There are a lot of benefits that come from deciding to start a business online. There are number of benefits that come from deciding to move from a strictly brick-and-mortar operation to one that offers products and services online. There are also a number of risks.
The risk of online fraud is drastically different than the traditional fraud risk retailers experience in a brick-and-mortar business. A lot of this risk stems from the fact that you do not see the individual who is at the other end of the transaction. So it is difficult, or sometimes impossible, to accurately identify the person who is purchasing something on your site.
There are a number of common e-commerce frauds that are being perpetrated. For example, a study by Hosting Canada revealed that chargeback fraud was one of the most common forms of e-commerce fraud. Let’s take a look at some of the more common forms of e-commerce fraud as well as the steps that you can take to protect yourself from them.
1. Credit Card Fraud
The number one type of e-commerce fraud we hear discussed is credit card fraud. Credit card fraud can take on so many different forms. For example, a crooked individual may try to purchase a product from your site using a stolen credit card or the information stolen from a credit card. The frustrating thing is that from the second the credit card is swiped, the online business is responsible for taking steps to ensure that the customer who made the purchase is who they say they are. If not, the legitimate owner of the card could seek reimbursement from you for the amount that was charged.
A step that you can take to protect yourself is requiring security codes for credit card purchases. Most credit cards have three or four identifying numbers on their back. Before accepting a credit card payment, your e-commerce store should require that the customer inputs this security code. This alone would be enough to cut down on credit card fraud.
2. Credit Card Testing
Credit card testing is where someone uses your e-commerce store to test whether or not the credit card information they have stolen is valid. The idea is that if the credit card passes the test at your store, it will be used to commit other types of frauds. Fraudsters are looking for e-commerce stores that provide different responses, depending on why the card was denied. For example, if the card they’re trying to run is denied because of an expiration date, the site triggers the response as an incorrect expiration date. This gives the cyber crook the information that they need in order to make the credit card work. Then all they need to do is find the right expiration date and can start using the card fraudulently.
You can protect yourself by keeping track of attempts to defraud your business. Learn the patterns that cyber criminals use. Monitor where these attempted attacks are coming from and the frequency with which they occur. Use this information to improve detection and protect your business from becoming victimized.
3. Chargeback Fraud
Chargeback fraud is when a person makes a purchase online, they receive the good that they purchased, they will write to the e-commerce store and say that their card has been stolen, and then they ask for the expense to be reimbursed, even though they have the goods or services.
It takes a little prep work to protect yourself from chargeback fraud. You will need to put some security protocols in place. These protocols will help you and any employees who work with you to know how to react if the business is being defrauded.
For example, a way to prevent chargeback fraud is through tracking credit card numbers. If a customer tells you that the purchase was fraudulent, you should be able to use their information to contact their bank. You should be able to provide the shipping address and the notice of delivery. If the shipping address coincides with the address of the owner of the credit card, you may have reason to suspect fraud and should be able to take the appropriate action.
Excessive chargebacks can be damaging to your revenue stream. If a chargeback occurs after you have shipped a product, you will lose the value of the product and the cost of shipping.
Chargeback fees can exceed $100 per transaction. Banks determine their chargeback fees according to how many chargebacks a merchant has incurred over a month. So, the more chargebacks you have, the higher your fees will be. In extreme cases, card issuers may revoke your ability to accept their debit cards altogether.
Robust fraud protection tools can help you get chargebacks under control. Solutions, such as, ClearSale, combine the power of expert staff and artificial intelligence to evaluate transactions and stop fraud from cutting into your revenue.
If chargeback fraud does make it past their system, they’ll pay the entire amount of the chargeback
These scams involve a person pretending to be someone they are not with the goal of getting access to personal information, including credit card details, IDs, and passwords. One of the ways that this could affect your e-commerce store is by having someone contact you and pretend to be a credit institution. They may say that they need to confirm some information about a client because of a charge that appears on their system. If you do not have a strong security system in place, you or your employees can fall victim to the scam and unwittingly provide cyber criminals with the information that they need to hurt others.
One of the best ways to protect yourself and your e-commerce store is to have clear guidelines in place for storing and sharing the personal information of your customers. There are a number of third-party e-commerce platforms that are a great choice if you are looking to put automatic checks in place.
You should never take a credit card payment without a postal code. If the postal code does not match the credit card payment, the payment should automatically be denied. This will not stop every fraudulent attack, but it can help.
Something else that can help is to monitor what your customers are purchasing and then flag things that are out of the ordinary. For example, you have customers that are constantly purchasing men’s pants and now they’re purchasing large amounts of mascara. It could be legitimate. However, it is suspicious enough that it should trigger a flag on your system, requiring more identification before the purchase is approved.
Fraud is a fact of life and business. E-commerce has a higher level of vulnerability to it than other forms of industry. This is why it is imperative that you take the time to learn about the different types of e-commerce fraud and examine steps that you can take to protect yourself.
Have you been the victim of e-commerce fraud? We would be interested in learning about the steps you took to protect yourself.