Fraud plagues all aspects of retail. It’s particularly troublesome for eCommerce businesses. In response, there have been advances in fraud prevention techniques, legislation, and finance policies over the past few years. Only time will tell how successful these endeavors will ultimately be, but all eCommerce companies should be aware of what changes are happening and how it could affect them.
Bureaucracy moves slowly, but privacy, data, and fraud have been hot topics in politics around the globe. As laws and new court decisions begin to crop up, it’s important to know what changes may be on the horizon in your neck of the woods. These are just a few of the changes that have been made or may be upcoming:
- PSD2 (European Union)
The Payment Services Directive 2 (PSD2) includes a requirement for Strong Customer Authentication (SCA). That means that nearly every online transaction in the EU moving forward will require 2-factor authentication. It also means that any company selling to EU customers must comply or risk owing fees and penalties to EU countries.
While this requirement will mostly fall on the shoulders of payment service providers, you should be talking with your payment providers and fraud prevention companies to learn how these rules will affect your business and if there is anything you need to do to prepare for the September 14, 2019 rollout. Companies that do not sell in the EU may still want to keep an eye on how well this requirement works as it may become more widely adopted if implementation goes well in Europe.
- Foreign Investment Rules (India)
To combat fraud and help the emerging eCommerce market in India, the government has created new laws around the industry. This rule mostly affects larger eCommerce companies, but anyone looking to break into the growing eCommerce market in India should pay attention to these changes. India is cracking down on foreign companies to try to boost local businesses in the country.
The new rules include how much money can come from outside investors, how much inventory must be stored or made in the country, and even how much of a discount can be offered to customers. If companies fail to comply with these rules, they may be fined or even barred from operating in India at all.
- Potential Legislation and Changes
Many countries and states are also considering additional legislation to help reduce issues with privacy, fraud, and eCommerce. While national legislation is unlikely to happen in the US soon, states have been pushing forward with new regulations that affect eCommerce companies. Make sure you are up-to-date for any state where you do business. Other countries like China have begun introducing new laws around eCommerce to attempt to cut down on fraud and regulate the whole industry. As eCommerce continues to grow, expect other countries to follow suit with more regulation.
Many times, companies adapt more quickly than governments to changing threats and new technologies. Visa in particular has been pushing the eCommerce payment industry forward in an attempt to reduce fraud.
- Visa Chargeback Threshold Change
In 2018, Visa introduced a lowered chargeback threshold for merchants. It went into effect earlier this year. Under the new rules, merchants must keep their chargeback ratio under .9%, reduced from 1% previously. The new rules attempt to keep fraud levels low for at risk merchants. Additional details about this change can be found in our blog here.
- Visa Return Authorization Mandate
Another change introduced by Visa in 2019 is a new return authorization mandate. This will change the process for returns for all companies, eCommerce and brick-and-mortar. With this new mandate, all returns must be processed as immediate transactions in the same way as purchases. Instead of holding returns and processing them all at once, each individual transaction will need to get approved. Returns that do not include a return authorization may be subject to chargeback fees.
The goal is to reduce friendly fraud that occurs when customers are unable to verify a return has been processed. Many times, these customers will initiate a chargeback even though the return was correctly handled. Under the new system, customers should be able to see return transactions that are pending in the same way they see purchases. However, it does mean that in some circumstances a return could be declined. This should only happen in rare cases (such as an expired or canceled card), but merchants should keep customers informed of any potential issues to avoid complaints.
- Potential Changes
Companies around the world continue to battle with the changing landscape of fraud. Many large eCommerce companies even have departments dedicated to risk management. As payment providers and other industries attempt to limit their own risk, merchants will need to be flexible and ready to accommodate new fraud prevention techniques. Making your defenses strong right from the start is the best way to win your own battle against fraud.
Changing Threats in Ad Fraud
Unlike transaction fraud and chargebacks, the damage done by ad fraud is much harder to measure and assess. Because of this, statistics and data vary as to whether the eCommerce world is winning in the battle against ad fraud. For example, Digiday discusses how digital ad fraud is worse than ever while the Association of National Advertisers (ANA) released a study showing that ad fraud is down. There is also no legislation and very few company policies that affect this threat.
That means every company is essentially on their own to determine how ad fraud is affecting them and how to protect against it. Plus, digital advertising is under a lot of scrutiny around the world right now, with Google and Facebook coming under fire for how they use data. In the next few years, businesses may need to be versatile to keep up with changes and deter fraud from eating away at their bottom line.