Fraud prevention, like website security, is a major challenge companies need to tackle head-on to avoid being in the news for wrong reasons. It also puts a serious dent in your bottom line, since the seller is left holding the bill. E-commerce fraud typically happens when a thief, who has stolen a credit card or user ID from your site, uses it to order goods from your site.
According to CyberSource, 0.9% of US e-commerce transactions were fraud in 2011. By 2018, research and advisory firm Aite Group estimates the online credit-card fraud transaction to reach $6.2 billion. However, there is no need to press the panic button yet, as there are effective ways available to prevent e-commerce fraud.
One option is to subscribe to fraud prevention service from companies like Kount, Riskified, Signifyd or Maxminds. Most of the payment vendors also provide these services as part of the package (e.g. Authorize.Net, Chase Startech). Fraud prevention services enable you to set targeted rules, in addition to the standards they provide by default. These services provide a fraud score based on various parameters and the latest fraud data.
As you guessed by now, these are not free and the cost varies from provider to provider. But you can customize your payment plan based on your industry. Certain industries are more likely targets for attacks, such as electronics, and you might need to shell out more.
If you do not have the appetite for high subscription costs, you can implement a simple system in-house which can easily detect 90% of fraudulent transactions. IP country detection, zip code mismatch and value of orders are just some of the checks you can put in place. Once a transaction is flagged as suspect, you can decline it or put on hold. It is better to decline the transaction only in extreme cases and let your fraud prevention department process it manually after contacting the customer.
E-commerce fraud is a serious issue, as is evident from various high-profile breaches we have witnessed in the last two years. The right approach or solution is different for every customer. You may want to evaluate your current fraud prevention tools and how effectively they fit in your technology stack and CMS requirements. Contact us for an evaluation of your fraud prevention approach.