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Tips for Detecting Fraud & How to Protect Yourself

The COVID-19 pandemic has significantly altered buying behavior and how businesses run day-to-day operations. The growing number of online customers has not just impacted how ecommerce merchants run their businesses but has also affected the pattern of fraud behavior.

As per a 2021 study by Juniper Research, online fraud is set to exceed $200 billion by 2024, with fraud attacks becoming more sophisticated as time goes by.

Creating an effective dispute and fraud prevention strategy that best suits your business can help prevent fraud from occurring. By employing some of these best practices as part of your overall strategy, you can avoid excessive chargebacks and reduce potential customer burden and losses.

 

5 Steps to Detect and Prevent Fraud

1) Contact Customers to Confirm Orders

Contacting customers by phone or email to confirm their details before fulfilling an order can give you time to verify that a payment is legitimate.

Often fraudsters will use fake email addresses and if you send a simple templated email it could result in an immediate ‘ This email address does not exist’ failure which will expose them. Calling the customer under the guise of verifying their shipping address may also raise some red flags. A nonsensical or evasive answer is typically a good indication of potentially fraudulent behavior.

 

2) Manually Review Payments

Taking a few minutes to look over an order is often all it takes to detect and prevent fraud. Here are some considerations when reviewing a payment:

• Does the billing address match the shipping address? Does the AVS verification match?
  • If a payment’s billing and shipping address don’t match, look into the shipping address using Google Maps & Street View to find out more. A common tactic that fraudsters use is to have orders shipped to a freight or mail forwarding service or storage facility that forwards the goods to their actual location.
• Does the customer have previous transaction history with you?
  • Fraudsters are always looking for new victims, and the risk of fraud is much higher for a new customer than a repeat customer.
• Does the customer’s email address match the cardholder’s name?
  • Sometimes email addresses are random, but looking at the email and seeing if the first or last name is included could help identify potential fraud.
• Is this an order that the customer has asked to be expedited?
  • Often fraudsters are eager to receive the product before the actual card holder reports it stolen so they will sometimes reach out to the store and request for it to be expedited.
• Was the order changed or altered after it was placed?
  • Selecting Store Pickup then calling in later and requesting it to be shipped instead is a common way fraudsters will use to avoid billing/shipping address verification. They may also place a smaller order initially and then call in to add more items with a different card once they suspect their fraud wasn’t detected.

 

3) Create Store Policies

Taking the time to put policies in place with your staff is often the most effective way to protect against fraud. We hear stories all the time of shops making an exception one time to their store’s policy and it turning out to be fraud. Train your staff with clear, concise policies and they’ll be empowered to help protect your business. Here are some considerations when creating policies:

• Set dollar limits for manually-entered transactions.
  • Transactions where the card details are entered manually are by far the riskiest type of transaction for a retail business and have become an increasing popular target for fraudsters. Work with your staff to set limits on what can be purchased and how much. Avoid accepting any transaction that you can't afford to lose later to lose to fraud.
• Check the Orders page before fulfilling any order.
  • The Orders page contains helpful information that protects against fraud. The AVS and CVV icons can be clicked on to provide more information. They are also color coded for convenience. Red will never show up since we know it’s fraudulent and will block it before you ever see the transaction. Yellow means there is a partial match. These can be dangerous since it sometimes means that customer may not know the full details of the card they’re using. Green is the safest and means the information matches the card details.
• Set limits for high priced items.
  • More expensive items are primary targets for fraudsters since they can be resold for a large profit. Listing these products online but requiring them to be purchased or picked up in-store may be the safest option.
• Call or email the customer before fulfilling anything.
  • As mentioned earlier, attempting to contact the customer can show you that a phone number has been disconnected or an email is invalid, both of which are good indicators of fraud.
• Check ID’s
  • Checking ID’s should not always be required but for larger purchases many stores require customers to provide it at checkout so the clerk can compare it to the card being used. For larger online sales, some stores require 'selfies' with the customer holding their ID next to their face to verify their identity. This is especially relevant for Curbside or In-Store Pickup where fraud has increased by 55% since the pandemic.

 

4) Don’t Be Afraid to Block Some Real Orders

In an effort to protect against fraudulent orders, you will likely run into situations where you’ve blocked or refunded a legitimate order. That’s okay. If they call or email back in, you can help them place another order by requesting more information to validate it. Some stores even provide a small gift inside the order as an apology for the mix-up. It’s much less expensive than losing the inventory for a fraudulent order and paying chargeback fees.

 

5) Utilize Tools Provided By Your Payment Processor

Each processor has it’s own fraud prevention tools and systems. Learn more about what tools you can use or that your processor can use on your behalf. Additional resources may be available at additional cost so don’t hesitate to reach out to them.

We partner with Stripe, the same payments technology group that Google, Amazon, Lyft, Zoom, and many others use. 90% of U.S. adults have bought from businesses on the Stripe network giving our Payment customers some of the best fraud protection available globally.

Our anti-fraud tools use artificial intelligence and machine learning to adapt and learn from fraud happening all across the world to better protect you. Every single transaction done through our integrated Payments is scanned and assigned a Risk Value. This scoring allows us to block hundreds of thousands of fraudulent sales every year before they ever get to you. We also have partnerships with VISA, Mastercard, American Express and leading banks to provide an additional level of security.

With that said, we can’t block everything, and fraudsters do sometimes get through which is why it’s so important to arm yourself with the right tools and policies.

 

BONUS TIP

Educate yourself on the latest trends and preventative measures to protect against fraud. Free resources like the FORTER Fraud Attack Index are great resources to read.

 

You’ve identified a Fraudulent Order – Now What?

Refund the order as quickly as possible and don’t fulfill it. You can also contact our Customer Service to have them block the customer from ever purchasing from you again. Transactions that we identify as fraudulent are automatically reviewed to see if the card number, IP address, email address, devices, and more should be blocked.