Happy November, everybody! 'Tis officially the season of e-commerce.
Yep, customers are about to go on a spending spree. And if 2016 was any indication, most of them won't be leaving the comfort of their own homes. Last year, the National Retail Federation reported an estimated 108.5 million Americans shopped online the days after Thanksgiving, a number that exceeded brick and mortar shoppers by about nine million.
Experts in e-commerce believe the online shopping numbers will indeed increase during the 2017 holidays and unfortunately, so will online fraud. According to Rey Pasinli, founder of Total-Apps, "Even thieves and crooks need to shop for holiday gifts. Expect online fraud to spike during the holidays!"
One of the main reasons for an extra-special influx of thievery this year is that fraudsters being forced to be more creative, due to innovations in identity protection.
You remember when the credit card chip was introduced a couple of years ago? Yeah, I hated it too. I recall trying to pay for a bag of pretzels at a liquor store in Portland and the chip reader took a whole minute to process. It felt like an eternity as I heard the audible sighs from the checker, who apparently went through this long process numerous times a day. Thank goodness the chip has gotten faster since then!
The invention of the chip has been good and bad. Since its introduction, fraudsters can no longer buy lists of stolen credit card numbers and make them into physical credit cards to use in Card Present Transactions. But unfortunately, this has caused fraudsters to become more creative in their online tactics, resulting in over $700 million more in yearly loses than in previous years.
I've written before about innovations and how restraints are a major creativity booster. Seems pretty ironic to me that this even applies to fraudsters!
So how do you protect your business against these rebel artists?
"Merchants should think of fraud scrubbing as if they were a medieval castle," suggests Pasinli. "Castles had multiple layers of defense designed to thwart specific threats. Moats, draw bridges, high castle walls and troops all combined to provide a layered defense to protect the treasure inside."
Here are some of the protective layers he's talking about:
Understand your risk.
As you lay out your fraud protection plan, you need to first understand how attractive your business is going to be to fraudsters. They won't want items of small monetary value, but they will want luxury items.
If you sell children's Bibles, for example, you probably won't need to do too much fraud scrubbing. However, if you're selling the next iPhone 10, you're likely going to be a target and need to pull out all the stops.
Do a volume and velocity check.
If, for example, someone just ordered $25,000 worth of dresses online over a period of three days, your red flag should go up. That's far too many dresses for one household, no matter how many fashionistas might be living there!
"Volume and velocity checks are two of the most powerful tools against fraudsters," says Pasinli. "Volume looks at the number of transactions and dollar amounts coming from a single source: $25K in orders from a single card is highly suspect and should be further validated. Conversely, velocity examines how many times a specific data point repeatedly appears. For example, 20 different credit cards in quick sequence all originating from the same IP address is a clear indication of fraud."
Too many businesses don't do this easy step. Don't be one of them.
There are tools to help with fraud scrubbing, such as Cybersource or ThreatMatrix, which tend to focus on approving:
· AVS, which is the billing address
· CVV, the number found on the back of the physical credit card
Making sure these crucial pieces of information match up is going to provide you with an added layer of protection.
It's bad enough to experience massive fraud occur and then have to waste money on shipping and lost inventory, but possibly more damning is the matter of charge-backs.
Charge-backs occur when a customer disputes a charge on their credit card. This eventually happens with all fraud and then the merchant is responsible for the refund, as well as the chargeback fees associated.
If, say, all of those dresses I mentioned were purchased with different credit cards and then shipped to the same address, it's likely the fraudster got a hold of numerous cards. When each of those cardholders dispute the charges, the merchant would receive a charge-back for each one. Not only would they pay a pretty penny, the business might become blacklisted with the credit card companies for having too many charge-back disputes.
This is obviously not how any of us wants to spend our Black Friday this year. So if you haven't already, spend the next few weeks arming yourself against fraudsters by using these tips. Your bottom line will thank you.