Those selling on the internet are aware that the “cost of fraud” must always be embedded into the business risk – after all, it is the store owner who is responsible for the chargeback (refund) for purchases made with stolen credit cards. Nowadays, an e-commerce is considered “healthy” when its fraud rate is no greater than 1% income, but this is not the only data you should be concerned with.
The losses caused by frauds can go well beyond the cash or product lost. Chargebackis only the first and most obvious consequence of an online fraud. There are other “layers” that can compromise much more than 1% of your income or cause damages that are many times irrecoverable for your business.
In this article, Konduto listed the five main problems fraud may cause, as well as chargeback:
You are starting to have headaches
Handling with the problems caused by fraud is complicated. You will have to destine (or hire) employees to solve the issues related to conciliation, challenge, auditing, recovery and refund.
There are several “fires” that will break out in your company and that need to be extinguished, causing considerable trouble to your operation. Moreover, instinctively, as to protect your business, you might become a bit more strict in approving orders and denying more sales.
That is, from the moment fraud becomes a more severe problem for your store, you spend a considerable amount of time and money to overcome this “bleeding”, instead of investing such dear resources in activities that will bring you more revenue.
You are subjected to very high fines
When noticing your e-commerce is suffering a high volume of frauds, overcoming the acceptable 1% rate or other preset metrics, the credit card acquires can include you in a chargeback program. The store is initially notified and, if the problem is not corrected in a specific deadline (around three months), Visa and/or MasterCard fines start to arrive.
These charges are made in American dollars and are progressive, becoming more severe with time. In some cases, the store owner can have a penalty of up to USD 200 for each chargeback received (as well as charges and the loss for goods sent to criminals who were able to make purchases with stolen cards).
In order to leave the chargeback program, the e-commerce must return to the fraud threshold considered “acceptable” and stay there for a few months. Otherwise…
You might lose the accreditation from the procurers
That’s it! If you are in the chargeback program for a long time and is not able to recover your e-commerce health, you may end up loosing the right to receive payments from a specific credit card logo (or both).
Can you imagine what that would cause? It is not hard to estimate, considering that the average transactions performed with a credit card in an e-commerce is 75%, and that Visa and MasterCard together hold over 90% of the transactions.
Banks may deny your sales
Banks do not have chargeback programs, but they have a kind of score for store reputation, which influence in the approval rate for sales going through such institutions.
The increase in frauds will directly impact your e-commerce score, and your approval rate will decline. Banks, to protect themselves and their account holders, will start denying more orders coming from your store.
Think about it: the more orders you have, more relevant is the impact of such bank score.
The consumer can be afraid to buy from you
“My credit card was cloned and a $ 1,500 purchase was made in John’s Store, can you believe it?” We have heard that, and I can imagine you have heard it, too. But have you actually analyzed this situation?
John’s Store was not only the place where the cloned card was used, and it is probably not guilty for the data leakage. Considering that the client requested a chargeback and will be refunded, John’s Store ends up becoming the greatest victim in this history.
But that consumer ended up having such a bad experience by being the victim of a fraud that the terms “cloned card” and “John’s Store” shall echo for so long that it may as well be possible that he be afraid of purchasing at John’s Store in the future and having his card cloned again.
Even worse: he may share this fear with friends and relatives, who will also think twice before purchasing at your e-commerce. Your brand will be worn out in the consumer’s mind, and you may also lose several other clients on the way.
And what can you actually do?
For a store owner, the best way to face fraud in e-commerce is through prevention. Reversing a chargeback is not an impossible task, but it is very difficult, indeed. And the solution for all problems we listed here will also demand a considerable amount of time, energy and budged, which mi considerably harm your operation.
Prevention against such type of fraud consists in, especially, protecting your e-commerce with the best anti-fraud for your needs and expectations. There are many alternatives available in the market, including Konduto, which has developed an innovative method for detecting suspicious purchases by using artificial intelligence on risk analysis.
We are a startup developing an innovative technology to bar e-commerce frauds. Our intelligent anti-fraud monitors the client throughout his purchase journey in your site and evaluates the transaction in real time – our answer is given in less than 1s! We detect only the purchases that are really suspicious, approving more orders and reducing the costs with frauds. Send us an e-mail on firstname.lastname@example.org