As the number of merchants using e-commerce for their businesses continues to increase, payment fraud is also on the rise. The cost of fraud through the means of online purchases can lead to a negative impact on a business’ bottom line, decrease business efficiency, as well as damage the trust between merchants and their customers. Whenever fraud occurs, it requires urgent attention and the ability to fight back and prevent it from happening again in the future.
In a study conducted by LexisNexis, e-commerce fraud in the U.S. accounted for an average of 2.38 per cent of revenue in 2018 alone. “Successful retail fraud attempts have risen almost 30 [per cent] in our year-over-year study,” the study also found.
It should be noted that the cost of fraud is dependant on the sector. For instance, fraud affects digital goods more than physical ones. In addition, larger businesses are more at risk for fraud compared to smaller businesses.
One of the best ways to fight against fraud is through the use of chip technology. In 2018, Visa found that the technology reduced counterfeit fraud by 76 per cent after merchants decided to complete a chip upgrade. According to the study, the counterfeit fraud dollars for all U.S. merchants also decreased by 49 per cent.
The technology in question is the transition into using the EMV chip payment method. Since October 2015, the adoption of this technology succeeded in decreasing counterfeit fraud as the number of merchants using chip-enabled technology increased by 219 per cent by the end of March 2019. This technology is also being used for contactless payment cards. These particular cards allow users to simply “tap” on a terminal to make payments.
Another effective way to fight against e-commerce fraud is to apply means to prevent it in the first place. For instance, there are some red flags that merchants can be on the lookout for when managing their website and sales. Warning signs include, but are not limited to, the shipping and billing address contradicting each other, multiple orders with different cards to the same address, unprecedented large orders, as well as multiple orders of the same product.
While these are useful warning signs of fraud, they are not failsafe. This is because these signs highlight how difficult it can be to fight fraud in the first place by virtue of not being guarantees. Every situation can be different, so while a transaction appears to be a red flag, it can nonetheless be genuine. Not accepting these genuine transactions can, in turn, negatively affect one’s business.
Therefore, it is useful for merchants to have, for example, services like address verification and fraud scoring tools. When it comes to address verification services, they can compare billing addresses with the ones already on an issuer’s database. This type of service also adds two types of data authorization requests, namely the cardholder’s address number, as well as their ZIP code.
As for fraud scoring tools, they can come in the form of payment processors. These processors utilize a database to determine what constitutes as viable transactions. For instance, a score that determines whether or not a transaction is fraudulent or not can be determined by an IP address, card security code, or even through biometric measurements like a fingerprint and a face scan.
Choosing the best fraud prevention tool is integral to a merchant’s business. PayFrame not only provides you with the best credit card processing rates on the market, but we also pride ourselves with our stellar communication and customer service.
To begin taking your business to the next level, contact the PayFrame team at either 1-888-668-0733 or info@payframe.com.
