-school sales. More surprisingly, the study says, is that fraud rates do not rise notably on heavy shopping days like Black Friday, but rather on days like Christmas when many people aren’t shopping.

Stripe’s study, which examined transaction data across hundreds of thousands of its customers in 25 countries, also found that fraudulent transactions in the United States are usually small, only slightly larger than normal transaction amounts. Further, fraudsters tend to repeatedly shop at the same merchant rather than buying products from multiple businesses. Stripe notes that cards that have made four fraudulent charges typically have made all these charges at the same merchant; four normal charges tend to be spread out across an average of two merchants.

“This conspicuous pattern of “high-velocity” purchases with a single merchant contradicts the notion

of fraudsters trying to blend in with a cardholder’s normal transaction patterns,” the report said. “One lesson here for businesses is to be cautious with many rapid-fire transactions from the same credit card—though, as always, it is important not to block good transactions with blanket rules.”

The report also noted that online fraudsters tend to prefer targets that don’t require physical delivery – although they tend to stay away from reoccurring subscription charges.

Read the full report here.