Most ecommerce merchants learn the hard way; orders and registrations from fraudulent sources cause financial, merchandise, and time losses. With the rise of mobile ecommerce and the proliferation of high-profile data breaches, you’ll need the best information and tools available to combat fraud in your marketplace. The October 2017 Global Fraud Index reported a total of $57.8 billion in ecommerce fraud losses in eight major industries.
Ecommerce fraud continues to grow, and the best way to protect yourself is a good defense. Here are some of the most troubling fraud issues ecommerce merchants face, and how to limit your exposure.
Identity theft
Identity theft is defined as the fraudulent acquisition and use of a person’s private identifying information, usually for financial gain. Financial identity theft through credit card fraud is what most people envision when they think of identity theft.
Identity thieves use a person’s identifying information, such as name and address, or an existing credit card to make a purchase on your website. Frequently, this data is acquired in a breach or skimming scam and sold on the black market before a victim even knows they’ve been compromised.
DOTS Order Validation can help identify if a user is who they claim to be by cross-checking the information provided at the point-of-sale, such as Ship To and Bill To address, phone number, and Banking Identification Number (BIN). IP address location is also compared to the billing and shipping addresses to determine if the order should be flagged.
Order Validation assigns individual quality scores to each input and a composite quality score to the overall transaction. You determine your quality score threshold, which is used to flag suspicious transactions for your team to review or reject.
Here are a few examples of transactions that might be flagged for additional review:
- Phone number not matching the name and state on the order
- Issuing bank (via BIN) in a different country than shipping address
- IP location not close to shipping address
Your team can review and manage flagged transactions before the order is fulfilled.
Chargebacks
A chargeback occurs when a customer disputes a transaction and their payment is returned to their account. Sometimes this is referred to as “friendly fraud,” meaning it was a misunderstanding on the part of the consumer. Perhaps they didn’t read the fine print to see that they were signing up for a subscription with recurring fees, for example.
Frequently, chargebacks are caused by a fraudster either using stolen financial information to make a purchase or by lying and claiming they never received the product. Friendly or not, chargebacks cost your customer service team time, both interfacing with the customer and researching the issue.
Chargebacks are particularly nasty because you lose product, incur shipping costs, chargeback fees AND they hurt your standing with creditors over time. If your business reaches the high-risk threshold for your industry your processing rates will increase, or worse – your processor could drop you.
DOTS Order Validation can again flag risky transactions by cross-checking customer information and location elements through more than 200 proprietary tests, resulting in a quality score based on the validity of the information. Order Validation also provides a record of the order with all the information you need to argue a chargeback should one occur.
Order Validation also helps your customers correct typos in shipping info at the point of entry, so you can avoid chargebacks from misdelivered shipments and any related customer service headaches.
High risk cards
With the rising sales of prepaid credit cards and gift cards, the frequency of scams involving these cards has risen. There are many types of prepaid and gift card fraud, involving both the sale or loading of cards, and using prepaid or gift cards to make a purchase. High risk cards can cost you on either end of the transaction.
High risk cards can also hurt you if your product or service is offered on a payment plan. The first payment on a prepaid card might be approved, but subsequent payment transactions could return insufficient funds. Not only do you have product loss, you’ll incur additional costs attempting to collect the debt internally or settle for a fraction of the debt through a collections service, if you can collect at all.
DOTS BIN Validation uses the Bank Identification Number (BIN), comprised of the first six digits of a card number, to identify the issuing bank and card-type, including those higher risk prepaid and gift cards. Cross-referencing the BIN with user phone and address information can help you identify a high-risk transaction.
Your team creates protocol to manage these transactions, such as:
- declining prepaid cards outright at point-of-sale
- requesting a secondary form of payment in real-time
- simply flagging the order for review before fulfillment
BIN Validation also provides the name and phone number of the issuing bank, so you can call to verify flagged transactions.
Validation services help your team stop wasting time identifying and troubleshooting fraudulent transactions, and spend more time managing transactions flagged as high-risk before they become a problem.
It’s increasingly important to protect your business from fraudulent transactions. Implementing an API can literally stop fraud before it even begins, right at the point of sale, and in real-time. Learn more about how Order Validation or BIN Validation can help you prevent fraud and enjoy the benefits of improved customer satisfaction and more efficient resource management.
