Clarke & Sampson Blog

Preventing E-Commerce Fraud

Matt Stephens | Tuesday, April 26, 2016

Tackling_e-Commerce_Fraud.jpgConducting business online presents countless opportunities to enhance customer relationships, attract new business and increase revenue. However, without the security of a physical credit card and signature verification, cyber thieves have an advantage and opportunities for fraud. It is up to the e-commerce merchant to apply the right tools and controls to verify cardholder identity and the validity of transactions. With these controls, merchants can reduce fraudulent transactions and the risk of customer disputes.



Take these steps to effectively manage e-commerce risk: 

  1. Evaluate risks and train accordingly. Examine your business, and determine your unique set of risks. Risks might include fraud, account information theft or chargebacks, depending on the type of goods or services you provide and your specific business policies. Ensure your staff understands these risks and how to mitigate them.
  2. Select the right payment processor. Ask service providers what steps they take to manage the risk of fraud before signing a contract. Bank and payment processing providers should provide risk management support and have a comprehensive understanding of e-commerce fraud risk and liability concerns.
  3. Design your website with operational needs and risk factors in mind. To avoid customer misunderstandings and eventual disputes, make your privacy, shipping, return and refund policies accessible on your site, and aim for easy and simple navigation. Communicate your security controls clearly.
  4. Focus on risk reduction. Establish your sales order process to address risk concerns. Highlight required transaction fields, verify card and cardholder data, use cookies to recognize customers and identify high-risk international addresses.
  5. Design and implement internal fraud prevention structure. Internal strategies and controls like maintaining an internal database of fraudulent transactions and setting goals for reducing fraud as a percentage of sales can promote profitability.
  6. Make use of fraud prevention tools. Widely used tools include Address Verification Service (AVS), Card Security Verification Codes, Verified by Visa® and MasterCard® SecureCode.
  7. Implement fraud screening procedures. Screen online card transactions to minimize fraud for large-ticket items and high-risk transactions.
  8. Protect your merchant account from intrusion. Minimize the risk of cyber thieves gaining access to your shopping cart or payment gateway and making fraudulent fund deposits through the use of monitoring, passwords and information security efforts.
  9. Create a secure process for routing authorizations. Set up a secure process for submitting authorization requests online before accepting card payments over the internet.
  10. Prepare to handle transactions post-authorization. Evaluate how you will deal with approved and declined authorizations before fulfilling an order. Require e-mail order confirmations for approved transactions, and review declined authorizations to take appropriate actions.
  11. Comply with PCI standards. Payment Card Industry Data Security Standards provide web-based merchants with standards, procedures and tools for sensitive account information protection. Ensure that you have reliable encryption capabilities for data transmission and effective internal controls for protecting stored card and cardholder information.
  12. Reduce chargebacks. Chargebacks are costly in several ways, increasing processing time, hurting profits and affecting revenue. Tracking and managing chargebacks will help you take steps to prevent them. Act promptly when they happen, and know your representment rights.
  13. Use collection efforts to recover losses. Compensate for unwarranted chargeback losses through an effective collections system. Often contacting the customer directly produces results. Outsource remaining customers to a collections agency.

If your interested in learning more about e-commerce prevention contact Clark & Sampson to speak to one of our friendly and knowledgeable staff. 703.683.6601 - Or click the link button below to fill out an online form in which case we'll get back to you within 24 hours on the week days. 

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