5 Common Online Payment Risks Merchants Face

Online retail is growing faster than the High Street, which can result in increased fraud from card not present (CNP) transactions for merchants. Fraud and chargebacks are just two of the most common online payment challenges merchants face; in this post we shine a light on some solutions.online-payment-risk

For small retailers, medium-sized merchants, and global brands, the barriers to entry to e-commerce have never been lower, thanks to social media and easily scalable global platforms and services. Finding and reaching potential customers has never been easier. At the same time, risks, from fraud, hacking and burdensome charges, keep increasing.

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Minimising Online Payment Risks

Merchants have to be prepared to minimise these risks. Reduce them and fight fraud and chargeback errors to limit the impact of these costs on their revenue and profits. Here are a few ways you can do this.

#1: Watch for unusual card activity

Often, customers trying to purchase goods or services with stolen cards exhibit behaviours that, once you are aware of them, are easy to spot.

Multiple attempts to pay from the same customer, or failed attempts to buy at higher prices, before a successful charge for a lower amount, indicate potential fraud or a stolen credit card. Customers wanting products shipped internationally, or an unusual email address, are also potential red flags that could result in chargebacks.

#2: Competing on shipping fees

Smaller merchants face this challenge every day. Put service first, and try to minimise shipping fees as much as you can, without eating too much into your profit margins.

Not everyone can compete with Amazon, Tesco and other big retailers, whom, according to reports, are losing millions on postage and shipping; therefore, focus on aspects of your service that give your business a natural advantage.

#3: Fighting Chargebacks

Not all chargebacks are fraud. More often than not, these come from customers who either dispute a purchase or don’t recognise a transaction, resulting in them using the Visa or MasterCard schemes to demand their money back.

Rapid responses are essential when a chargeback is issued. For example, a customer could say the goods weren’t received. Merchants sending them recorded delivery or through a courier would be able to show that a parcel was received. This could result in a refund from the delivery company, or a customer cancelling the chargeback. In other situations, acquiring banks and issuing banks can sometimes cause admin errors that result in a customer being charged twice, or a refund not going through, which often falls upon the bank, instead of the merchant, to fix.

Customers can also query a charge if it doesn’t come from a company they recognise, even if the purchase is legitimate. Therefore, ensure your payments show up using the trading/brand name of the business, instead of a registered name. Avoiding confusion reduces the chance of chargebacks being upheld.

#4: Introduce a new level of payment security: Bitcoin

Bitcoin is a virtual currency that emerged in 2009. Since then, it has evolved into a secure global payments network, with hundreds of companies and thousands of people around the world mining coins, storing, exchanging and securing them in wallets. At present, daily average transaction volume is around $89 million globally, which is still small compared to the major card networks.

However, the value of Bitcoin is security for merchants, especially for businesses that experience higher levels of fraud or chargebacks. Even Ben Bernanke, the US economist who served two terms as the Federal Reserve Chairman feels that Bitcoin, “may hold long-term promise, particularly if the innovations promote a faster, more secure and more efficient payment system.” It also doesn’t cost merchants to receive or send Bitcoins, thereby reducing transaction costs whilst increasing security.

#5: Fight Friendly Fraud

“Friendly fraud” is the online equivalent of in-store theft. Customers receive the goods, then claim they didn’t get them, therefore asking for a refund whilst blaming the postal system or courier firms. In both cases this costs merchants, when some verification could reduce the impact of this type of fraud. Customers who do this may reason it away as a “victimless crime,” but that is far from true.

Check with your delivery service first, before issuing a refund, and only reverse the charges once you are sure a customer didn’t receive the goods. Building a 3 – 5-day refund timescale into your T&Cs would give you the time to verify whether the goods were delivered and seek compensation from the delivery company if there was a failure in the supply chain. At the same time, merchants can re-issue the order or send a refund. Keeping customers happy without harming your bottom line.

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