Two of the most anticipated shopping days of the year are Black Friday and Cyber Monday. Every November, shoppers run online and in-store to take advantage of deals from tech gadgets to gift cards and digital subscriptions. But while businesses prepare to deal with these huge demands, fraudsters prepare for an opportunity to strike. And the threat is very real, especially for fast-moving digital goods (FMDG) — items like prepaid top-ups, game cards, eSIMs, and online gift cards. These products are a magnet for fraud, given their instant delivery, high resale value, and untraceable nature.
In this blog, we’ll break down the unique challenges of Black Friday fraud in digital goods, the kinds of fraud you’re likely to experience, and actionable ways to protect your business and customers from falling victim.
What is Black Friday again?
It would be a surprise if someone actually asked this question, but what had started in the US as a one-day deal, is now a global shopping event. It’s the weekend all shoppers are patiently waiting for, when “sale” signs light up like holiday decorations, and carts—digital or not—fill until they are about to explode. But there are doubts on whether it’s even a one-weekend affair anymore; with pre-sales and discounts popping up early in November, Black Friday, together with Cyber Monday, feels more like Black November!
In 2023, global spending reached around $70.9 billion, a testament to the worldwide appeal and excitement around finding that perfect deal. Retailers and shoppers alike jump in with both feet, making Black Friday all about catching the season’s most irresistible bargains.
A snap into consumer’s habits
Black Friday shopping habits of European consumers reflect a cautious optimism. While consumers are still enthusiastic about deals, inflation leads them to be more selective. We can observe a noticeable preference for essential, value-driven purchases, with price-conscious consumers planning holiday shopping around Black Friday. Gen Z and Millennials remain the most involved, showing higher online engagement and mobile usage, especially in countries like France and the UK, where e-commerce and mobile shopping experienced major growth.
Why do fraudsters looooove Black Friday?
Just as shoppers look for the best deals, fraudsters see Black Friday as their main “business” opportunity. Why? The holiday rush means a proliferation of transactions, so security systems can get overwhelmed—perfect for sneaking in shady activities. Here’s why fraud is on demand:
- Big volumes: The steep volume of transactions makes it difficult for fraud detection systems to keep up, which creates loopholes for fraudsters to take advantage of.
- High value of digital goods: Digital goods, like prepaid top-ups and e-gift cards, are ideal for fraudsters because they’re easy to resell and difficult to trace.
- Urgency and distraction: With all the discounts and deals out there, customers often rush to buy without thinking twice. Fraudsters take advantage of this by using phishing and impersonation tactics to trick customers into giving them sensitive information.
- Compromised accounts: Many consumers have dormant accounts on various platforms, which may be compromised during the year and exploited during Black Friday when fraud detection measures may be overwhelmed.
Read more about this: 5 tips helping business to avoid fraud on Black Friday and Cyber Monday
In short, the combination of a high volume of transactions, excitement, and the nature of digital goods makes Black Friday a very appealing period for fraudsters.
What types of fraud could you notice more with digital goods?
Fraudsters have a variety of tactics on their sleeve for exploiting digital goods during Black Friday and Cyber Monday. Here are some common types of fraud that we’ve put together that you should watch out for:
1. Account Takeover (ATO)
Account takeover fraud happens when fraudsters gain access to a customer’s account, allowing them to deplete account balances or make unauthorised purchases. In digital goods, ATO can result in instant losses. For example, prepaid top-ups or loyalty points redeemed from stolen accounts lead to customer dissatisfaction and can damage your brand reputation.
2. Gift card fraud
Gift cards are a high-target item, especially around Black Friday. Fraudsters acquire stolen credit card details to purchase gift cards in bulk or use phishing scams to get access to customers’ gift card information. These cards are then resold, which means businesses are left to deal with the chargeback costs.
Recommended reading: https://alphacomm.io/blog/the-gift-card-industry-a-fraudsters-paradise
3. Card testing and carding attacks
Fraudsters use card testing to identify active card numbers. Bots test stolen credit cards with small, inconspicuous purchases to avoid detection. Once a valid card is found, it’s used for bigger purchases. Card testing finds fertile ground especially during Black Friday because of high transaction volumes that make it harder to detect suspicious activities.
4. AI-Driven fraud
Becoming more and more common is AI-driven fraud where sophisticated algorithms mimic legitimate customer behaviour to bypass traditional fraud detection. This form of fraud is particularly challenging to fight, as AI can learn from successful transactions to make fraudulent ones appear more authentic.
5. Friendly fraud and chargebacks
Friendly fraud happens when a legitimate customer disputes a transaction they actually made, either unintentionally or intentionally. Chargebacks spike around Black Friday, as some customers engage in “wardrobing,” claiming they didn’t authorise purchases for refunds.
6. eSIMs fraud
With eSIM technology gaining momentum, fraudsters are getting creative. They may use social engineering tactics to convince telecom providers to switch a victim's eSIM to a new device, allowing them to take control of the victim's phone number. Consequently, this can lead to unauthorised purchases and significant financial losses for businesses.
The conclusions? In the race for holiday deals, having good fraud prevention tactics in place can really make a difference for online merchants. Awareness is a great first step, but actions need to follow.
How to protect yourself better?
You may feel like Black Friday could be very challenging for your business, but we put together some concrete steps you can take to protect yourself and your customers. Let’s take a look:
1. Boost account security
A step that can add a second layer of security is two-factor authentication (2FA). Additional layers you could consider adding are biometric verification or email confirmation for significant purchases. Account takeover attempts can be identified early by monitoring for unusual login locations and sudden changes in account details.
2. Monitor transactions in real-time
Real-time transaction monitoring allows you to detect anomalies immediately. For example, sudden spikes in small purchases or unusual purchase patterns, such as repeated purchases of digital goods within a short time frame, could indicate fraud. If you have sophisticated fraud prevention solutions in place, they can flag suspicious patterns and alert your team for further investigation.
3. Combine human intelligence and AI tools
You can have a big team to look for suspicious activities, but AI-based fraud detection tools can recognise abnormal patterns faster and adapt to emerging fraud trends. But by combining both AI and human intelligence, you can create a comprehensive fraud prevention strategy that identifies and prevents fraud in real time.
4. Limit bulk purchases of high-risk goods
Prevent bulk purchases of high-value digital goods, like gift cards, through purchasing limits or requiring additional authentication steps for larger orders. You can also implement cooldown periods for certain types of purchases to prevent rapid bulk ones.
5. Educate customers on common scams
Often people underestimate the power of awareness. Educating customers can go a long way in preventing fraud, so remind them to beware of phishing emails, fake discounts, and account verification requests from unknown sources. Provide tips on how to recognise suspicious emails and encourage them to report any unusual activity.
6. Use chargeback management solutions
Friendly fraud can be managed with chargeback solutions that prevent revenue loss due to false claims. With a clear record of purchase history and verification steps, you can challenge chargebacks effectively, saving both time and money.
Recommended reading: Exploring chargeback protection
7. Leverage partnerships
Fraud prevention specialists can offer solutions tailored to your business, making sure that your anti-fraud systems stay up-to-date and keep being effective.
What you should remember is that proactivity is always the best prevention measure to protect your business from fraud in buying periods like Black Friday and Cyber Monday. These measures for fraud prevention allow you to not only protect your bottom line but also your brand.
Protect your sales
They say all the good things come with some challenges, or they wouldn’t be as good. Black Friday and Cyber Monday can be lucrative times for businesses, but they also come with a higher risk of fraud, particularly for digital goods. Understanding the specific fraud tactics used against digital goods — from account takeovers to gift card fraud and AI-driven schemes — will give your business the proper knowledge and tools to be aware. If you enable layered fraud prevention strategies and work with specialised partners, you can really make a difference and provide a safer experience for your customers. After all higher fraud means a high chance of reputational damage, and we know this is not something to strive for.
Let us help
At Alphacomm, we’re committed to helping you turn potential pitfalls into opportunities for success, making the sale of your digital goods simple and safe. With our cutting-edge solutions, you can focus on what truly matters—delivering a consistent shopping experience. Connect with our team today and let’s make the most out of this holiday season!
