This holiday sale season could be a good one for retailers, but each money lining has a cloud. In this case, a shadow will be generated by billing fraud, which can occur when buyers make purchases with a credit card, and then request debit debits from the issuing bank rather than the merchant.
"Merchants bleed (US) $ 227 for every dollar lost in e-commerce fraud," said Robert Capps, Authentication Strategist at
NuData Security, citing data from Kount, a provider of fraud and risk management solutions.
Merchants are "more sensitive to chargebacks because they process cardless transactions," observed Monica Eaton-Cardone, COO of
"The deliberate Chargeback Fraud is based on the idea that the cardholder did not approve the transaction," Eaton-Cardone told the E-Commerce Times. "The greater the distance between a cardholder and the merchant, the more difficult it is to verify the identity of the customer, and the greater the risk that the transaction will become a chargeback."
Opening up to more distant channels "will make more than ever necessary the reduction of bitrates," she said. Chargeback911 chargeback costs will total approximately $ 25 billion by 2020, and "many of them" will be fraudulent.
The pain of the traders
Online fraud has increased by 33% in 2016. The success of smart cards "has significantly reduced the volume of counterfeit card fraud," NuData's Capps told the E-Commerce Times, pushing criminals into line.
In general, physical stores have "less than 1.0%" throughput rejection rates and retailers about 0.5%, noted Kevin Lee, architect of trust and safety at
Sift the science.
Digital products sold online have the highest rate of chargebacks, "often over 1%," he told the E-Commerce Times. This is partly because online fraudsters can be anywhere and make transactions at any time, and partly because online crime laws are harder to enforce.
"Stealing a $ 4,000 TV from bestbuy.com has a much lower penalty than stealing $ 400 from a 7/11," Lee said.
However, there are actions that etailers can take to mitigate the risk.
1. Beef Up Website Security
The merchant's website "is primarily where the biggest fraud occurs with respect to the trader's liability," Capps noted.
"Direct web access to the merchant site is probably the best point of attack for a fraudster because that trader is alone and often does not have the protection needed to stop the abuse on his site, "said Lee Lee.
2. Use tools to verify customer identities
"You have to use tools to check the identity of customers – like address verification and CVV alongside fraud filters," recommended Eaton-Cardone of Chargebacks1111.
Additional tools, such as delivery confirmation, are valuable as proof that a transaction is moving towards a chargeback, she said.
Simility launched early in the year 3-D Secure, a protocol designed to be an extra layer of security for online credit and debit card transactions. 3-D Secure uses advanced machine learning combined with rules to evaluate each transaction in real time across attributes, including fingerprint of the device, behavioral analysis in session, the proxy filtering and geolocation.
NuData Security's flagship product, NuDetect, helps businesses identify users based on their natural online behaviors.
3. Turn to the experts
SMB retailers "should implement third-party risk management systems to reduce exposure to fraudulent transactions," Capps said.
They should consider solutions that entrust the responsibility for verifying transactions to the card issuer or to a third party who will guarantee the transaction.
The cost of such services is often lower than the cost of fraud that they may suffer, Capps said.
"The best approach to dealing with debit rejects is to entrust them to a company with the necessary expertise," said Eaton-Cardone.
"If fraud prevention is not considered a basic competitive advantage, a partnership with an external company like Sift Science specializes in [combating] this type of abuse," Lee said. .
4. Change your approach to adapt to the times
Do not rely on traditional approaches, warned Lee.
"The traditional way is to create rules on the types of transactions that a merchant wants to accept or refuse," he said. Such rules could include the presentation of a driver's license to verify the identity, and the decrease of transactions when the billing and shipping addresses do not match, for example.
These rules limit fraud, but can also distract potential customers.
"Consumers tend to have even less patience in this on-demand and instant gratification economy," Lee said.
"The only sustainable way to control fraud is a combination of several factors," he said, including:
- Machine learning models that analyze user behavior in real time and can predict the probability of fraud;
- Manual review of cases that fall into gray areas because "the human ability to understand the context is invaluable and can not be replaced," according to Lee; and
- Rules, because "some things just can not happen."
5. Be aware of external events
The recent Equifax breach, which may have compromised the personal information of 143 million people, will make things more dangerous for retailers, Eaton-Cardone warned, as it could lead to an increase in charge-back fraud. .
"With the EMV responsibility change, the cost of the Equifax incident will have a huge impact on online retailers," she said. "We do not know how much it will cost."