These days, anyone can pretend to be anyone online. Ecommerce fraud is a major threat to online businesses, with a recent LexusNexus study finding that fraudulent practices have increased 35% year over year. For small businesses, every $1 in ecommerce fraud creates about $2.32 in expenses, and it’s becoming harder to accept fraud as a cost of being in business.
Online stores have some of the highest potential for fraud, but that doesn’t mean store owners are powerless against would-be thieves. Consider the following five ways you can minimize ecommerce fraud to protect your customers and your business:
1. Reconcile Your Bank Accounts Every Day
Though bookkeeping might not be your favorite chore, it’s essential to recognize anomalies in your sales that could signal fraud. For example, you might see inconsistencies between shipping and billing addresses or suspicious IP addresses.
If you’ve been in business awhile, you probably know your best customers and their spending patterns, so review the day’s cash flow to find red flags early before they create larger problems.
2. Set Purchase Limits
You may be able to limit the number or value of purchases made by a single account or credit card in a day. Review your order and revenue trends to decide what kind of purchase limits you can feasibly set. While it doesn’t prevent fraud completely, it can limit your exposure should fraud occur.
3. Use the Address Verification System
The Address Verification System (AVS) is a powerful fraud prevention tool that compares the buyer’s address with the address on file with the credit card company. If the two don’t align, the transaction cannot proceed. This system is already in place, so work with your payment processing provider to learn how you can implement it.
4. Ask for CVV Codes
CVV codes are the three- or four-digit codes on the backs of credit cards that add an extra layer of security to the transaction. Online databases can store credit numbers and expiration dates, but they can’t store CVV codes.
Buyers who enter CVV codes most likely have the card in hand, increasing the likelihood that it’s a valid transaction. It’s a small extra step, but it can go a long way in preventing fraud.
5. Use Merchant of Record Fraud Services
Merchant of Record services add a thick layer of financial protection to online store ownership in that the service provider, not you, will bear the costs and responsibilities of fraud. The Merchant of Record will establish a merchant account and payment gateways to your store, monitor transactions for fraud, and prevent potential threats to your business. Any chargebacks, hidden fees, compliance, and liability is no longer your problem to worry about, giving you peace of mind that your customers and business are protected.
At Gapp, we take our responsibility as a Merchant of Record seriously. Reach out today to learn more about Merchant of Record benefits and how we’re stopping ecommerce fraud in its tracks!