Tiny or Giant: Your Business is Always at Risk of E-commerce Fraud


Oct 1, 2018

Most small-scale online business owners dismiss the possibility of e-commerce fraud, saying, it only happens to high profile online business. That’s one of the biggest e-commerce myths ever! Professional fraudsters and computer hackers target businesses irrespective of their size. Small businesses are more vulnerable to risk owing to inadequate fraud prevention techniques or managerial team.

Why do Criminals Target Small Merchants?

Criminals tend to target small scale businesses for fraud because it’s usually easy. Most business dismisses the problem of fraud as the problem of large retailers. Even if a small business has fraud protection, most of the time it is not as comprehensive or effective as the multi-layered protection system of large retailers.

The following are three common ways in which fraudsters hit small businesses:

  1. Card testing
  2. Reselling
  3. Sharing information

How does CNP Fraud damage Online Business?

The fraudsters use these following methods to damage an online business:

  1. Chargebacks: It usually happens, when a customer calls a card company to disagree to a purchase made through their account. Earlier, chargebacks protected customers from dishonest sellers but in recent years about 30% of the chargebacks are accounted as friendly frauds.
  1. False declines: Fears of chargeback often drive the merchants to falsely decline valid orders that are based on machine screening flags. Too much caution results in loss of potential revenue and also strains your customer relationships. As per reports, the US merchants lose around $118 billion per year, owing to false declines.
  1. Rising rates: The hike in the number of chargebacks can raise the cost of payment processing. The card companies tend to monitor the chargeback ratio of each merchant. If the chargeback ratio exceeds a specific limit, the merchants have to pay comparatively more to process their payment and they also run the risk of losing their account.
  1. Account cancellation: The bank may cancel your merchant account in case of hike in your chargeback ratio. The cancellation leads your company’s name into the industry match list for a 5 year period. It’s very difficult for a company to create a new merchant account during this period.

CNP Fraud Prevention

To successfully prevent a fraud, small business owners can take certain steps.

Manual screening of every order can prove to be effective for business, like luxury retailers. Few businesses geo-block certain regions or countries to avoid fraudsters, but in the process, they tend to lose out the ease of reaching customers worldwide. Most small business owners believe, outsourcing fraud prevention program to professionals tends to be more cost-effective and time-saving.

A good service that takes care of the protection program includes:

  • Telephone follow-ups with customers to successfully verify the transactions before any order decline
  • Real-time protection to accommodate peaks in sale and spike in fraud attempts
  • Up to date protection methods to keep up with current fraudulent techniques
  • Knowledge about International fraud prevention
  • A guarantee against fraudulent chargebacks
  • These will protect your business from serious losses, fallout from false declines, chargeback ratio difficulties and other potential threats.

Why Outsourcing Works

Outsourcing fraud protection enables you to focus more on your business. It strengthens your customer relationships, aids you to reduce false claims and protects your venture from the clutches of higher processing fees, chargeback fees, and unfortunate account closures.

Managed dedicated servers will be protecting your established or small business from all the above-mentioned threats. So, never consider yourself small and move to managed dedicated servers before any fraudulent activity.

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