Even if you don’t know exactly what it means, the word “fraud” just sounds menacing. The truth is, last year alone, fraud cost online retailers an astounding 1.47 percent of their annual revenue, which amounted to more than $5 billion. For every dollar stolen through fraud, merchants must spend at least $3 to recover afterwards, and as fraud continues to increase, e-commerce businesses stand to lose billions more in the coming years.
Fortunately, there is much you can do to stop fraud from defeating your online business. The following tactics should drastically decrease the risk of fraud, keeping you and your customers safer.
PCI Compliance
In 2006, the Payment Card Industry Security Standards Council was launched with the intent to monitor and improve security standards for payment accounts throughout the transaction process. As a result, the group created the Payment Card Industry Data Security Standards (PCI DSS) to ensure that all companies that accept, process, store, or transmit payment card information do so safely and securely.
It should go without saying that understanding and adhering to PCI compliance rules will help prevent your business and customers from becoming victims of fraud. However, it is equally important that you partner with merchant services providers that uphold the same levels of compliance, so your payment data will be safe from start to finish. Vendors of different sizes and styles may have different rules and regulations, so it is important that you review the PCI DSS before executing your fraud prevention plan.
Automated Transactional Risk Scoring
Authentic and fraudulent dealings look different, but to see the distinctions, you must look closely at every transaction. However, few e-commerce businesses have the time or manpower to devote to close scrutiny of every purchase. Fortunately, there is another solution: automation.
Computers can easily track risky purchasing behaviors to calculate scores that will help you determine the possibility of fraud in every transaction. The scores are created based on a number of data factors, including:
- Time of order
- Sale amount
- Type of merchandise
- Geolocation of IP address
- Shipping and billing addresses
With this score in hand, you can decide whether a particular transaction is worth further investigation or possible cancelation. You should develop a threshold for a risk that is sensible for your industry.
Categorizing and Resolution
Generally, a transaction’s risk score should place it in one of two categories: accepted or rejected. Eventually, there may be scores that warrant further investigation, and your automated system should be capable of flagging these for manual review. Your automated system should be able to make these calls instantly to ensure your customers receive speedy service ― and to ensure your business never suffers at the hands of fraud. Usually, providers integrate categorizing and resolution in line with the authorization flow, so the process will rarely require intervention on your part.
Post-Purchase Transaction Management
The purchase is not the beginning, middle, and end of fraud management. To stay thoroughly safe from fraud, you need a system for recording and analyzing the data of fraud, so you may better understand your business’s history with fraud.
The best tool for this is a fraud prevention service that offers an interface for this exact purpose. Typically, such dashboards will highlight inconclusive transactions for you to review manually, contain a database with detailed records of past risks and fraud attempts, and offer additional tools for fighting fraud in the long term.
Without a specially designed tool, you will have to devote untenable amounts of time and resources to resolving fraudulent chargebacks, so it is worth the effort to find a provider with post-purchase management capabilities.
Adjustments to Rules and Parameters
Fraud prevention is an ongoing journey; it is a war you must never stop waging. Though you might be tempted to forget about fraud once you purchase and configure the above tools, failing to stay up-to-date on fraud trends and prevention techniques will only make you vulnerable to attack. Criminals’ methods shift quickly, which means you must be willing and able to adjust your system to keep up.
Even weeks after you enact your first fraud system, you should review its performance to ensure its rules and parameters are effective. You should enforce a regular schedule for reviewing and maintaining your fraud security measures, so you and your customers will always be safe.
