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The Chargeback Risks and Revenue Rewards of Black Friday and Cyber Monday
The holiday season is the busiest and most important time of year for merchants. The two most important shopping days during the holiday season are Black Friday and Cyber Monday. These two days involve a high volume of transactions, which brings the potential benefits of an enormous amount of revenue while also bringing similarly elevated risks of chargebacks. A successful holiday season is often a make or break proposition for merchants. A key aspect of achieving that success involves navigating Black Friday and Cyber Monday without incurring too many chargebacks.
Chargeback Risks Associated With Black Friday and Cyber Monday
The increased shopping activity around Black Friday and Cyber Monday brings increased risk of chargebacks. Some of this is simply mathematical; as transactions rise, so do chargebacks. Some of it is due to increased rates of fraud. And some of it is due to the extreme volume of activity causing merchants to make more errors and be less diligent in their fraud prevention efforts.
Black Friday and Cyber Monday are both prone to high incidences of true fraud, which is one of the main sources of chargebacks. 2020’s increase in Black Friday and Cyber Monday sales also brought a 21% increase in the Better Business Bureau’s fraud tracker reports. In 2019, a cybersecurity expert told CNBC that “up to 30% to 50% of the annual average of data breaches happen in November and December alone.” According to ZeroFox, 64% of organizations report an increase in cyber crime on Cyber Monday.
Fraudsters specifically target consumers and merchants during the holiday season, with Black Friday and Cyber Monday being the most active days. Some of this is simply due to the fact that fraudsters know the largest volume of transactions of the year occurs on these two days, leaving them the most opportunity to commit fraud. Merchants can also leave themselves more vulnerable to fraud as their level of busyness on these two days makes it more difficult to maintain. Consumers also leave themselves open to special vulnerabilities on Black Friday and Cyber Monday, as well. In general, many modern consumers are savvy about avoiding such forms of fraud as phishing scams disguised as “too good to be true” sales and promotions. But the fact that Black Friday and Cyber Monday genuinely do involve such deals, combined with the limited time and inventory pressures of holiday gift shopping, can make consumers more easily fall victim to scams disguised as deals.
Other forms of fraud, such as chargeback fraud and friendly fraud, can also be higher during periods of intensely heightened shopping activity such as Black Friday and Cyber Monday. Consumers are often more impulsive, less careful, and more prone to irrational shopping behaviors. This could lead to a number of possible sources of chargebacks. For example, a consumer could make a purchase that they later regret, leading them to file a chargeback. Or a parent could be so busy with shopping that they accidentally allow their child to make unauthorized purchases, leading to family fraud induced chargebacks. And just as true fraudsters use the chaos of the shopping holidays to commit fraud, unscrupulous consumers could do the same to commit chargeback fraud as a form of cyber shoplifting.
Finally, merchant error is a significant but often under discussed source of chargebacks. It is a particularly acute issue during short periods of excessive shopping such as Black Friday and Cyber Monday. In their haste to keep up with the increased volume of transactions, attend to the needs of their many customers, and fully maximize the revenue opportunities, some merchants may get sloppy and make the sorts of mistakes that lead to chargebacks.
How to Prevent Black Friday and Cyber Monday Chargebacks
The most important thing merchants can do to reduce their susceptibility to Black Friday and Cyber Monday chargebacks is to remain vigilant. Merchants should not allow the hectic nature of these shopping holidays to prevent them from maintaining their usual standards of fraud and chargeback prevention. Other strategies to prevent these sorts of chargebacks include the same sorts of techniques that should be employed throughout the holiday season, such as:
- Be magnanimous with refunds in order to deter consumers from filing chargebacks
- Emphasize customer service in order to handle consumer issues before they become chargebacks
- Avail themselves of any relevant fraud prevention services and technology such as chargeback prevention alerts
- Keep an eye out for key indicators of potential fraud that are especially significant during the holiday season
- Be aware of the new merchant paradigms in the post-COVID world and be attentive to the risks of such new shopping models as “Buy Online, Pickup In Store” (BOPIS)
The goal for merchants is to reap the benefits of the holiday shopping season without allowing their business to become susceptible to the risks of Black Friday and Cyber Monday chargebacks. This requires discipline and attentiveness, but it can be a great boon to their business during the holiday season.
Frequently Asked Questions
Black Friday is the Friday after Thanksgiving and is the linchpin of the holiday shopping season in the United States. The term originated with traffic cops in Philadelphia in the early 1960s, dismayed about the difficulty of work in the busy downtown shopping district on the Friday after Thanksgiving. As the term spread to other cities and eventually nationwide, its meaning was changed to represent “the day when retailers saw their books go from the red to the black for the year”. While this is not necessarily an accurate reflection of the impact of Black Friday’s increased shopping volume on most retailers’ annual finances, it has been the biggest shopping day of the year in the U.S. since at least 2005. In recent decades, retailers have capitalized on and expanded the high amount of shopping activity by offering major sales deals on Black Friday.
Cyber Monday is a more recent e-commerce-based addendum to Black Friday. First coined by the National Retail Federation in 2005, it takes place on the Monday after Thanksgiving and features merchants offering e-commerce equivalents to Black Friday’s doorbuster sales. Spurred in part by the in-person shopping limitations caused by the COVID-19 pandemic, 2020’s Cyber Monday was the biggest in U.S. history, reaching nearly $11 billion in sales.
A number of different factors contribute to high rates of chargebacks during the holiday season, most of which tie back into the high volumes of holiday- and gift-related shopping. There are more transactions overall, merchants are busier and may be less diligent about preventing fraud, fraudsters are more active due to the busy season, and consumers may be more prone to fraud scams as they look for holiday deals.
The most important thing for merchants on Black Friday, Cyber Monday, and throughout the holiday season is to not allow the busyness of the season to interfere with their chargeback mitigation efforts. More attention needs to be paid to fraud prevention, customer service, and other strategies for reducing chargebacks.
