Online retail is stronger than ever, with the holiday spending spree in November and December up 15% over 2013, according to comScore. Yet with the ever-increasing opportunities of ecommerce comes the ever-present threat of fraud.
Fraudsters are also staying up to date with developments in online retail. As hard as merchants work to improve their conversion rates and develop their business, fraudsters work just as hard to steal some of those profits away.
What can merchants do to protect themselves and their business from fraud? In three words: Take It Seriously.
Stay Up To Date
It’s no good fighting fraud with the methods that worked five or ten years ago. Fraudsters are fast and creative, and know all those techniques probably better than you do, and how to get around them.
The basic methods are still effective. For example, AVS, the address verification process which determines if the billing address matches the shipping address, can still help to limit cases of fraud. However, in a time when street maps of every neighborhood and zip code are only a click away, it’s not hard for fraudsters to make it appear as if a match or partial match is present, even when it’s really part of a trick.
For this reason, the best way to approach the simpler methods is as gatekeepers helping to indicate when further research into a customer is needed. You can then use methods which go deeper into the case, such as digital fingerprinting or IP geolocation services. These will help you build up a clearer picture of whether you’re dealing with a fraudster or a real customer, but they are also likely to increase your false positive rate – the number of genuine customers you turn away because they look as though they may be fraudulent.
Dealing with this problem is complex, requiring the analysis of large amounts of data in a complex and technical fashion. Often the best way to deal with this challenge is to involve professionals whose job is to understand and limit the problem.
Big Data Is a Big Help
There is a lot of data available about the customers on your site, and it’s all relevant to fraud prevention. Big data, with its fascinating trends and patterns, can help prevent fraudsters from slipping through your checkout process if it’s used in the right way. It can also help to avoid false positives because it makes it easier to take each customer on their own merits.
Don’t Let Fraud Fighting Turn Away Customers
The sorts of stringent rule-based systems which turn away genuine customers because they share certain characteristics with fraudsters – which may be more common than you think – also affect your conversion rates. Not only will legitimate customers who were rejected by your system probably go to one of your competitors to complete their purchase, they are likely to avoid your site in future. They might even complain about their experience to their friends – and in an age of social media, the bad word spreads fast.
Also, the slow order processing brought about by manual reviews can lead to cart abandonment, further impacting your bottom line. Make sure that your fraud fighting system isn’t out of touch with the goals you usually set for customer satisfaction so that you can stay protected while real customers glide smoothly and quickly through a flawless shopping experience.
Fraud Prevention Must Be Flexible
Include fraud prevention as part of your 2015 ecommerce plan. If you’re hoping to move into a new market in South America, for example, it’s not enough prepare a perfectly targeted marketing campaign and prep your sales team for this new challenge.
You’ll also need to be ready to prevent fraud coming from this new environment, taking into consideration how every country operates differently. You can’t just blacklist transactions which look dubious based on your experience with U.S customers, because you’ll end up rejecting new customers who simply don’t match the patterns you’re used to. Make sure that your fraud prevention is flexible enough to adapt to changing trends and situations.
Liron Damri is co-founder and COO of Israeli ecommerce fraud prevention company Forter