Running a small business isn’t easy. Owners must be a jack-of-all-trades: hiring and training staff, managing inventory, and building a loyal customer base. One thing that often gets lost in the shuffle is implementing an effective fraud prevention strategy to minimize card-not-present (CNP) fraud risk.
Card-not-present fraud is expected to top $6 billion in 2018 — a number that can devastate small businesses that aren’t prepared to recognize and prevent fraud. Small merchants may think they don’t need to worry as much about fraud as their larger counterparts. After all, they’re just a small fish in a big pond, and bigger online businesses are worth more to fraudsters, right? In fact, the opposite is true: 65% of small businesses don’t encrypt or safeguard their sensitive or confidential business data, making them the perfect target for fraudsters.
Not only is it important for every online retailer to have a risk prevention strategy in place, it’s critical they choose a solution that will grow as the business does.
When it comes to fraud prevention, there are three main approaches: manual screening, automated transaction reviews and a combination of the two. Each has their pros and cons — but is there a clear winner for the growing merchant? Let’s look at the choices more closely.
Merchants may try to screen every transaction that comes through. But as the business grows, that can easily become a time-consuming, resource-intensive task — particularly during busy sales seasons.
So instead, they decide to screen only the suspicious-looking transactions. The trouble is, what do “suspicious looking” transactions actually look like? Fraudsters have become more sophisticated and malware more subtle, making fraud harder to spot if not expertly screened.
Some merchants who have neither the time, expertise, or resources to do in-house fraud screening turn to other options. Enter the technological solution.
Whether implemented as a stand-alone solution or as an added service from an existing e-commerce storefront provider, automated fraud screening can be a fast and inexpensive way for growing businesses to fight fraud — but does that mean it’s better?
Automated fraud screenings are certainly effective in catching subtle signs of fraud, and they are more scalable than manual screening. But they’re also not foolproof. Set the screening bar too low, and more fraudulent transactions sneak through; set it too high, and merchants find themselves rejecting legitimate transactions that only appear fraudulent (like the customer who places orders while on an overseas vacation).
The most effective solution for e-commerce retailers — regardless of size — is one that combines machine-learning algorithms with a specialized staff that’s trained in fraud validation and transaction investigation.
These hybrid solutions help merchants stop questionable transactions. How? The artificial intelligence component picks up on even the most subtle indicators of fraudulent transactions, while expert manual reviewers use their up-to-date knowledge of fraud trends to carefully review any red flags.
Plus, a hybrid solution easily grows along with any kind of business, while still being flexible enough to accommodate the peaks and valleys of seasonal sales.
The end result? A sophisticated system that can quickly analyze fraud attack patterns and order behaviors and systematically increase revenue. And that’s a great investment at any stage of business development.
A hybrid approach is an excellent fraud protection solution for a growing business. But, to ensure they’re getting the most robust protection possible, merchants should make sure their fraud protection solution provider offers:
The last thing a growing business needs is a fraud attack to bring their momentum to a screeching halt. By learning about fraud risk and choosing a smart, flexible solution that grows with them, merchants can stop spending time and energy fighting fraud, so they can devote it to running their business, gaining new customers, and exploring new markets.
Our e-book “Online Credit Card Fraud Risk: The Ultimate Guide to Growing e-Commerce Sales Safely” walks retailers through the complex world of retail fraud. We’ll even show you what credit card fraud looks like, how it can hurt you and the techniques proven to fight it. Download your copy today and start protecting your business, profits and customers.