Bot with Stolen Debit Card
Jackie Long

5 tips to protect your online store from transaction fraud

Know what to look for to minimize transaction fraud for your ecommerce business.

Every ecommerce business deals with transaction fraud and chargebacks. Whether an order gets placed with a stolen credit card or a customer initiates a chargeback because they do not recognize the charge, businesses can lose a lot of money in fees and resolution costs. Protect your company from these threats by following a few steps that can help you save time, money, and resources.

Know the most common fraud indicators.

Does the person's location match the billing address? Is it shipping to a forwarding address? Does the phone number match the billing ID? Is it a new customer? Is the email from a free service?

While none of these things individually is enough to label an order as fraud, all of them together may indicate a problem. There are also numerous other fraud indicators, and in-depth manual reviews can take too much time for most ecommerce businesses to realistically handle. If you don’t have an automated fraud solution, make sure your reviewers know the biggest fraud indicators for your company and how to look for them. Simply by implementing a review process, you can cut down on fraudulent transactions.

Use identity verification.

Does this order require additional verification?

Bots and non-human traffic can't verify orders that they place. They can be caught using a simple verification step. Whether you choose to utilize phone, SMS, or email verification, there are a number of ways to contact the customer and add friction to the process for bots. Adding a step like this for suspicious orders can not only cut back on transaction fraud, it can also make customers feel more secure. Many customers actually prefer shopping at stores that have some form of verification because it shows that security is important to that business.

Flag orders that are out of the ordinary for further review.

Did you pause an order so that you can manually review it when fraud is questionable?

If you have an automated fraud solution, you can adjust your settings to allow valid orders to automatically go through while holding questionable orders. With fewer orders to review and an easy way to view all of an order's data, manual review orders will be more efficient and effective. In addition, the focus on orders that need human attention will reduce the likelihood of false declines while increasing your fraud protections.

If your system is entirely manual, make sure reviewers are looking for anything out of the ordinary. For example, orders that are outside of the normal price range should be flagged. Unusually cheap orders could be card testing to see if it will be approved while unusually expensive orders could indicate a fraudster trying to get the most from a card before it gets shut off. Other examples include shipping to countries or regions that don’t normally order from you, multiple orders with the same name but different addresses, or new customers with incomplete or strange information. While these may not automatically make it a fraudulent order, it’s worth the time to investigate these orders further.

Don't be afraid to cancel and refund fraudulent orders.

Is the order worth the risk?

Many times, a simple rejection and refund are far cheaper than a chargeback. Stopping fraud early can prevent chargebacks from occurring, saving you fees and inventory. In an automated system, you can set the limits for which orders get rejected. For manual reviews, simply ensure that reviewers know what your risk level is and when it’s okay to reject an order for suspected fraud.

Keep track of all orders rejected orders for analyzing later.

Are you looking over your log of fraudulent activity for patterns or repeat offenders?

Knowing what both your good and bad orders look like can make reviews more effective. Being adaptive and flexible with your fraud prevention can save you a lot of time and money in the end. Remember, fraud is always changing, improving, and trying new things. If you don’t as well, you could get burned.

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