Published April 23, 2018

Transaction fraud is an ever-present burden for merchants, particularly when it comes to assessing how fraud affects their individual business. Each year, transaction fraud gets costlier as the scammers develop new ways to pocket a company’s hard-earned money, but part of the challenge for merchants is understanding where their vulnerabilities really lie.

As one report from Javelin Strategy and Research explains, on average:

“Fraud costs merchants more than 7.5% of their annual revenue… Digital goods merchants suffered the worst losses, at 8.6% of revenue on average, but hybrid goods merchants faced similar costs at 8.1% of revenue.” 1

These losses show that some types of stores are more vulnerable to fraud than others, as they attract different kinds of traffic and have different problems as a result.

In this case, those that sell software or services online tend to be more vulnerable than those that ship products to a physical address, as there is less information to verify the user’s identity and no tracking in place to confirm the delivery of goods. As a result, more simplistic fraud prevention tools that focus on things like simple billing and shipping mismatches might be unable to protect a merchant from the threats they see on a regular basis.

Moreover, one of the bigger challenges merchants face is making sure that whatever fraud prevention measures can operate without getting in the way of their real users. For instance, a company that frequently ships to users in certain “at risk” overseas locations might experience more red flags than normal, and so they might end up in declining important orders from their genuine customers.

The solution to this is to not just identify the red flags for fraudulent users, but to create a tailored fraud approach that can fit the particular needs of an individual business. Products such as NS8 Protect tracks over 170 different attributes and lets merchants create their own customized order rules, which means that companies can adapt their fraud prevention measures to better protect themselves and avoid declining real customers.

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NS8 Protect

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