Internet fraud: How to prevent them

As in offline sales, e-commerce is not exempt of risks.

Who takes risks can lose, but who do not assume them, always loses.

S. Tartakower, Chess Grand Master

As in offline sales, e-commerce is not exempt from youth gang members who find ways to make life impossible for both electronic stores and account holders. For example, some teenagers without trade or benefit are dedicated to generating bins and buying online with credit cards owned by some unfortunate.

No wonder there is a growing interest on the part of e-commerce in taking action to combat these online frauds. Banks protect the final consumer. The responsibility of proving that a transaction has been legitimate lies with the electronic businesses themselves.

An account holder has up to 180 days to claim an unrecognized operation. This procedure is known as “chargeback.” After the complaint is raised, the bank requires e-commerce a series of documents to prove the legitimacy of the charge: signature received by the client, ensure that the holder received the product, among other requirements that are not always possible to meet if we want An efficient e-commerce.

With this in mind, e-commerce must always have a backup of the transactions made to deal with any possible chargeback.

Tools for preventing Internet Frauds

Just as merchandise theft can be reduced without hindering the shopping experience in a brick & mortars store with specific security measures (such as exit sensors), e-commerce has different resources to reduce fraudulent transactions, such as blacklists or whitelists.

A blacklist is a record of entities that have shown suspicious behavior in the past, and we do not want them to buy on our site. A whitelist works the other way around; it is a registry of entities we trust.

Hiring an excellent fraud tool is not over. There are some aggregators, such as Conekta, MercadoPago, or OpenPay, which establish cross-cutting rules for all businesses. These are usually less effective. Although they maintain fraud at acceptable levels, they generate many false positives (good transactions that are rejected).

Other fraud tools, such as CyberSource, Accertify, Red (Globalcollect) are more expensive, but allow you to create anti-fraud rules specific to each business.

The main objective of any fraud tool is to maximize profits. This goal is achieved by controlling the percentage of fraudulent sales, reducing both rejected orders and manual reviews, growing as trade without increasing exposure, and identifying and preventing new fraud patterns.

As in the game of chess, we can adopt two strategies:

  1. 1) A defense that will avoid exposing us. Taking strict security measures will protect us very well from fraud, but also reduce our conversions.
  2. 2) A risky one. Open our lines to achieve the main objective: sell.

Smaller e-commerces may prefer to take stricter security measures because it is harder for them to recover fraud losses. But there are reasons not to fear. The chargeback rate in Mexico is one of the lowest (1.56%, according to CyberSource data).

So far, the only 100% effective method to avoid fraud is not to sell. Starting operations online involves taking some risks.