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How to Build Solutions against Online Payment Fraud for eCommerce

  by Isaac Thuku  
  Send Money to Kenya  
  pic courtesy of  

According to the Association of Certified Fraud Examiners, approximately 50 percent of small businesses fall victim to fraud at some point in their lifecycle, costing them an average of $114,000 per occurrence. Online fraud cost eCommerce businesses roughly $3.5 billion back in 2012.

eCommerce is a big deal and operators need to take preventative measures to protect their businesses at all costs. What is more alarming are the penalties and loss of service associated with violating Payment Card Industry (PCI) compliance. Aside from hacking and phishing, an online business owner could be held financially responsible for losses incurred if they accept a fraudulent payment.


Types of Online Fraud


There are many types of online fraud, but they can be categorized into two classes namely:

Account theft

This is where scammers generally hack into customer’s personal information, purchase history, and their financial data. The most common tactic is where hackers send false emails to trick customers into revealing their usernames and passwords. They use those credentials to log into these accounts, change passwords and make unauthorized purchases.

Identity theft

Although many businesses have now caught on and instilled precautionary measures to avoid this type of fraud, fraudsters still manage to hack into databases and steal passwords, credit card numbers, and other personal information. Hackers then proceed to sell this information to other scammers, who then open accounts with unknowing online retailers and use the stolen information to pay for purchases.

Here, I have compiled a list of 10 practices that will arm your business with the necessary tools needed to build solutions against online fraud and keep your online business PCI compliant.


1. Select an eCommerce Solution


There are countless fraud detection platforms that offer incredible features to ensure that your business does not fall prey of fraudsters. It is up to you to do your research and find a solution that works best for your company. Some of the best Ecommerce platforms that are PCI-compliant include:

Shopify – This platform is user friendly and is packed with features that every online business owner requires to stop Ecommerce fraud. It also has a mobile commerce shopping cart allowing your customers to have access to your products/ services from any device. Shopify is certified Level 1 PCI DSS compliant

Highwire – Highwire is a safe and secure platform that serves across multiple social media sites such as Facebook, eBay, and even Bonanza. It is incredibly simple to use and also comprises of a mobile-ready template. Highwire operates a fully secure PCI-compliant checkout and handles all SSL for you.

Stripe – Stripe handles all PCI compliance requirements for you using SSL.


2. Maintain PCI Compliance


There are a set of requirements designed by PCI SSC (Payment Card Industry Security Standards Council) to ensure that all companies that allow transactions via a credit card maintain a secure environment. To help businesses protect themselves and their clients, PCI SSC has developed a set of practices that safeguard vital customer data. Every online store owner should comply with these standards as noncompliance may result in a fine of $5,000 to $100,000 per month to the acquiring bank.

There are four merchant compliance levels, which are based on number of transactions a business processes per year.


3. Monitor All Transactions


As a business owner, you know who your biggest spenders are as well as their buying habits. Always monitor your transactions for red flags such as inconsistent information on their billing, physical location, as well as the shipping information provided. Make use of tools that track customer IP addresses as these tools will alert you to any address from suspicious countries.


4. Set Purchase Limits

  By setting limits for number of purchases and price value that is acceptable from one account in a single day, you stand to lose less should fraud occur.  

5. Be Vigilant about Orders From Outside of the US, UK and the EU

  Studies have shown that a large majority of fraud comes from Asia and Africa – be extra careful about accepting orders that originate from these continents. Keep in mind that is harder for you to enforce your rights in these areas.  

6. Be Suspicious of Orders that Use a Free Email Address

  Majority of people comitting fraud tend to use free email addresses as they are easy to get and require very little information (such as Yahoo, Gmail, or Hotmail).  

7. Request for Card CVC2 and CVV2 Verification Numbers

  On the back of MasterCard and Visa credit cards there is a 3-digit security code that is located after the credit card number – For anyone using American Express cards, request for the 4-digit number that is located on the front right above the account number.  

8. Keep Records and Require Strong Passwords from Customers


Keep records of all interactions with customers. Save all emails as well as voicemails. You should also use caller ID and when possible, record all calls with customers. This comes in handy when you might need to fight fraud or charge backs.

When customers are opening an account with you, make sure that they create a strong password that is not easy for hackers to guess. Require long passwords, capital letters, symbols and numbers.


9. Display Fraud Notices

  By placing fraud notices in your website and on order forms, you can scare away most scammers.  

10. Call or Email Customers


Speaking directly to a customer is the best way to clear up any confusion or suspicions that you might have.

It is possible to build solutions against online payment fraud for eCommerce. There are many platforms in place to help you achieve this. It is up to you as an online business owner to take the necessary precautions against fraud.

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