The pandemic has encouraged more people to transition from shopping at physical stores to purchasing things on e-commerce websites. With such a huge explosion of buyers at online stores, payment frauds have also increased dramatically. Merchants earn more but are exposed to a higher risk of e-commerce fraud.
Online merchants need a robust fraud prevention solution to keep fraudulent purchases to a manageable number while helping them to manage chargeback disputes. There are various fraud prevention solutions that provide online services to protect users from e-commerce fraud by the advanced detection of fraud patterns. One of the more important parts of the fraud prevention service is the Merchant Network.
What are e-commerce frauds and the Merchant Network?
There are 2 main types of E-commerce fraud:
- Credit/debit card fraud (card-not-present fraud) - a scam where the fraudster attempts to make a transaction while not possessing the physical card or using a stolen card
- Chargeback fraud (friendly fraud) – occurs when a buyer purchases with their own credit card, and then requests a chargeback after receiving the purchases goods or services.
Why is e-commerce fraud so widespread?
Fraud is a costly problem that every e-commerce website faces. As sales increase, websites are at risk of being fraudulent, facing higher chargeback rates and more losses. If you've wondered why e-commerce fraud is so prevalent, we'll give you the answers below:
- It is easy to obtain stolen credit card data nowadays. Fraudsters can buy them in bulk from the dark web for quite cheap.
- Buyers can easily disguise their identity and location thanks to proxy servers.
- The fraud amount is usually below what the authorities might consider worth pursuing.
- Buyers could be in another state or country, making prosecution tough due to jurisdiction.
The Merchant Network
Most of the Merchant Network consists of blacklists that contain fraud data contributed by merchants that are currently using certain fraud screening services.
Currently, there are blacklists data for the fraudster's IP address, email, computer or mobile device fingerprint, phone number, and the shipping address used. The order screening process will use this data to weed out potential fraudulent orders.
Once merchants access the Merchant Network, they have to integrate the fraud prevention system into their online shopping carts, either via ready-made plugins for their webstore platform or by using the REST API directly. That's basically it. The fraud prevention service is now screening all orders made on the website.
What makes the Merchant Network so effective in fraud prevention?
As mentioned above, the Merchant Network plays an important role in combating fraud and providing fraud prevention services. Blacklists data are being contributed round the clock by merchants around the world. Therefore, every merchant on the network is always being protected with the very latest fraud data.
Using multiple blacklists translates into protection from multiple angles, thus making it very hard for a fraudster to make a fraudulent order or hide their tracks. Global collaborative efforts ensure that fraud patterns are uncovered faster as data added to blacklists are immediately used in fraud screenings.
Privacy is not an issue
Merchants do not have to worry about privacy issues regarding sharing blacklist data. The process of sharing their contribution is an opt-in process. Besides that, the shared data is used purely for fraud screening purposes and is not visible to other merchants.
How do blacklists prevent fraudulent transactions?
The IP address and email blacklists help track a fraudster across multiple merchant websites. As a result, it is much harder for them to avoid detection.
However, some savvy fraudsters may know to change their IP address and email address when making a purchase online. Hence, using the shipping address blacklist prevents habitual offenders from making purchases because the delivery address is not that easy to change.
Similarly, the device blacklist uses a digital fingerprint of a computer or a mobile device to identify repeat fraudsters by their machines.
Combining the above blacklists has made life very difficult for malicious actors trying to make fraudulent purchases.
Conclusion
E-commerce fraud is sophisticated and ever-evolving. The Merchant Network works in conjunction with other features such as velocity checks, customizable fraud rules, etc. As a result, this has made the fraud detection engine highly effective in combating e-commerce fraud.
Small businesses can definitely benefit from using the free Micro plan to screen up to 500 orders for fraud every month. When they've grown beyond the free tier, then they can easily upgrade their plan to match.
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