For most online retailers, credit card fraud is always a concern. But knowing fraud is a risk and knowing what to do about it are two different things. Even worse, although there’s a lot of talk about credit card fraud, separating fact from fiction isn’t always easy.
Just as no two brick-and-mortar stores are the same, e-commerce businesses are just as diverse. As a result, what may be exceptionally risky for one company may be business as usual for another. It’s very hard to make absolute statements about credit card fraud, since every website is different.
Below, we’ve spelled out some of the most common credit card fraud myths – along with the truth that all e-retailers should know. Use this information to make informed decisions that are right for your business, so you can protect your profits while growing your online sales.
Myth #1: Domestic Orders Are Less Risky Than International Orders
Many retailers believe that expanding into the international marketplace puts them at a higher risk for credit card fraud. But as it turns out, this just isn’t true.
Statistics show that Florida, Oregon and Delaware have some of the riskiest ZIP codes for CNP fraud, while Chinese luxury merchants can have legitimate transaction rates as high as 98.96%.
Myth #2: Customers Who Make Excessively Large Purchases Are Always Fraudsters
It’s true that cybercriminals sometimes make large purchases to get the most bang for their (stolen) buck. But legitimate resellers also place these same large orders.
Big-dollar purchases are not always a reliable determiner of legitimacy; in fact, many fraudsters will place a high volume of low-value purchases, simply to test the validity of credit card numbers and fly under the fraud detection radar.
Myth #3: Only Large Retailers Are at Risk for Credit Card Fraud
Cybercriminals are equal-opportunity fraudsters, targeting businesses of all sizes. It’s actually smaller online business owners, who often think of fraud as a large-retailer problem, who end up most at risk and are the easiest targets. Fraudsters know these retailers probably don’t have a comprehensive fraud management solution (if they have one at all) that can flag fraudulent transactions before they’re processed.
Myth #4: Retailers Should Expect Increased Fraud During the Holiday Buying Season
While it’s true that there’s generally an increase in fraud attempts during the holiday season, there’s also a substantial increase in legitimate transactions during this same period. As a result, the overall rate of fraud for online sales often remains constant — and may even drop — during this time.
Myth #5: Suspicious Order Characteristics Automatically Mean Fraud
Order characteristics that retailers often regard as questionable, like mismatches between billing and shipping addresses and expedited shipping requests, aren’t always indicative of fraud and are increasingly common during the holiday shopping season.
Older fraud protection solutions tended to error on the side of caution — flagging every risk factor in a transaction — and didn’t dive into the details. But because today’s shoppers are global travelers and active participants in cross-border e-commerce, transaction mismatches are more common and require fraud protection solutions to look deeper into the transaction to get the whole story.
Myth #6: The Shift to EMV Is Helping to Protect Consumers From Online Fraud
Although EMV helps protect consumers from card-present fraud, it has done little to decrease online fraud rates. As criminals shift to the easier targets of ecommerce transactions, card-not-present (CNP) fraud has been on the rise.Technology is opening new opportunities for tech-savvy fraudsters, and even cutting-edge solutions like EMV are not enough to stop determined cybercriminals.
Myth #7: Merchants Can Never Win Chargeback Disputes
Winning a chargeback dispute is difficult for e-commerce retailers, but it’s not impossible. By keeping thorough documentation, like e-mails, delivery confirmations, past transactional histories and CVV/CVC match information, merchants can improve their chances of winning the dispute.
But even if a retailer wins a chargeback dispute, that win isn’t always a victory. The chargeback is still counted against a retailer’s ratio, and retailers still incur fees from the dispute. The best way to avoid the negative impact of a chargeback is by preventing it altogether.
Myth #8: All E-Commerce Sites Are Equally Safe
No two retailers are alike. Neither are their e-commerce platforms and security levels. A merchant’s budget, size, products and services, and beliefs about their susceptibility to credit card fraud all affect how they approach implementing a fraud protection solution. Not only must merchants carefully evaluate their risk, but they must also understand that customers will return to only those retailers who make e-commerce security a priority.
Myth #9: Expedited Shipping Options Make Mitigating Credit Card Fraud Risk Impossible
As customers clamor for the near-instant gratification of same- or next-day delivery, retailers understand that these shipping options make them increasingly vulnerable to fraud: Faster fulfillment means less time to conduct a thorough transaction review.
However, it’s possible for retailers to meet shipping deadlines while still performing comprehensive transaction reviews. Real-time fraud management systems that incorporate human review with artificial intelligence can help merchants seamlessly navigate the purchase process and stop questionable transactions.
Improve Your Fraud Protection Approach
The line between truth and fiction is often a blurry one. To protect themselves against today’s threats and tomorrow’s evolution in fraud attacks, merchants must actively protect their online businesses; the right fraud protection solution can help them do just that. By selecting a solution that’s tailored to their needs, retailers can improve the number of legitimate orders accepted and increase their revenue.
Every merchant should be concerned about preventing credit card fraud and improving the security of their online sales. Download ClearSale’s “Online Credit Card Fraud Risk” e-book today to learn how to protect your business against the rising threat of CNP fraud.