The e-commerce industry’s growth allows more people to chase their dreams and be their own bosses than ever before. Setting up a store without having to deal with the challenges of a physical storefront is too attractive to pass up for aspiring or seasoned entrepreneurs with some money and a concept they think they can sell.
What these e-entrepreneurs soon learn is the prevalence and cost of e-commerce fraud. Per an October 2017 Global Fraud Index, attempts increased 5.5 percent from Q2 2016 to Q2 2017 for a total value of $57.8 billion. If this revelation got your attention, employ these eight strategies to reduce ecommerce fraud and the associated lost revenue.
When it comes to cybersecurity and fraud, it’s impossible to guarantee safety. While ecommerce fraud and cybersecurity aren’t the same thing, you’d be wise to properly set your site’s overall security foundation before deploying specific anti-fraud techniques. If you don’t have any in-house security professionals to lean on, get a site audit through a third-party cybersecurity firm to uncover any vulnerabilities. It will be worth the investment. If you think fraud is expensive, try a data breach, which those cost e-commerce stores $141 per record stolen in 2017.
Require Customer Accounts
You’ll undoubtedly lose some conversions and customers due to inconvenience when you require them to create an account prior to purchase. However, it’s important to get as much customer info as possible to thwart scammers intent upon making a quick purchase with stolen financial information. You can use single-click form-filling to speed up the process for shoppers.
Use Verification Services (But as Layered Security)
Ideally, you’re already using an address verification system (AVS) to check shoppers’ billing address with their credit card information. Likewise with card verification numbers (CVN). You should also have a process in place to cross-check IP addresses with shipping or billing addresses, in addition to verifying the IP address is coming from an individual account versus a proxy server.
Use these methods in a layered approach, rather than completely relying on any single one of them to thwart fraud. It’s common for fraudsters to use keylogging systems to guess CVNs, and it’s also quite possible to get around AVS. Further, consider the fact that addresses not matching up could just be a mistake. You might not want to completely disqualify that order from going through, but contact the customer to verify instead.
When in Doubt, Always Reach Out
False positives will occur regardless of how you layer your security and fraud-detection methods. This is why you shouldn’t automatically screen out orders that don’t pass one of your tests. Instead, filter those orders to one consolidated place where customer reps can reach out to the customer to confirm the order.
Display a Fraud Badge on Your Site
Just as fake blinking auto alarms and “smile, you’re on camera” signs are effective in reducing break-ins and theft, having a anti-fraud site badge can yield similar effects. A site badge that states you monitor for fraudulent activities and prosecute to the full extent of the law won’t eliminate fraud, but it could discourage casual interlopers out for a thrill.
Share Knowledge Internally
Your staff, particularly, customer service and order reps, are the front lines of your business. Routinely sharing the latest e-commerce fraud tactics and preventive methods with your entire staff will help you filter out fraudulent transactions. In addition to aiding your employees in spotting suspicious transactions, internal knowledge sharing reduces the odds of an employee falling for a phishing attack or another exploit.
Signature on Delivery
Many people won’t be home to sign for their deliveries. This makes requiring signatures upon receiving shipment challenging to pull off without annoying your customers. However, if for example you sell furniture online, or other high-value merchandise you can’t afford to lose product to fraud. Most customers will understand expensive items come with more stringent security methods. In fact, they expect them to do so and are more than happy to make arrangements to comply.
You may have heard about the use of AI and machine learning in sales and marketing to score customer leads. A similar concept is applied in fraud detection to grade how likely a transaction is to be legitimate. No amount of human-driven fraud-detection methods can equate to the power of artificial intelligence. Algorithmic scoring offers the most potential of any strategy on this list, but it also requires the most time to develop.
Layered Detection Is Your Best Bet at Reducing Fraud
The goal at the end of the day is to reduce revenue loss caused by fraudulent transactions without screening out valid orders. This can only be done with a multi-tiered detection approach that hinges on AI but incorporates AVS, CVNs, IP cross checking, human outreach and other secure methods. Like with cybersecurity, you cannot completely rid your store of fraud. But employing the above eight strategies in your e-commerce store will reduce the amount of money you’re giving back due to fraud.