If you’ve been making your purchases mostly online, you’d realise that the concept of promo codes have reached greater heights than we could imagine. Once a rare sighting, promo codes have changed the incentivization game online. Whether its ordering food or buying apparel or even purchasing gadgets, it’s undeniable that these codes are…everywhere. 

Promo Codes are used by e-commerce platforms to get new users to sign up for or refer the site, or app, to others and get additional benefits. Most importantly, promo codes and coupons are conjectured to turn new users into permanent or regular customers– i.e., as an effective customer retention strategy. 

Promo codes, coupons and vouchers are considered some of the most reliable strategies to attract new customers. They are mostly marketed through social channels to measure reach and RoI of social activity.

The e-commerce industry especially has been integrating promo codes to expand its business and increase its user base. Special codes are provided to lure users for referring the site to friends, downloading the website’s mobile app, or buying more products. 

While this is a welcome move to the larger user base, motivating them to buy more, there’s also a dark side to this. The promo code strategy often backfires for e-commerce businesses as fraudulent users or criminals have begun to use advanced techniques to abuse or exploit these offers and get illicit benefits or gains.

It can be quite easy to hack into the promo code system since it’s only a finite combination of numbers and words to get rewards. With many people vying to get the maximum benefit out of it, it’s crucial that this system is free of glitches and is, of course, 100% secure.

One of the most recent examples of losses due to a promo code glitch is from none other than the tycoon themselves– Amazon. Students from the UK stung online giant Amazon for hundreds of thousands of pounds after discovering a glitch which meant a one-off discount code could be used again and again. This could cost a lot to a business, big or small. 

However, it’s not always students who benefit from glitches like these. Most times, glitches and loopholes like these are intentionally misused by fraudsters to dupe merchants. 

Now, let’s get to more examples of promo code abuse in the e-commerce industry.

  1. A food tech business that offers discounts to its customers through ‘Refer Codes’ often end up facing huge losses as some users keep on creating new accounts from different devices and get discounts on their food orders
  2. Promo code abuse of discounts on ‘Buy 2 Get Rs. 200 Off’ on apparels gets combined with friendly frauds, whereby people not only abuse Promo Codes but also deny that they ever received the product
  3. Free ride coupons by taxi apps get misused by fraudsters to claim free rides from numerous fake accounts

The impact of these frauds is not just on the revenue and inventory of businesses but also occurs in the form of unrequired operational costs in responding to or in the prevention of these frauds, manually. 

What’s the way out?

Manual prevention of fraud in e-commerce can take a heavy toll on the business financially as well as in the form of the workforce and resources wasted on the process.

To get out of this multiplex problem, Artificial intelligence can be employed to detect fraudulent transactions automatically. Fraud prevention solutions that are powered by AI can promptly identify fraudulent users in real-time by scrutinising every transaction received by the platform.

Artificial Intelligence helps in processing tens of thousands of data points before scrutinising whether the user is attempting a fraudulent purchase or not.

E-commerce fraud prevention tools like Thirdwatch evaluate each transaction associated with a promo code or voucher with multiple benchmarks like the following:

  • User’s phone number
  • Device type 
  • Location 
  • Related traffic patterns and reported fraud
  • PIN code 
  • IP address

 Each transaction is assessed in real-time and is automatically distinguished as ‘genuine’ or ‘fake’. What’s better? If you’d still like to monitor and flag orders in real-time, you can do so with Thirdwatch. 

Offering a healthy amount of manual intervention, Thirdwatch allows you to review and make a decision for every order that you receive. Using advanced machine learning technology, Thirdwatch learns and becomes more intelligent with every iteration. The AI-built promo code fraud prevention leverages machine learning and device fingerprinting to detect patterns of fraud. They automatically block promo code abusers from making transactions, once ‘flagged’ risky, and also accentuates ‘real’ users so that the business does not lose its genuine customers.

Hence, promo code abuse can be easily prevented by an e-commerce business by utilising the astounding features of AI-based fraud prevention systems. AI can swiftly analyse redemption rates, order details, device fingerprints, connected accounts and other user patterns to prevent promo code or Voucher abuse in e-commerce businesses.

Interested in how the product can accelerate your business? Sign up today and get a one-month free trial of Razorpay Thirdwatch!

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Writer. Payments enthusiast. The most curious person in the room.

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