Do You Need eCommerce Fraud Protection?

When a retailer begins accepting online payments, they have officially entered the card-not-present space. For a consumer, the choice between buying merchandise online or in-store merely comes down to a matter of convenience, cost, and availability.

Buying online versus in-store are two very different scenarios, especially concerning the liability of accepting a fraudulent transaction. For the eCommerce merchant, a card-not-present (CNP) transaction, which means that the cardholder isn’t physically present with the credit card when swiping it for a purchase with the merchant. For online sellers, having credit card fraud protection for merchants when you launch is a critical step as it can save your business a lot of money in losses. For a consumer, the choice between buying merchandise online or in-store merely comes down to a matter of convenience, cost, and availability.

With no standard security measures like checking identification during the transaction and using a chip reader during the transaction, an internet transaction is deemed to have far less eCommerce fraud prevention and eCommerce fraud protection measures making it a much higher risk for fraud.

Given the risk involved with accepting an online transaction, the liability of accepting a fraudulent transaction rests with the retailer, rather than the issuing bank. If a merchant accepts an order online that is later deemed a fraudulent transaction, it’s the merchant’s responsibility to refund the consumer. The cardholder’s issuing bank will collect on behalf of the cardholder.

Understanding this liability is critical for online retailers, many of whom are unaware of their responsibility to examine their online purchases closely to weed out credit card fraud.

It’s imperative that an eCommerce merchant implements online credit card fraud detection steps to safeguard themselves from the losses of fraudulent transactions. Mainly, the entire cost to the merchant for accepting a single fraudulent purchase can be more than double the cost of the actual purchase itself, because they cannot recover the original merchandise or services that had been fraudulently purchased, and because they must also repay the defrauded customer.

Also, the retailer’s bank (known as the acquiring bank) heavily monitors their customers for credit card fraud acceptance and might charge a fee for every chargeback received.

If the merchant starts to process lots of fraudulent transactions, an acquiring bank might not only drastically raise credit card processing fees, they might even take steps to shut down a retailer’s merchant account altogether. This information presented to you, it isn’t meant to scare you but to serve to educate you on how you should take steps to protect yourself and your profits and losses. As an eCommerce retailer, it’s important to educate yourself about what credit card fraud looks like, what it involves, and how to arm yourself with eCommerce credit card fraud protection for merchants.