Increasingly, consumers are skipping the mall and buying online instead. Many traditional retailers have already moved online to maximize sales among customers who either don’t have access to physical shops due to distance or prefer to shop from home. With the proliferation of convenient and easy-to-use online purchasing options, people now forgo brick and mortar stores, thronging instead to their online offspring.
In fact, market research from eMarketer, in a February 2014 report, projected that the global e-commerce market will grow over 17 percent per year, representing a total value of nearly $2.4 trillion by 2017.
While many businesses are successfully capitalizing on the rapid expansion of online commerce, many e-merchants still lack adequate security to protect themselves from fraudsters. This in turn makes these vendors less appealing to potential customers, preventing healthy transactions and likewise exposing them to false credit card charges.
Some signs of fraud are easy to spot. For example, a new customer ordering especially high priced items, frequent small-amount orders to the same delivery address or large-quantity orders of easy to resell tech gadgets can be red flags. However other signs of fraud are harder to discern, as they are often minor and occur regularly with valid customers, such as the request to ship to an address that is different from the billing address or international orders from some of the countries considered key offenders in the world of online fraud.
These signs of fraud offer no guarantee to merchants, who remain wary of transaction rates. For instance, merchants who decline too many transactions risk losing good customers, while those who approve too many borderline cases risk having to pay losses out of their own pocket. Nevertheless, online retailers looking to prevent online fraud while still approving safe transactions aren’t at a loss. New technologies are constantly evolving to meet the changing needs of online businesses. However, as technology advances, so does fraud. Any technology based solution must be able to operate around the dynamically changing online fraud ecosystem.
One new technology, chip and PIN for credit cards, is backed by the government and goes live in the US on Oct. 1, 2015. The new card looks much like current credit card, except it lacks the magnetic strip. The chip and PIN cards are more successful at blocking fraudsters who steal credit card information for card present transactions. However, in Europe, where this technology has been adopted, it funnels more fraudsters into the online space, as the chip and PIN technology is not widely applicable for e-commerce.
Some simple steps to preventing fraudulent charges don’t require additional technology but may prove too cumbersome or not cost effective for business use. One tactic guaranteed to decrease fraud is to stop selling internationally to the top 10 countries known for having the highest amount of fraud. While this will cut down fraud, it also means giving up doing business in some of the most dynamic markets in the world.
In addition, sellers who suspect potential fraud can always call the phone number provided by the cardholder to verify that the cardholder made a purchase. eMerchants should also be aware of odd requests, such as rushed shipping at any cost or partial payments with multiple credit cards. A quick phone call can often clarify any concerns.
Unfortunately, it is still difficult, from an industry perspective, to deter fraudsters attempting to monetize the multi-billion dollar e-commerce business for personal gain. Individual merchants must be pro-active and utilize technologies and smart practices to protect themselves and their business. Until credit card security and technology can catch up with the mind of a fraudster, e-commerce companies must employ whatever steps are necessary to prevent cyber fraud.
