Advances in e-commerce and payments have made completing purchases easier than ever for busy consumers. Whether signing up for subscription services for food, cosmetics, entertainment, or making an impulse buy on their mobile phone, consumers expect a frictionless experience. While card-not-present (CNP) merchants offer new ways for their customers to shop, their ongoing challenge is to maximize sales without increasing fraud and chargebacks. Frictionless transactions have a darker side, allowing consumers to easily dispute transactions which often result in costly chargebacks. Darker still is the risk of sophisticated fraudsters exposing vulnerabilities they can leverage to steal from merchants and consumers.
Certainly, consumers must take steps such as shopping at reputable websites, creating strong passwords, and not clicking on phishing emails to protect themselves from cybercriminals. At the same time, they rely on merchants to use the latest security tools to protect them and their personal data from hackers. Taking a multi-level approach for security enables CNP merchants to protect their customers and themselves from fraud, using tools such as geolocation, biometric analysis, address verification, CVV, IP Intelligence, 3 Domain Secure, and SSL.
Cybercrime can come in many forms, including stolen credit card details for card testing, diverted delivery of goods to an address not connected to the credit card, online skimming, and fraudulent credit cards. Any of these fraud schemes can destroy consumer trust in merchant security measures. In turn they can compromise a merchant’s relationship with both new and long-time customers when large orders, new credit card numbers, or a simple address change could raise suspicion. Without ensuring a secure connection, brand loyalty wanes and merchants have a much more difficult time preventing fraud and chargebacks.
A Balancing Act for CNP Merchants
CNP merchants are challenged to implement a fraud prevention strategy that effectively protects consumers, without being so strict that they turn away legitimate sales. Merchants are conflicted: too little security and their company makes the headlines in not a good way. Too much oversight and they turn away good customers who take their business to a merchant that in their mind, manages e-commerce security more effectively.
What’s a Merchant to Do? Start with These Tips:
- Be proactive and never overreact. An overreaction can result in the enforcement of strong, sometimes overly restrictive, fraud prevention strategies and filter settings.
- Find the right balance of tools that cover your business without being too rigid. Consider machine-based solutions versus purely rules-based options. Machine-based solutions use the same data that tracks and predicts customer shopping preferences to help CNP merchants detect fraudulent transactions before they happen.
- Make sure your data is accurate. Inaccurate or incomplete data is a root cause of false positives. When fraud alert solutions use aged or inaccurate data, the false positive rate increases. For example, alert systems that rely on associate-reported data from sources like TC40 can lead to false alerts by signaling a dispute when none exists (e.g. the fraud issue is old and has been resolved).
- Choose agile tools that allow you to adapt to changing conditions.
- Ensure your tools offer reporting that enables you to understand the effectiveness or lack of effectiveness of your security solutions.
- Implement a comprehensive multi-channel solution for all points of your business, including mobile, device and IP intelligence.
E-commerce consumers rely on merchants to safeguard their data and protect them from fraudsters. At the same time, they expect frictionless transactions and flawless product delivery. Merchants struggle to put protection tools in place that will not interfere with legitimate sales. The resulting false positives cause lost sales, while concurrently compromising a relationship between merchant and consumer that is hard-earned and even more difficult to recover.
Contact us to learn how Verifi’s collaboration solutions can help you prevent fraud and chargebacks while mitigating false positives.