The American e-commerce industry witnessed a surge amid the pandemic, and it isn’t slowing down. Buyers love the sheer convenience of shopping in a few clicks, while merchants can save big on space, infrastructure, and operational costs with this model. But opportunities often bring along challenges, which is the reason why many e-commerce sellers struggle to stay afloat.
Competition is the biggest challenge, considering there are 2.5 million online sellers in the US alone. That means you will probably have to compete with thousands of sellers offering similar products at comparable prices. Shipping costs, customer retention, identity theft, and product returns are some other issues sellers often face.
Payment fraud is another critical concern hindering the growth of e-commerce businesses. According to a recent survey, 47% of sellers admitted to having experienced fraud in the past 2 years. Further, internal preparators committed 37% of these frauds, while 39% of them were attributed to external preparators.
Fortunately, online sellers can address the payment fraud problem with a few effective measures. Here are a few tips to ensure that your transactions are fraud-proof:
The first step is to know the potential threats to your business. When you think of e-commerce fraud, you will probably picture criminals using stolen credit cards to buy products. But there are many more threats you should worry about. After all, statistics reflect more than 200,000 attacks on online stores each month, and all cannot have the same cause. Here are the ones you may encounter:
According to Ethoca, online sellers should be vigilant about first-party fraud because it is the trickiest to handle. No one wants to struggle with a complicated chargeback process and transaction disputes. The best way to address these issues is by closing the information gaps across the purchase journey. It can be done with real-time information sharing.
Return fraud is perhaps the hardest to deal with. After all, customers can always lie about not having received their order. You may have qualms about getting into a dispute with legitimate requests and giving in to illegitimate ones. The numbers are alarming as online retailers lose an estimated $ 25.3 billion to this problem.
Fortunately, you can combat the issue by collecting proof of delivery from customers, such as signatures or photos of delivered parcels. A trusted shipping carrier or third-party logistics partner can help you with the step. When you have valid evidence, you can always fight against customers illegitimately claiming a refund for undelivered products.
Sellers often spend big on their e-commerce websites to showcase their products and ensure an incredible shopping experience. Terms and conditions and policy pages do not seem critical because visitors hardly go through them. But showing clear policies on your store’s website can help minimize the e-commerce fraud risk.
You can cover these fronts to ensure that potential buyers are aware of their rights and responsibilities:
Savvy online retailers implement measures to flag risky orders. You can rely on e-commerce software to flag such orders, and manually review them. If something appears amiss, you can reach out to the customer to confirm whether the order is legit. For example, a low-value order from an unknown IP location warrants further verification. Failing to hear back indicates the possibility of the use of a stolen credit card.
Likewise, you can lower the risk of friendly fraud by limiting transaction confusion so that customers remember the purchase they made from your platform.
Friendly fraud occurs when a cardholder believes that a purchase on their transaction statement is fraudulent and raises a dispute. However, there is no fraud in this case, as they or a family member may have made the purchase. At times, people forget about buying things or informing family members about a purchase.
Start by following buyer behavior and identifying the ones likely to ask for chargebacks. You can collaborate with your card issuer to bring transaction-related information to their fingertips.
Every $1 of fraud costs American e-commerce merchants $3.75, which marks a hefty increase of 19.8% from the pre-Covid figure of $3.13. Undoubtedly, this area deserves all the attention you can give because the last thing you want is to sustain huge losses due to transaction fraud.
Awareness gives you a head start against such events, so you should start by brushing up your knowledge about the risks. Additionally, implement these actionable measures to stay ahead of friendly and unfriendly fraud.