Fraud Protection in the E-Commerce World

Want to hear something scary? Analysts project that small and medium businesses will be hit with more than $130 billion in losses due to payment fraud over the next five years.

Before the rise of the digital world, fraud could be committed by stealing someone’s identity, running schemes like money laundering or embezzlement of cash, producing counterfeit money, forgery, etc. In all of these cases, physical money and paperwork were exchanging hands.

As the digital world grew, businesses were able to share their products and services online, and consumers could click a button and instantly purchase them. Businesses were thrilled with the speed at which they could grow, and customers loved the new ease of making purchases. The majority of customers now are accustomed to having a fully online presence. Credit card information can be stored in a digital wallet, web browsers can save and auto-fill customer information….you get the idea.

But the tradeoff was a whole new type of problem – transactions that weren’t meant to happen at all. These days you’re much more likely to hear about fraud through methods like phishing, data breaches or scams, and the criminals who then have a customer’s information can make purchases. This can result in disputed charges, chargebacks, fees, and other costly outcomes.

Thankfully, it’s possible to proactively identify, manage and prevent suspicious and potentially fraudulent transactions before it strikes your bottom line.

So how do you do that? Enlist the help of a payment processing solution that can provide fraud protection.

Data & Analysis

A solution with robust reporting can provide all the information you need about your business, when you need it. This can include daily, monthly or yearly summaries of transaction activity, customer demographics, banking information and more. Whether big-picture or drilling down into more transaction-specific information, accessing and understanding all this data can help you figure out what thresholds to set to minimize fraudulent transactions.

With thorough analysis you can figure out what your average transactions look like, which makes it easier to identify when a particular one might be fraudulent. For example, maybe thousands of dollars worth of product are being purchased, when a typical transaction is only a couple hundred dollars. Being able to configure and adjust these settings can help monitor what’s happening with your business and flag any suspicious activity, in real time:

  • Payment velocity: Card velocity is the number of transactions completed with the same credit card over a given period of time. If you begin to see an uptick in transactions that doesn’t make sense, this can be a red flag that the card information may have been compromised.
  • Geographic limitations: If the bulk of your company’s business is being done in North America and all of a sudden there is a charge coming from Europe, that would be a pretty good indicator it may be fraudulent.
  • Endpoints and IP addresses: If you’ve identified that fraudulent payment attempts are occurring from the same device, you can proactively block future attempts.


Humans make mistakes, we all know this. But one of the greatest benefits to technology is eliminating that potential for human error. A payment processing service can take the manual labor off your shoulders and automate it. Customization is important – not only do you want to set your parameters (like the above) for what typical and atypical transactions would look like, but you should also take advantage of being able to get intuitive account alerts and reports to review. These can be filtered further by the type of sales channel, portfolios, or individual merchant.

Ideally your front-end website will be designed so that it seamlessly integrates with the backend, with one solution to consolidate fraud protection with shopping integration. Making legitimate transactions possible while blocking these potentially fraudulent ones will ultimately save you money in chargeback and authorization fees, and could also help prevent inventory loss if your business offers a physical product.

Better fraud targeting can help stop illegitimate disputes without impacting sales and your customer experience.

Security & Compliance

So you have a solution that is monitoring and analyzing data constantly to proactively flag any potentially suspicious transactions. But what about the legitimate transactions? How can you be sure that your customer’s data is protected?

Always look for a payment processing solution that is fully compliant with PCI and DSS data security standards pertaining to card data security. This will ensure secure handling of credit card information and prevent sensitive data from being compromised.

Also look for a solution is using industry-leading cybersecurity technology. It’s important to find a company using application security providers to encrypt both customer data and yours, shield your applications and network from data breaches, and ensure that your website has consistent uptime and performance.

While the word “fraud” has taken on many new meanings as our digital world continues to expand, businesses shouldn’t fear that they will be one of the many companies losing money to fraudulent transactions. There are some simple steps, like enlisting the right payment processing solution, that can help keep you financially sound and your business running smoothly.

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