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It is down to the merchant to provide their customers with that feeling of trust and a safe trading environment. With the explosive growth of ecommerce and the introduction of chip-and-pin technology in the high streets, fraudsters are moving to target e-commerce. This makes fraud a major problem for online retailers. Companies that have been successful “offline” can find themselves facing issues they have not dealt with before when setting up their online offering.
This can be a major resource drain, especially for smaller businesses which often do not have the same resources as their larger competitors to deal with these issues. Paradoxically, the internet which was supposed to be the great leveller of the playing fields has come to favour larger businesses.
Latest figures from APACS, the UK payments authority, show that total card fraud losses have increased by 14 per cent in the six months to June 2008 compared with the same period last year. In total, card fraud losses for this period reached over £300m – roughly £10 for every adult living in the UK, in just six months.
Businesses of any size need to assume that they will inevitably experience some fraud – it is not something that affects an unfortunate minority.
Loss of earnings is only part of the headache – there is also the loss of the goods or services sold, the time taken to handle the administration created by fraudulent transactions and finally the processing fees levied by the card issuers. Also the rules for protecting cardholders’ data are getting tighter and tighter, Since June this year, all businesses accepting card payments must conform to the Payment Card Industry Data Security Standard (PCI DSS) – not a trivial task. Dealing with these requirements can be difficult for smaller businesses that often do not have the time or resources to manage all of this on their own.
Managing fraud is a necessity for any online business – even though this is not always recognised by smaller businesses.
According to a survey of small businesses commissioned over the summer of 2008, there is confusion over who should be accountable for online fraud: 35 per cent of respondents believed their own banks should be liable for fraud, whereas almost half felt responsibility should lie with either the payment service provider (24per cent) or with credit card issuers (23 per cent).
However, consumers are far clearer about who should take the blame for the fraud they experience: they will associate bad experiences on a site directly with the merchant, regardless of fault.
Whether they like it or not, it is down to the merchant to provide their customers with that feeling of trust and a safe trading environment.
There are a number of things a small business can do. Firstly, sign up to a provider that supports Mastercard SecureCode or Verified by Visa. These password-based schemes (also known as 3D Secure) add an additional step to the payment process, but shield the merchant from fraud .
Next, set up the right business rules. The most common occurrences of fraud have clear distinguishing marks; setting up rules to mitigate these is always a good move. For example, a rule that requires that any transaction with a discrepancy between shipping and billing address be followed by a call to the customer to check the facts is a good way to screen fraudsters. Taking prompt action – ideally before the funds change hands – is paramount in managing fraud.
Lastly and most importantly, a small business should consider outsourcing. Choosing a provider that offers PCI compliance, dynamic fraud management, 3D secure processing enables a small business to operate securely while focussing on what’s really important: running their business.
It is easy to overlook the online payment platform as a simple link in the e-commerce chain. However, choosing the right payment system could make the difference between a successful business that is trusted by its customers, and one that is burdened by fraud. Asking the right questions of prospective providers and looking closely at the technical, security, and particularly the anti-fraud credentials, will help build a solid platform for success online.
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