How to Pick a Fraud Prevention Service, for Ecommerce

Ecommerce merchants love the holidays.

So do fraudsters. Chargeback cheats and organized criminals know you’re busy driving sales, fulfilling orders, and keeping customers happy. They hope you are less vigilant in manually reviewing their orders.

To help reduce fraudulent purchases and chargebacks, it might be worth having a fraud prevention solutions.

What is a Fraud Prevention Service?

A fraud prevention agency is a company devoted to identifying deceptive card-not-present transactions — i.e., ecommerce transactions — that will result in chargebacks and lost earnings. It helps catch organized account takeover attacks, purchases made from stolen credit cards, and the so-called”friendly fraud” chargeback cheaters, who buy products using their own, legitimate credit card numbers but then fraudulently file a chargeback with the credit card company after receiving the product.

A fraud prevention agency is a company devoted to identifying deceptive card-not-present transactions — i.e., ecommerce transactions — that will result in chargebacks and lost earnings.

These services evaluate an extensive amount of information from several sources to make an arrangement approval recommendation. The analysis is typically far more comprehensive than that which your card processor offers — address and security code verifications, usually. In addition to this, it can integrate into your ecommerce platform and to make those recommendations quickly.

Fraud prevention providers typically charge a percentage of your transaction value or a fixed fee that ranges from $80 to $1,000 per month, typically. To learn if a fraud prevention service makes financial sense for you, calculate your total fraud and chargeback costs and then add in the lost revenue from orders that you declined. Compare that entire total to the cost of the service.

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Save Time and Money?

Chargebacks hurt your profits with the dual impact of lost margin from unreturned product and additional fees from the bank. Then, MasterCard and Visa can charge additional amounts if chargebacks exceed 1 percent of your transactions. In any case, you have lost opportunity costs of your time when you fight chargebacks.


Prevention is the best approach. The address verification system (AVS) and CCV security code services in the merchant account provider or payment gateway are a start. But solely relying upon your own merchant account provider to flag questionable orders is not enough. (by for example, MerchantVoice columnist Erica Tevis, owner of Little Things Favors, an Online gift souvenir, recently explained the nine tests she uses to detect fraudulent orders, in “I detect ecommerce fraud.” )

Still the bad guys have many tricks. They can spoof their location, utilize mobile devices, and respond to your email inquiries. They can even answer your phone calls. It is often complicated and time consuming to manually cyber sleuth each risky buy.

For many ecommerce companies, therefore, a fraud prevention service is well worth the cost.

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Fraud Prevention Services: Questions to Ask

Here are ten questions to ask to aid you decide on the perfect fraud prevention service to your ecommerce business.

  • What support programs do they supply? Vendors provide various strategies to fit the quantity of control or involvement you would like. Determine if you want to be completely hands off or in the event you want to define the fundamentals. Consider vendors that could customize their rules engine to satisfy your policies and risk tolerance.
  • What information is analyzed? A broad number of information tools are available to help make a risk decision. How do the service include IP geolocation, proxy discovery, chargeback blacklists, social charts, issuing-bank info, and address, phone, and email verifications? Learn what’s being monitored and how frequently new information resources are added.
  • How is mobile data identified? Mobile earnings are growing quickly. Fraud from mobile devices is rising too. Sophisticated vendors can decide on a purchaser’s net fingerprint and determine action patterns from a customer’s computer, smartphone, and other online access devices.
  • How are false positives diminished? Declining a fantastic order also costs you new and gains customers. It’s simple to create a policy that declines all transactions from certain countries, for example. But a powerful fraud detection service can help capture more sales by digging deeper and validating orders that you would otherwise cancel.
  • Do you have to approve or decline an order? Despite advanced fraud detection monitoring and analysis, the service provider could just make a recommendation or dent the buy. You might still have to make the final decision to accept or decline an order. Ask if they have any rules or triggers which could then be used to automatically cancel any undesirable orders and process all orders which are good.
  • Is it integrated with your shopping cart? you might want order advice to pass seamlessly in the shopping cart into the fraud prevention systems. Ask the vendor what ecommerce platforms it works with. Most vendors support the most popular platforms. Then find out what you’ll have to do so as to grant access permissions and if there is plugin installation or additional coding required.
  • Are additional sequence stations supported? Are there any other credit-card-not-present transactions that you’ll have to process, for example phone orders? Discover how the service supports all of your channels. What does it need to submit order information to the fraud investigation systems for offline channels? And in case you have a physical store, some vendors can augment your in-store fraud solutions.
  • What guarantees are offered? Some suppliers offer chargeback guarantees or insurance — i.e., if they approve a transaction that turns out bad, you are insured for a few or all of your financial loses. But if you are still making the final approval decision, it is very likely you may not be eligible for payment. So check the legal terms carefully on any warranties.
  • Dedicated support is available? With a dedicated contact or, better still, a direct fraud agency staff can be a substantial benefit to you. Vendors can improve their performance if they know more about your organization. By means of example, the vendor can improve its fraud rules based on the products that you market, average order amounts or values, or if you’re targeting a new market. Additionally, it is helpful to have someone to quickly call to talk about a questionable purchase.
  • What service level agreements are included? Speed is crucial when making decisions concerning orders, even insecure ones. You do not have to sit down on an arrangement for quite a long time. Know a vendor’s commitment to fast alarms and communications, system up-time, performance during high volume times, and direct contact services.
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