How E-Commerce Businesses can Avoid Fraud
E-commerce is an easy place for a small business to begin operations since you don’t need a brick-and-mortar store, large staff, or massive inventory to enter the business space. Startup costs are low and smart marketing makes the potential for returns high. The largest drawback to the online shopping space is cybercriminals and shopper fraud. Know what to look for and how to protect yourself so that you don’t ship your inventory to buyers who won’t pay you.
Scrutinize Your First-Time Buyers
Image via Flickr by Siri Hardeland
Always pay extra attention to new shoppers. If you’re a small business receiving an international order, you may want to contact the buyer to verify information and authenticity. Asia and Africa are two continents with high numbers of credit card fraud reports, so you should be more careful when orders from these areas of the world.
Additionally, track all credit card data closely. If the same card gets used for multiple orders sent to different addresses, you could be witnessing a key indicator of fraud.
Watch for Large Orders from New Customers
When criminals use stolen credit cards, they typically have a limited amount of time to make transactions with it before a stolen card gets reported and purchases stop. Many criminals will attempt to place orders that are as large as possible to maximize use of the card before a stolen card report happens. If you see an unusually large order from a customer whom you’re not familiar with, you should question that order.
Paying close attention to the size and contents of new customer orders will help you spot red flags that often point to fraud. An order that features several of the same high-ticket items should definitely prompt further investigation.
Require a Valid Phone Number for Every Buyer
Most shoppers who are placing fraudulent orders will not give you valid contact information. If you spot any key warning signs that point to likely fraud, reach out to the customer immediately. The best way to contact customers is by phone. If you find a disconnected number, a ring through to the wrong person, or no answer at all, these signs can suggest that you’re not dealing with a valid shopper.
If you reach an answering machine or voicemail, leave a message requesting a callback to resolve an issue with the order. You may likely never hear back from the buyer, in which case you can safely cancel the order and protect yourself from potential fraud. If you can make contact with the buyer, this contact usually indicates a valid order. In this case, you can use any excuse for your call. Verify the shipping or credit card information, ask about the shopper’s experience, or offer a personal greeting to the new customer to justify your call.
Stay Compliant with the PCI
The Payment Card Industry (PCI) maintains Data Security Standards, otherwise known as PCI DSS. These requirements protect both merchants and customers from data breaches or fraud. Make sure you maintain strict compliance with the PCI DSS. Not only will this compliance protect you from fines associated with noncompliance, but it will also keep you up-to-date with the latest methods for protecting data and processing purchases securely.
Require Secure Payment Methods
Only accept payment through secure methods. If you take credit cards, require address verification for all orders. This verification checks the billing address on the card against the billing address for the order. In some cases, this verification will be enough to stop criminals who don’t have access to all the necessary data.
You should also ask for Card Code Verification (CVV). This number is the three-digit number on the back of the card. Visa calls it the CVV2. For Mastercard, it’s the CVC 2. Discover and American Express refer to this number as the CID. On American Express Cards, the number is only four digits and appears above the card number. Regardless of the name, this number acts as an added layer of security against card-not-present fraud.
Work with Fraud Prevention Services
You’ll find many services designed exclusively for small businesses or e-commerce establishments that are at high risk for purchase fraud. A reliable high-risk merchant account provider such as High Risk Pay will flag accounts and affiliates that are fraud-prone so that you can catch fraud early. These account providers also offer an automated system that will help you fight chargebacks to reduce your costly chargeback ratio.
Signifyd is an e-commerce platform that offers similar protections, including on-demand or complete assurance from a certified fraud expert who can help you spot and react to suspicious purchases. If you’re new to e-commerce and not yet familiar with the ever-changing hazards in this space, turning to professionals can give you an edge against crafty criminals.
Put Limits on Declined Transactions
Fraudulent shoppers will often guess at important details such as the CVV. Declined transactions are problematic for more than one reason. Even a legitimate error will likely cost you a small fee if the transaction gets declined. Multiple transactions of this type can incur large charges for your business.
Set a strict limit on declined transactions and lock customers’ shopping carts when they hit their limit. Direct them to your customer service line for further help. In the case of a fraudulent shopper, you may likely never hear about the order again.
Keep Up with Criminal Trends
Stay up-to-date on the latest trends in cybercrime. Fraudulent shoppers will often use a few trending strategies to try to place orders. These change periodically to catch businesses off-guard and bypass the protections they have in place. Follow major blogs and publications that cover e-commerce and credit card fraud. Stay on top of the latest news so that you always know what to look for with potentially suspicious sales.
With the right precautions in place, you can protect your small e-commerce business from fraud and maximize your earnings. A few smart moves now will have a major impact on your business operations in months to come.
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