As a mediator between the merchant and the bank, payment processors help facilitate payments. They handle transactions involving credit cards which are completed upon confirmation that sufficient funding is available.
However, eCommerce fraud has nearly doubled over recent years with the growth of digital sales. Thus, keeping fraud at bay and managing chargeback disputes is a priority for e-commerce stores more than ever before.
What Is eCommerce Fraud?
eCommerce fraud is any fraud that takes place on an online platform. In e-commerce fraud, it is also possible to use a stolen or fake credit card, create a false identity, and engage in affiliate marketing fraud.
Retailers absorb the costs associated with fraud made by consumers on your online store and as fraudsters employ more sophisticated tactics every year, e-commerce fraud is becoming more sophisticated. An online store is most likely to experience several types of fraud.
Below is a list of the most common types of e-commerce fraud:
- Classic fraud: Unsophisticated fraudsters purchase stolen credit card credentials on the dark web with the intent of using them later.
- Card testing fraud: Fraudsters (often bots) test a credit card’s validity and subsequently use its credentials to commit fraud at a third-party website.
- Account takeover: Taking advantage of a customer’s login credentials, fraudsters purchase items using stored credit cards.
- Identity theft: occurs when skilled fraudsters assume the identity of another person and establish credit cards in their name. The victim is then able to spend money.
- Chargeback fraud/ friendly fraud: rarely perpetrated by hardcore criminals, but by disingenuous consumers. Having made a purchase, they issue a chargeback claiming that their credit card has been stolen. It is usually a chargeback that occurs after goods have been delivered.
Therefore, it is imperative to develop a strategy to combat and reduce the damage caused by fraud within your store.
Here are a few tactics that can protect your online store from fraud:
- Implement Fraud Detection Solutions
In general, fraud detection solutions specialize in identifying red flag transactions and protecting eCommerce merchants from card testing fraud, friendly fraud, and chargeback fraud.
- Comply With PCI Standards
It ensures that companies storing and processing credit card information, including online retailers, maintain a secure environment by adhering to PCI DSS (Payment Card Industry Data Security Standard).
The PCI compliance process includes basic security precautions, including creating a firewall to keep your internet connection and any systems storing credit card information separate. Since PCI compliance is mandatory, you need to ensure you are following the relevant PCI guidelines to avoid any penalties or sanctions.
- Develop Blacklists
You may notice that your e-commerce customers have started testing their credit cards through a fraud detection solution. When you locate these customers, add them to a blacklist.
Even though you made the transaction in a secure environment, you may still face a fraudulent transaction, however effective management of your online store will help minimize fraud and losses.