In ecommerce, it’s essential to prevent fraud to ensure your business is healthy. After all, if you’re leaking money or regularly targeted by scammers, your profitability is in serious danger. You’ll also struggle to maintain a healthy cash flow.
Simply put: fraud prevention measures help you determine that transactions are legitimate and that customers really are who they say they are. Both are vital to your business’s success.
So, how can effective fraud detection help you stop losing money and reduce unnecessary costs?
Let’s take a look.
Increase authorisation rates
Your authorisation rate – also known as your approval ratio or auth rate – is the percentage of your transactions that are approved during the authorisation process.
For most card payments, the issuing bank – or the consumer’s bank that issued the card – has to review and authorise a transaction before sending funds to your business.
If your business is subject to a high amount of unauthorised transactions, issuing banks will eventually see it as high risk and decline higher numbers of attempted payments. This can lead to more cart abandonments as customers might not retry a failed payment or lose trust in you.
In fact, our data shows that 54% of consumers would abandon a purchase if they didn’t feel the payment was secure. It can also lead to more false declines, which are legitimate transactions that get blocked due to suspected fraud.
So, how can a robust fraud detection strategy help?
It will help you ensure payments are legitimate, increasing your authorisation rate, decreasing friction during checkout, and driving revenue.
Avoid monitoring programs
If your business is prone to fraud and chargebacks, some card schemes – or the companies that run card networks such as Visa or Mastercard – may place you on a monitoring program. These are the two types of programs:
Fraud monitoring
Chargeback monitoring
These programs incentivise you to reduce fraud and chargebacks and will often impose penalties if you don’t. These penalties include making you pay higher fees or fines, and sometimes even preventing you from processing payments altogether.
Avoiding being subject to one of these monitoring programs will help you control costs and – in extreme cases – even help your business keep trading.
Reduce chargebacks
If fraud detection is part of your business’s armour, chargebacks are the shield that helps to protect consumers from online scammers.
Chargebacks can be initiated for several reasons, including valid issues such as defective products or incorrect charges. But they can also be caused by fraudsters stealing a cardholder’s details and using them illegally. If this happens, the card’s owner will file a chargeback to get the funds back.
No matter the cause, chargebacks cost your business money and time: you have to pay fees, contest the dispute, and you might also lose the cost of the products or services delivered.
If you have a high rate of chargebacks, you can also face other problems, including lower authorisation rates, higher fines, increased payment processing fees, and even account closure.
Preventing fraud can help you block fraudulent chargebacks – protecting your business from the dangers that come with them.
