In the digital age, credit card fraud is a rampant issue, particularly hitting e-commerce merchants hard. The necessity of fraud management software has evolved from a choice to an essential obligation for online businesses.
The Growing Challenge of Credit Card Fraud in E-Commerce
The Nilson Report in November 2019 revealed that gross fraud losses amounted to $27.85 billion in 2018. But the cost of fraud isn’t just about lost sales and products. It encompasses the expenses of managing fraudulent transactions, call centers, investigations, and recovery efforts, which have seen a 15% increase from the previous year.
While EMV chip technology has reduced storefront fraud, it has inadvertently spiked card-not-present (CNP) fraud, a significant challenge for e-commerce retailers. CNP transactions, lacking physical verification methods like chip readers or PIN entry, are more susceptible to fraudulent activities.
Types of E-Commerce Credit Card Fraud
E-commerce merchants face three main types of fraud: friendly fraud, chargeback fraud, and true credit card fraud. Friendly fraud arises from a misuse of chargeback rights by consumers, often triggered by increased fears of identity theft. Chargeback fraud, more malicious in nature, involves customers deliberately seeking free items through chargebacks. True credit card fraud involves the illicit use of stolen personal and credit card data.
These fraud types not only cost merchants financially but also impact their reputation, time, and the very ability to process payments.
Managing Fraud Risk as an E-Commerce Merchant
For e-commerce merchants, adopting the right merchant account and implementing a comprehensive fraud management system is crucial. Opting for a merchant service provider experienced in high-risk processing, coupled with a high-risk payment gateway equipped with fraud detection software, is essential.
This software should include 3-D Secure 2.0 and tokenization capabilities, enhancing the security of each transaction. Fraud management software allows merchants to set customized rules and thresholds, identifying and mitigating fraudulent transactions effectively.
What Does Fraud Management Software Do?
Fraud management software offers various features such as setting transaction rules, flagging or denying suspicious activities, and setting transaction limits. It enables merchants to block or review specific transactions based on various criteria, such as transaction amount, IP address, or geographical location.
For instance, merchants can flag or block transactions from specific countries or set limits on the number of transactions per card. These tools are vital in preventing common fraud tactics like card testing and repetitive unauthorized purchases.
Proactive Fraud Management in E-Commerce
Effective fraud management in e-commerce requires a proactive approach. Using tools like iSpyFraud, merchants can review transactions flagged for suspicious activity, allowing for quick action against potential fraud.
E-commerce businesses, especially those in high-risk sectors like online dating, gambling, or adult content, must be particularly vigilant. Employing a strategic approach to fraud detection and prevention is critical for safeguarding both the business and its customers.
Bankcard International Group’s Commitment to Secure E-Commerce
At Bankcard International Group, we understand the importance of secure payment processing, especially for high-risk merchants. With over two decades of experience in high-risk payment processing, we offer our clients the latest, most effective tools for fraud prevention and management, ensuring secure and reliable payment processing at competitive prices.
