A Merchant’s Guide to Online Fraud Detection
The rapid development of eСommerce is, unfortunately, accompanied by a constant appearance of fraud. Today, it is a real problem for online merchants, which not only leads to a severe loss of revenue, costly chargebacks, and damage to the company’s reputation. However, technology hasn’t stood still, and merchants are actively reducing fraud by developing and implementing prevention strategies, as well as using effective anti-fraud tools.
Not all merchants are aware of the existence of anti-fraud software. Nevertheless, there are more and more companies on the market today that provide online fraud detection and blocking services. These are very useful tools for today’s online merchants, but it’s important to understand how they work and what functions they perform. This article will look at online fraud detection and how to use this tool effectively to prevent fraud and chargebacks.
Since mid-2020, when online ordering has skyrocketed because of Covid-19, credit card fraud has also increased. According to research, the number of fraudulent bank card transactions has increased by nearly 50 percent. At the same time, online merchants are more likely than usual to encounter phishing emails or other attempts to access customer payment information. So if you’re in eСommerce, know that scammers are close, and their illegal actions can devastate your business.
While scammers’ actions can vary, they often use stolen payment information for chargebacks for their criminal purposes. This type of financial transaction can be very costly and painful for businesses. After all, for each chargeback, the seller pays the cost of the merchandise, various bank charges and fees for the chargeback, and other related costs. As a result, the final cost of a chargeback can be 2-3 times higher than the original transaction amount.
Another significant disadvantage is that a confirmed chargeback payment results in an increase in the chargeback rate, a specific metric tracked by the acquiring bank at the direction of the card networks. If a merchant has too many chargebacks, or if they take too long to process, the merchant account could be penalized or even suspended.
That’s why it’s important to prevent chargebacks. Chargebackhit is a chargeback prevention solution that offers a set of measures to detect, prevent and recover from online fraud and related chargebacks. This service can help to grow your online business and spend much time increasing sales instead of fighting chargebacks.
How Does Online Fraud Detection Work?
There are many fraud detection solutions on the financial services market today. All of these services are similar, and the way they work is by examining transaction data and having fraud indicators at all stages of the transaction. While most online services monitor credit card fraud and the unauthorized use of stolen customer payment data, online fraud prevention companies are also responsible for monitoring other data. They examine customer behavior, geolocation, information about the device being used, and other data that allow them to see the complete picture of whether fraud is occurring.
In the process of monitoring customer activity and transactions, each action is assigned specific points. These points are added up and based on the data, the online fraud detection tool decides whether to allow or deny the transaction.
However, not all suspicious transactions are immediately blocked. Some of them may be subjected to manual verification. The service may also ask the buyer to provide additional data to verify their identity. All of these actions reduce the number of fraudulent transactions, thereby saving money.
Most fraud detection solutions on the market today are self-learning, meaning they use machine learning technology. This allows to improve the algorithms and increase the number of accurate predictions.
What Do Merchants Need to Know About Using Online Fraud Detection?
Many merchants are convinced that online fraud detection is a service you can set up and forget about. But in a constantly changing market environment, online fraud detection is a continuous process that needs to be continuously monitored and adjusted to individual settings.
The goal of this continuous adjustment is for this fraud detection tool to effectively block genuine fraudulent transactions and make as few false positives as possible. To do this, it’s important to work with the data as well as listen to customer feedback. It happens that in the process of setting up the service, some regular transactions may be rejected. This negative user experience can cost a business the loss of a customer. To minimize such cases, it is important to examine each rejected transaction to find the true reasons.
The Bottom Line
It’s important to understand that a regular online fraud detection service may not be enough to fully protect your business from fraud chargebacks. The fact is that many fraudsters today do their best to behave normally, while some customers sometimes make unusual actions and purchases.
Therefore, to effectively combat chargebacks and protect your online business, it is important to develop a comprehensive strategy that will help protect your funds securely and minimize fraud chargebacks.
