Fraud in E-commerce

E-commerce is big business in the U.S. and across the world with an expected growth rate of 9% compounded annually for the next five years. With people shopping online now more than ever fraudsters have taken note, shifting their strategies to take advantage of the opportunities in the digital world. E-commerce fraud saw an increase of 30% between 2017-2018 and with data breaches becoming larger and more prevalent, the data that fraudsters require to process these transactions is becoming more readily available.

Unfortunately it is not as easy as just saying “Hey! There is a fraudulent transaction!” Although there are signs for fraudulent transactions, the characteristics of a fraudulent one still happen all the time with legitimate transactions. This creates a problem for merchants because not processing legitimate transactions can cause lost business and potentially of a life-time client.

Some enterprise merchants take fraud into their own hands. Credit card transactions are generally an authorization or decline, either it processes or doesn't. Some platforms and organizations allow an authorization but do not settle the transactions. Instead a manual review process takes place to assess whether or not a transaction is fraudulent. Only the largest organizations most susceptible to fraud have the resources and breadth to afford a solution like this.

 

Fortunately, technology such as Visa’s Fraud tools are catching up and fraud protection is turning out to be big business.

Authorize.net offers a set of fraud prevention for users of its platform:

 

AVS Address verification services that compare shipping and billing addresses with existing data
CVV2 Security codes on credit cards which are not allowed to be stored for subsequent transactions.
Filters User customizable filters which allow for merchants to approve or deny purchases based on their own criteria. These criteria range from IP addresses, physical addresses all the way to the specifics of the transaction.

Organizations have built businesses on the sole offering of fraud prevention. Companies like Kount and Riskified are two such organizations with anti-fraud offerings.

Riskifieds offering includes tools ranging from those listed below while Kount has similar offerings while also integrating machine learning into their mix:

Account Protection Prevention of account takeover attacks, exploitation loyalty programs, safeguarding sales promotion and protection of customer data.
Payment Authorization Minimization of PSD2’s negative impact on customer experience by routing exempt orders to TRA. Removes clearly bad orders from bank reviews to boost your overall payment authorization rates.
Dynamic Checkout Adjusts the checkout experience to the shoppers risk profile and offers customers various ways to verify their purchase.
Alternative Payment Deco* is a groundbreaking solution to payment declines that lets your customers complete their purchase, even if you their bank declined the transaction.
Chargeback Guarantee Models accurately reject fraud, instantly recognize good orders, and prevent false declines. Takes liability on every approval.
Representment Automated chargeback representment overturns incorrectly-decided disputes to reclaim payment, allowing approval of more good orders on your behalf and reduce repeat friendly fraud attempts.

Fraud is an ever evolving landscape requiring merchants and organizations to always be at the cutting edge. The tools listed are just some of the common available features that you get with Authorize.net as your payment gateway. If you have a question or are looking for a solution, get in touch with your payments processor to learn more about your options.

 

More Reading:

2019 AFP payments fraud and control survey report:

https://www.jpmorgan.com/content/dam/jpm/commercial-banking/documents/fraud-protection/2019-afp-final-report-highlights.pdf

The 7 Types of Ecommerce Fraud Schemes You Should Know About: https://www.entrepreneur.com/article/324464