NoFraud is pleased to announce an integration with Cashier, by Bold, available to our Shopify and BigCommerce customers.
“Cashier is a feature-rich global checkout solution designed to help your business scale. You can create a flawless shopping experience for your customers with advanced features such as Upsell after checkout, stored credit card accounts, the ability to sell in 150 + currencies, and much more. Best of all, our high converting one-page checkout can be fully customized to match your branding, complete with custom URL and design.”
Increasingly complex card-not-present fraud will cost retailers US$130 billion globally in digital sales over the next five years.
A Juniper Research study predicts that retailers’ slow pace in keeping up with new fraud prevention requirements will allow cybercriminal practices to become more widespread as more and more consumers shop online. It observes that established point-of-sale vendors will need to move towards mobile POS technology in order to expand their reach into fresh markets and reduce their exposure to card-not-present fraud.
“A layered fraud detection and prevention (FDP) solution naturally helps directly preventing fraud, but it also offers major gains in terms of recovering potentially lost revenue through false positives,” said the report’s author Steffen Sorrell. “This is something about which retailers remain undereducated, and has allowed fraudsters to capitalise on relatively low FDP spend”.
An implication of the Juniper research is that a low understanding of FDP investment return is causing the low uptake of the technology. the report anticipates digital payment players will be spending $9.6 billion annually on FDP solutions by 2023.
Many online merchants fight chargebacks by using payment gateway filters to protect their integrated payments processes from fraudulent behavior. What they may not realize is that these gateway filters are actually hurting their businesses by declining perfectly safe orders along with fraudulent ones.
In this blog post, we’ll walk you through the nitty-gritty of what payment gateways do, how you can use their filters to screen for fraud—and why you shouldn’t.
What is a Payment Gateway?
Payment gateways process online payments from credit and debit cards. They make online shopping possible by connecting and authorizing payments between eCommerce customers and merchants.
requirements to ensure safe checkout.
Payment-processing companies like PayPal operate hosted gateways. The main benefit of using a hosted gateway to manage your transactions is that the hosting company is responsible for all compliance and security requirements to ensure safe checkout.
The downside is that your customers will have to leave your website to place their orders. They’ll be redirected to the gateway host’s website, which means that you won’t have full control over their entire online shopping experience.
A sense of disconnection can jolt a customer out of the shopping process prematurely.
Consider this example: a potential customer spends time browsing the products on your website, which you’ve carefully designed to run smoothly and reflect your brand. When he’s ready to check out, he is suddenly and unexpectedly rerouted to the gateway host’s website to finish processing his payment. Suppose your customer thinks that the gateway site is slower, less secure, or even less visually appealing than your own familiar website. In that case, he might just reconsider his purchase and abandon his cart.
Alternatively, integrated gateways can be built into your website so that your customers never have to leave your site during the payment process.
WooCommerce is an example of an integrated payment gateway. Like many similar services, WooCommerce integrates neatly into most websites. However, you’ll be charged a processing fee for each transaction, making it a costly choice for businesses that handle many small transactions.
Also, unlike their hosted counterparts, integrated gateways put the burden of data security on your business. They require some technical expertise to manage, so if you aren’t at least somewhat skilled at computer programming, you may need to hire a programmer to set up and maintain your payment gateway.
It’s important to choose the right payment gateway for your business. Again, if your customers don’t feel that their payment information is secure, or if they run into difficulties during the order process, they’re likely to abandon their carts and take their business elsewhere.
That number rises to 48% among members of Generation X (those born in the years between 1965 and 1980), and 50% of Millennials surveyed (those born between 1981 and 1996).
What is a Gateway Filter?
A gateway filter is a set of rules used by a payment gateway to identify and reject payments that seem likely to be fraudulent. To some extent, eCommerce merchants can usually set up and adjust the filters on the gateways they use to customize their specifications.
For example, you could set your gateway filter to deny all transactions with AVS mismatches—billing addresses that don’t match the addresses on file with the credit card company. You could also set your gateway filters to deny all transactions with CVV mismatches—when the card verification value does not match the code associated with the credit card—or block transactions from certain countries entirely.
Gateway filters are usually free to use and can be a decent fraud prevention tool for merchants who don’t experience much fraud. They’re far from a perfect solution, however.
What’s the Problem with Gateway Filters?
The selection of available rules is limited, so you can’t screen for every type of transaction fraud. The gateway filter rules are also not very flexible. This leaves the merchant with an unpleasant choice. They can set the rules too loosely and unintentionally allow fraudulent transactions to be processed, which results in lost merchandise and a costly chargeback fee. On the other hand, they can set the rules too strictly and decline legitimate transactions along with fraudulent ones.
A high false rejection rate can cost merchants heavily in lost sales, especially since rejected customers are likely to take their future business to a competitor. Advisory firm Javelin Strategy and Research found that 32% of legitimate customers whose transactions were declined by a merchant’s overcautious fraud-prevention filters never shopped with that merchant again.
“We estimate that in the U.S. alone, the value of false declines is more than thirteen times the total amount lost to actual card fraud,”
says Al Pascual, senior vice president, research director, and head of fraud and security at Javelin.
Consider these Statistics:
– 3.6% of all eCommerce shoppers put in the wrong billing address when they check out. Standard fraud-detection filters will flag these orders with an “AVS N” error notification and decline the transaction—even though 91.9%of those orders are from legitimate customers.
– 6.7% of all eCommerce shoppers enter a billing address that’s only partially correct (leading to the error notification “AVS A,Z”). A full 98.1% of those orders are legitimate, but all of them will be denied by overzealous gateway filters.
– Similarly, 15% of all transactions do not have an exact CVV match. 98.7%of those orders are safe to ship, but you won’t ship any of them if your strict gateway filter declines them first.
By turning away good customers, your gateway filters could be forcing you to leave money on the table. Take a few minutes to check if you have those profit-killing settings for your filters turned on at your payment gateway. By switching them off, you can easily boost your order acceptance rate by more than 10%.
Is Manual Review a Safe Substitute for Gateway Filters?
For many eCommerce businesses, achieving adequate security without turning away valid customers is impossible with their payment gateway filters. In this case, they’ll need to rely on a more accurate fraud detection solution.
Often, merchants will fight fraud with manual review, counting on employees to look through orders, spot the fraudulent ones, and decline them. However, manual review is an expensive and time-consuming solution, even when merchants choose to review only orders worth more than a certain dollar amount.
When engaging in manual review, business owners are stuck paying for countless hours of human resources, often hiring employees whose only job is to screen orders for fraud. These employees are still vulnerable to human error, especially when they don’t have access to all the available fraud-detection databases and technologies. Moreover, manual review can be relatively slow and tedious, resulting in delays when processing a high volume of orders.
What Can I Do to Protect my Business from Fraud if I’m not Relying on Gateway Filters or Manual Review?
A genuinely effective fraud detection system uses multiple layers of technology to analyze many data points from various sources and drastically reduces the need for manual review.
Unfortunately, they tend to be prohibitively expensive, difficult to set up and maintain, and designed with large businesses in mind. For many smaller companies, these technology-driven solutions are not a viable or cost-effective option.
This is exactly why NoFraud was created. NoFraud’s automated fraud prevention service provides a layer of advanced protection between an eCommerce site’s shopping cart and its payment gateway, running quickly and smoothly in the background without slowing down the customer’s shopping experience.
NoFraud is also capable of reliably identifying when data mismatches are the result of honest customer errors. When typos are detected, NoFraud alerts customers instead of declining their orders, allowing them to correct their information and complete their purchases. That means you don’t lose out on a sale every time someone makes a mistake while typing in their billing address.
NoFraud is easy to use, affordable and adapts to keep up with evolving fraud threats. By comparing data gathered from all NoFraud users, NoFraud’s algorithm is able to spot emerging fraud trends and better protect all the merchants who rely on it.
There’s a human element to NoFraud, too. Our team of experts carefully monitors the declined transactions and makes sure that our software never turns away legitimate orders from your business. It’s the ideal fraud prevention solution, weeding out the fraudulent orders for you without compromising your bottom line in the process.
NoFraud is the perfect option for smaller businesses, requiring no monthly minimums and no long-term contracts. You can try NoFraud at no risk today. In just minutes, NoFraud’s powerful algorithm will integrate seamlessly into your payment system to keep your business safe from fraud and overcautious fraud-prevention filters.
To find out more about how NoFraud’s AI-powered solution can help your business and to try it for yourself, click our ‘Request a Quote’ button at the top of the page.
This article was written by our director of business development for Entrepreneur.com.
As an eCommerce seller, there are multiple responsibilities juggled between you and your team — sourcing product, quality control, customer service, SEO, HR. One of the tasks that is often overlooked, until it is too late and very costly, is fraud prevention.
With the frequency of data breaches recently — 1,253 reported breaches in 2017 alone — stolen credit card data is readily available to cybercriminals. According to a recent Javelin study, $16 billion was lost to fraud last year. While the credit card companies identify and stop some of the credit card fraud that occurs, any fraudulent charge that slips through their fingers and makes its way to your website is your responsibility to stop. If you miss one, you will know about it, in the form of a fraud chargeback from your bank.
1. Classic fraud.
This type of fraud is generally committed by unsophisticated fraudsters. Stolen credit card credentials are purchased on the dark web, and goods are sent to reshippers in an attempt to retrieve the stolen merchandise. Often, internet proxies are used to mask the international IP where a majority of this type of fraud originates.
2. Triangulation fraud.
This type of fraud involves three parties — the fraudster, the unsuspecting legitimate shopper and the ecommerce store.
An online storefront is created by the fraudster, often on eBay or Amazon, that offers high-demand goods at extremely low prices. The store collects payment for the goods it sells. The fraudster then uses other stolen credit card data and the names collected in orders on his online storefront to purchase goods from a legitimate website and ships them to the customers that purchased on his new online storefront.
This type of fraud can usually be identified by the products that are targeted as well as some investigative work by locating the unsuspecting shopper who can identify the storefront where the stolen goods were purchased.
3. Interception fraud.
Fraudsters will create orders where the billing and shipping match the address linked to the card. Their goal is to intercept the package in any of the following ways:
Asking a customer service rep to change the address on the order before shipment.
Contacting the shipper to reroute the package to an address where they can retrieve the stolen goods.
In cases where the fraudster lives in close proximity to the cardholder’s billing address, physically wait near the address for the delivery to arrive and offer to sign for the package as the homeowner is not available.
4. Card testing fraud.
This is the practice of testing the validity of a credit card number, with plans to use valid credentials at another website to commit fraud. Fraudsters target websites that reveal a different response for each type of decline. For example, when a card is declined due to an incorrect expiration date, a different response is given, so they know they just need to find the expiration date. This is generally done by bots, and transaction attempts happen quickly, in rapid succession. The data on the orders will often be identical, either all the data or just a subset of data — like the shipping address.
5. Account takeover fraud.
This occurs when fraudsters get hold of a legitimate customer’s login credentials and take advantage of stored credit cards to purchase goods. An update on the shipping address will usually occur shortly before purchase so the fraudster can retrieve the stolen goods.
6. Fraud via identity theft.
In this case, the fraudsters assumes another person’s identity, creates credit cards in the victim’s name and goes on a shopping spree. This type of fraud is increasing rapidly as the number and scope of data breaches increase. It is also the most difficult to identify as the fraudsters behind identity theft are quite sophisticated.
7. Friendly fraud, also called chargeback fraud.
An online shopper will make a purchase, then issue a chargeback, claiming their card was stolen. The chargeback usually occurs after the goods are delivered. This type of fraud is traditionally not carried out by hardcore criminals but rather by consumers who are clearly aware of what they are doing. This type of fraud is difficult to detect but can often be won via chargeback representing.
As we make more cashless payments for retail purchases, restaurants, and transportation – not to mention the increase in online shopping – wallets loaded with legal tender may become a thing of the past. According to 2018 research by BigCommerce, software vendor and Square payment processing solution provider, 51 percent of Americans think that online shopping is the best option. Last year, 1.66 billion people worldwide bought goods online. And the number of digital buyers is expected to exceed 2.14 billion.
Unfortunately, growing sales may mean not only greater revenue but also bigger losses due to fraud. For instance, 63 percent of businesses that participated in the 2018 Global Fraud and Identity Report by Experian claim to have the same or higher levels of such losses over the last year.
Originally posted on Digital Transactions by Kevin Woodward.
Payments companies and retailers have a sobering forecast to ponder for online fraud. By 2023, global online fraud losses from e-commerce, airline ticketing, money transfer, and banking services will grow from $22 billion projected in 2018 to $48 billion, says Juniper Research in a new report.
Thanks to the proliferation of synthetic identities—when fragments of real identity information is used to create a new identity—and account takeovers, criminals are increasingly skirting anti-fraud measures retailers and payments companies use, Juniper says.
How much would you guess businesses lost to chargebacks in 2017? $10 billion? Maybe even $20 billion? Generous guesses—but not generous enough. Or, maybe you keep up with statistics and you read that the total cost of chargebacks came to $31 billion in a single year. Sorry, you’re still not even close.
Uncovering the True Cost of Chargebacks
To find out what chargebacks are really costing merchants, we cannot simply look at merchants or the cost of merchandise lost. Chargebacks have a dramatic “bottom-line” impact that cuts across the entire payments ecosystem. They sap sales revenue and merchandise, they saddle businesses with a host of additional fees and administrative costs and they threaten critical relationships between merchants and institutions.
New research from the Minneapolis Fed indicates that retailers are more concerned with fraud in their online channels than any other kind of fraud. Across nearly every size business, Fighting Fraud in the E-Commerce Channel: A Merchant Study found that not only was CNP fraud considered their greatest threat, but half worry about their systems’ abilities to handle fraud as the nature of data breaches changes and attacks at the online account level increase. More than three-quarters of those polled expect increased attacks on their e-commerce channels in the next 6 to 12 months.
Chargebacks are a growing concern for modern merchants. And at the rate they’re increasing, it’s no wonder why.
From 2016 to 2017, chargebacks jumped 179 percent, costing merchant’s 1.9 percent of their total annual revenue. Add in the potential threat chargebacks pose to your reputation and merchant accounts, and you’ve got a pretty serious problem on your hands – no matter what line of business you’re in.
What is a Chargeback?
Put simply, a chargeback is when a customer is credited back for a card transaction.
It occurs when the customer contacts their bank, disputes a charge on their bill or statement, and requests a refund.
Typically, consumers file chargeback disputes when they don’t recognize a transaction or are somehow dissatisfied with their purchase or the buying experience. In some cases, they may simply be trying to get their product or service for free.