E-commerce is fantastic for businesses that want to expand beyond brick-and-mortar retail and rake in online sales. Having a digital presence also allows you to connect with customers faster. However, with e-commerce’s many benefits also come massive risks, one of which is fraud.
Shoplifters and return fraud in stores are old news. Today, thanks to e-commerce, fraudsters rely on identity theft, stolen credit cards, and weak dispute policies to drain businesses’ profits, all behind a screen.
Some seemingly legitimate “customers” also commit chargeback fraud. This happens when a customer purchases a product online and receives it. Then, they’ll dispute the purchase with their bank, claiming they received the wrong product or didn’t get it in the mail at all. The online store is then forced to refund the money based on these false claims.
While online fraud can happen anywhere in the world, its impact is massive in North America, which accounts for 42% of fraudulent transactions globally. Each dollar lost to fraud costs businesses triple in losses. This can harm not only your business’s finances but also its reputation as a merchant among payment channels and e-commerce platforms. Fortunately, there are plenty of proactive measures you can take to protect your e-commerce business from chargebacks and minimize fraud. Here are five ways to do it.
1. Write clear, accurate product descriptions
Some chargeback fraudsters will claim that the items they received were not as described on the website, even if they were. Ensure that your product descriptions are as accurate and detailed as possible. The clearer and more precise they are, the more difficult it will be for customers to make false claims about the products they receive.
2. Strengthen your customer verification process
A thorough and rigorous customer verification process can help deter fraudsters from using fake identities and stolen credit cards on your e-commerce site. Incorporate extra security measures on your customer sign-up page, such as two-factor authentication or an ID card scanner with a selfie identity verification feature.
3. Implement AVS and CVV checks at payout
Conducting AVS (address verification service) and CVV (card verification value) checks are a must when a customer pays with their credit card. An AVS check means asking them for their billing address, which your payment channel can verify with the buyer’s bank.
Meanwhile, requiring them to provide the CVV code on the back of their credit card ensures they have the physical card with them. These two simple steps have a huge impact on preventing unauthorized purchases from people using stolen and incomplete card details.
4. Keep records of shipping and delivery confirmations
Even with the prevalence of e-commerce, customers still experience many frustrating problems with delivery. Some people’s packages are delivered to the wrong address or get lost in transit.
Fraudsters often take advantage of these common issues. Even if they receive their item from your e-commerce business, they’ll file a chargeback and claim it never arrived, crossing their fingers to get their cash back.
Always be ready to dispute false claims like these with records of every order’s shipping information. Save shipping receipt emails and take screenshots of delivery confirmations from your courier. That way, if someone claims they never received their order, you have strong evidence that proves otherwise.
5. Keep tabs on suspicious transactions
Train yourself to spot suspicious transactions and flag them before they go through to order fulfillment. These include new users making multiple big-ticket purchases in one day or large orders that are unusual for customers who typically buy one or two small items at a time. Be extra cautious about orders from IP addresses or countries with high fraud rates. For orders that follow patterns like these, set up additional verification steps before allowing the customer to proceed.
Endnote
Whether it’s a sneaky customer making false claims about a successful order or cybercriminals shopping with stolen cards, fraudsters can cost your business thousands (maybe even millions) of dollars. By implementing these strategies, you can safeguard your online business and reduce fraud and chargebacks significantly. Incorporate them into how you run your online store for a smoother, safer e-commerce experience.