EYEMAGINE EYEMAGINE on November 12, 2018 at 7:47 AM

4 Fraud Prevention Tips for eCommerce Merchants

Magento, eCommerce, BigCommerce, Shopify, Website Development, eCommerce Platforms, Website Security, Software Integration

So you decided to get with the times and take your business online to expand your market. Higher sales, less overhead costs, and more customers are coming your way. But wait, be sure to process your online transactions safely and cautiously. Don't worry, you're not the only online merchant who could learn a thing or two about safe payment processing. Some of the topics covered here are major mistakes made by eCommerce businesses. To help your company thrive, we've put together 4 fraud prevention tips for eCommerce merchants which are guaranteed to work!

SEE ALSO: Best 3 eCommerce Platforms For Your Business

1. Ship to the Verified Billing Address

If you aren't already familiar with AVS, we highly recommend it. Address Verification Service checks the billing address a cardholder provides to your shopping cart and checks it with what is on record at the card issuing bank. Not only should the billing address match, but it is in your best interest to ONLY ship your paid for product to billing addresses that pass an AVS test. If you ship to a separate shipping address, then you won't be protected from a fraudulent chargeback. This best practice protects you from fraudsters who order product and ship it to abandoned warehouses or lot. Fraudsters never steal a credit card number and then make a purchase and ship it to the actual cardholder. This does not benefit them. Keep in mind that in some cases, addresses won't match on completely safe transactions. For example, people often order gifts for their family and have them shipped straight to the gift receiver's house. Another example is a cardholder who mistypes their billing address or forgets what it is if they recently moved. If your business sells products that people commonly gift, you may want to implement a maximum dollar threshold in which you allow shipping to unverified shipping addresses.

2. Collect Signature on Delivery

Fraudsters aren't always the stereotypical criminals ordering merchandise online with fraudulent cards. Many instances of fraud are committed by those who actually ordered the product with their own credit card, but then falsely claimed they never received it. We call this friendly fraud and it is preventable. As an eCommerce merchant, you can require a signature before dropping off of your delivered packages. Now you have physical proof of safe delivery if your customer calls and claims it never arrived. We recommend taking precautions one step further by tracking your packages and purchasing insurance with your delivery company. Merchants with a smaller average order size may choose to skip out on some of these security precautions due to their cost. However, even with low average transaction sizes, it is possible to get a large order at some point! Anything can happen from point A to B, so protect yourself from chargebacks and misplaced packages.

3. Watch for Red Flags

This fraud prevention tip is a bit less system oriented. There are so many signs of fraud you can look out for. The below list is not exhaustive, but it includes the biggest red flags:

  • Exceptionally large orders
  • First time customers
  • Shipping address doesn't match billing address
  • International orders
  • A request to split the sale into multiple transactions or onto multiple cards
  • Orders quantities that don't make logical sense

A business owner with an exceptionally large order can sometimes lose common sense when staring at a sale with so many zeroes on it. The feeling of excitement can overwhelm their senses and prevent them from thinking logically. It's helpful to remember that if something seems too good to be true, it usually is. Say level headed and look out for red flags. A single red flag does not indicate a sure sign of fraud, but when you have multiple stacking up, you need to be careful.

What can you do when you run into these red flags? If they are anxious to give you their credit card number because its burning a hole in their pocket, run an authorization instead of a sale. If you find out later that its fraud, you can always void the authorization. You won't get a chargeback because the sale never went all the way through. Plus, you won't have to pay 2-3% to process the sale only to refund it later when you realize its fraud.

What next? What if this mystery mega sale is not fraud and it might be a true customer? How do we proceed with shipping thousands of dollars of merchandise and be 100% certain that we are safe? Well, when there are lots of red flags, the best thing you can do is request a fax of the front and back of the credit card used for the purchase, along with their Driver's License. Because fraudsters rarely have the physical card they're using and instead have only the card numbers (usually stolen in a digital data breach), ask to see proof that they have it in their possession. If for some reason they do have the card, a simple verification of the name on their ID will dispel all doubt. Also, you can call your payment processor or reseller agent and inquire about a suspicious transaction. They will always be happy to offer their opinion and guidance. You can call an expert payment processing representative who's written for other industry leading card not present websites.

4. Filter Out the Fraud

As an eCommerce merchant, you are more susceptible to fraud. That's why you should have access to software that is constantly fighting against fraud. We are a certified reseller for Authorize.net, a popular payment processing software that has a total of 13 filters in their Advanced Fraud Detection Suite. They range from notifications of odd billing information to pre-authorizing credit cards. One filter protects against the fraudsters that input random numbers into an online shopping cart until a successful set is found. You typically pay a fee every time a transaction like this is declined, but the filter prevents this. Another filter allows you to accept orders from certain countries. This geolocation setting ensures suspicious orders from certain high-risk countries don't make it past security.

Want More Fraud Prevention Tips?

For additional safety measures, check out Visa's Guide to eCommerce Risk Management. Having a website that takes payments can be a very profitable way to grow your brand, but only if it's done safely. Like with all payment methods, credit cards require certain security standards to be followed.  However, if you implement our four fraud prevention tips for eCommerce merchants you have nothing to worry about. Contact us to learn more about how we can help your online security.

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