With a certain frequency we receive e-mails of retailers that still don’t have an anti-fraud and have just suffered their first chargeback. Many of them show a big surprise when they face this very unpleasant news: They are the ones who must take responsibility for the fraudulent purchases in their e-commerce, and not the banks or the credit card operators. It’s a very frequent comment:
“But why?! I thought that when the bank that issued the credit card approved the transaction I wouldn’t have to worry about fraud anymore.”
This confusion happens many times because this flow is true in the physical world: When a client chose to pay with an EMV credit card and put the password in the machine, once the transaction is authorized, the retailer can rest assured. If a consumer contest that purchase in the future, the store doesn’t need to take responsibility. After all, since the password is personal and (supposedly) not transferable, it’s a way to guarantee that who is making the payment is indeed the owner of that card.
But in the on-line environment, things are a bit different. When an e-commerce decides to receive on-line payments, it also compromises in afford the safety of the transactions that involve those credit cards. It’s even necessary to sign a term of responsibility about it, but this is one among many other documents that need to be signed by the retailer. In other words, if in the future there is any objection of purchase, the chargeback will come from the retailer’s wallet.
This means that in the e-commerce the authorization of the bank that issued the credit card doesn’t mean that the bank is recognizing that client in front of the screen of the computer or the smartphone as the bearer of that card. The authorization is not related to the identity of the client, but only to the check of if that card being used has money to pay for that purchase. Can you understand the difference?
However, we know that all this can lead to a lot of confusion and cause great disappointment to an entrepreneur when they face the damage of one, two or dozens of chargebacks from night to day. Also, our idea is not to get into the legal matter and opine if this flow of responsibility for the online fraud must be taken by the retailers or the banks, but it’s important to highlight that the on-ine fraud generates prejudices in all the payment chain.
According to the data of the sector, for each $ 1.00 that the e-commerce loses with fraud, the banks and the acquiring companies disburse about $ 1.50 with operational costs of attendance and substitution of those credit cards that were canceled by the clients – besides many others preventive and safety activities.
When a consumer finds out that their credit card was misused, they also get unsafe about the whole on-line payment. It’s common to hear a client who was victim of a fraud say that “from now on, they will only make payments through bank tickets” -which is a very big mistake, thinking as a consumer- or then, those who distrust the safety of the bank issuer or the flag of the card, with thoughts like: “My card of the flag A has never been cloned, while my card of the flag B has been cloned twice.” In other words, frauds generate a very bad experience for banks and flags, as well it will generate for your e-commerce, as we have already published in this article.
The bad news is that there isn’t an e-commerce that is “fraud-proof”: From the moment you decide to receive on-line payments, you are subject to this kind of fraud – independently of the kind of product or service you sell, for there are many cases in which the criminals aren’t necessarily interested in the product of your store.
Fraud if part of the game of e-commerce, and keep it in a rate between 0.3 and 0.7% is one of the tasks that you must manage in your operation. Assimilate this idea is one of the many tasks of an entrepreneur, who needs to understand that the goal of the analysis of risk is not to “end fraud”. There are many other metrics that must be taken in consideration and we shall talk about it in the next articles. Stay tuned!
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