Online fraud is one of the biggest risk faced by eCommerce enterprises with global retail frauds rising to 30% by 2017. eCommerce fraud typically refers to any illegal or false transactions that take place across online stores. Hackers usually source card information of random users and use the data to make fraudulent transactions or share the data with other hackers
Assessing risks and measures of losses
As an online retailer, here are few ways to assess if there is a fraudulent transaction has taken/is taking place on your web store.
- The order value and size is bigger than your store average
- There is a request for fast shipping.
- The delivery address is a little unusual.
- The shipping and the billing addresses are not the same.
- There are several cards used on the IP address
- The user has multiple shipping addresses.
- There are large quantities of the same product or multiple transactions in a short span of time.
The total cost of fraud can be measured as Direct Losses to fraud + Lost sales + Cost of manual review + Cost of technology (tools used to detect and solve).
Implications of frauds
No matter what causes the fraud, the implications are usually borne by the retailer.
- Most frauds end up in a ‘chargeback’ to the retailer. Since the hacked card details might belong to a customer, the retailer must return the same amount to the cardholder once a fraudulent transaction takes place.
- Chargebacks usually come with processing fees, transaction fees, legal fees, or currency conversions, if any, surmounting to a huge sum for the retailer. Along with chargebacks and refunds, retailers also need to measure the overall impact of frauds on their store.
- Sometimes, if there are too many fraudulent transactions occur, leading to a large amount of chargebacks, the retailer is usually considered to be a high-risk merchant.
- Furthermore, the product/s fraudulently sold is a product lost, since there is no ‘return’ of the physical product.
To prevent such scenarios from occurring on your store, always have clear shipping, refund, and return policies and address any unusual activity right when they occur. For smarter store management, resort to a trusted and reliable eCommerce development company like Magento and enjoy a safer retail business.