Online Payment Fraud Protection

Mobile and online sales are here to stay, and this is a good thing for merchants and consumers. What was once an add-on to traditional sales models is now the de facto standard, making the online store the first store of choice for most shoppers. For merchants, this new sales channel brings with it new customers, new competitors, and new risk factors.

For many m-commerce and e-commerce merchants, online payment fraud is a new threat that previously was not a major focus or concern. For merchants who are new to online or mobile fraud, or those who are transitioning to a Card Not Present (CNP) sales model, online payment fraud can be the make-or-break factor. The good news is that there are proven tools, technologies, and solutions available to keep merchants and consumers protected from fraud.

A report was recently released by Cybersource Corporation titled 2017 North America Online Fraud Benchmark Report, which summarized survey results from 466 businesses in the U.S. and Canada. This report looked at the key trends and challenges facing North American business, providing some interesting data about how merchants are responding to the demands for m-commerce and e-commerce while managing fraud risk and prevention. This survey, conducted during September – October 2016, focused specifically on the fraud management practices of online, mobile, mail, and telephone order merchants.

Online Payment Fraud Management

The survey emphasizes that for all merchants, regardless of size and annual revenue, online fraud management and protection is not simple. Managing fraud prevention practices has become a large part of merchant focus, particularly as the methods and technology behind online payments continue to evolve.

Four major barriers remain for merchants when it comes to managing online payment fraud and a profitable business:

  • Being efficient:  Many merchants are still using manual review to prevent fraud. This is time-inefficient, costly, and error-prone. 89% of manually reviewed orders are accepted—indicating that too many orders undergo manual review.
  • Denying real sales:  Merchants are still struggling to find the balance between too restrictive and just right fraud detection methods. Often, real customers are denied access due to too strict rules engines.
  • Need to streamline:  Merchants are slow to streamline their fraud detection solutions for all sales channels. A cohesive end-to-end solution that works for all sales channels is most effective.
  • Budget constraints:  More than half of the businesses surveyed spend less than 1% of their digital commerce revenue on fraud management. Lack of budget makes it a challenge to improve efficiency and to implement end-to-end solutions.

The key to eliminating these barriers to fraud prevention and protection is in taking advantage of an end-to-end solution that enables merchants to focus on their core business, while knowing that their online payments and customers are protected.

Finding the Ideal Fraud Prevention Solution

Merchants know they need online payment fraud prevention solutions in place, but it’s a challenge to determine which solution is the right one for their business. The cost of the solution, resources needed to manage and implement the solution, and the time required to learn the solution must all be considered when choosing the right platform.

The top three fraud detection tools of businesses surveyed in 2017 North America Online Fraud Benchmark Report, were: Card Verification Number (CVN) at 88%, Address Verification Service (AVS) at 82%, and postal address verification services at 60%. The top three most effective fraud tools were: AVS at 58%, CVS at 53%, and device fingerprinting at 42%.

In addition, for merchants who are focused on growing their m-commerce business, it’s important to adopt the latest tools that allow effective and efficient purchase review. Tools that support IP address analysis, credit card owner purchase history, device and time of day review, and address comparison are vital to creating a rules engine that has the ideal level of detection and prevention.

The key for merchants is to ensure that they are using the end-to-end solution that works for them. Knowing your business and understanding how and where your sales are coming from is important in identifying your risk factors. Online payment fraud is a real threat, but the good news is that there are readily available tools, technologies, and experts who can help you find the solution that keeps your business protected.

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