eCommerce sales are anticipated to reach over $630 billion by 2020. While increasing sales generate more revenue, more significant losses are inevitable because of fraud. Experian reported that nearly three-quarters of businesses adduced fraud as a growing issue, and almost two-thirds showed similar or higher fraudulent losses levels.
In the current digital era, combating new eCommerce fraud techniques demands superior eCommerce security for online businesses. Science Direct stated that the basic approach to fraud detection with the use of an analytical model is to determine how potential predictors of fraud relate to known fraudsters and their past activities.
The most powerful models are created based on historical data. There are also several secure and automated methods available in the market to mitigate fraud risk. Here are five effective strategies for fraud detection and prevention for online businesses.
Utilize Software Specifically Designed for Fraud Detection
From basic fraud set to machine learning algorithms, there are a variety of superb fraud detection systems within the industry. Some vendors of online shopping cards offer built-in fraud detection. There are also plenty of third-party software applications that merchants can install. These tools, when used along with robust internal practices, can significantly decrease the risk of fraud and even automate the task.
Determine Which Type of Payment Method to Accept
Online merchants need to be aware that not every payment method is created equal, especially when it comes to risk conditions. Some methods of payment, such as AMEX, tend to incline towards the cardholder-in-disputes.
Other methods, such as PayPal, are more merchant-friendly during disputes and offer protection services for sellers with the use of shopper verification and other tactics. Among others, PayPal has also been a pioneer in the field of fraud detection with machine learning algorithms.
Evaluate the Address Verification System Codes
eCommerce sites should permit the merchants to see the industry-standard Address Verification System or AVS codes. These codes allow the latter to verify if the shopper’s billing address is indeed the same with the address that the cardholder has on file with the credit card issuer. While a resulting AVS mismatch does not necessarily confirm fraud, it could alert the merchant to be vigilant and cautious of the doubtful order.
Utilize Card Verification Codes
Online businesses should utilize their website’s functionality on payment processing to require card verification code for every purchase. The code contains three digits and can be called by a different name as per the preference of the credit card company. Visa, for instance, recognizes the code as CVV2 code. This code can be found printed at the back of the card.
The EMV chip cards have also never ceased to use this code. Since the code is not kept in the magnetic strip, it can be hard to buy without bringing along the card.
Utilize Gateway Settings
Merchants are typically liable for chargebacks and payments when it comes to fraudulent orders due to the capturing of funds. But by utilizing the gateway settings to authorize-at-sale, merchants can assess every order for fraud before obtaining the payment and shipping the products. Nevertheless, not every payment gateway vendor provides this feature. Hence, merchants need to search and pick one suited for their eCommerce needs.
Online fraudsters are evolving with better fraud techniques. If merchants do not take proper fraud detection and preventive measures, they will suffer losses no less than billions of dollars. There are several effective methods to detect and prevent fraud in the eCommerce industry, which include using a competent fraud detection software, identifying a suitable payment method, analyzing the AVS codes, and utilizing the code verification codes and authorize-at-sale feature.