It’s no surprise that when a retailer encounters fraudulent orders it has a direct impact on their wallets. When a reseller receives an order through fraudulent means (for example, an order placed using a stolen credit card), they may have to request the order be canceled by the supplier, turned around while in transit or, in some cases, it’s a chargeback they have to deal with after it’s delivered. All of these potential outcomes wind up costing the retailer money, cutting into their precious profit margins.
But just how much money does fraud cost you, the retailer? A study from 2012 done by Javelin Strategy & Research and LexisNexis found that the average actual cost of having a fraudulent order had gone up $0.40 from 2011 to $2.70 per fraudulent order dollar. As an example if the fraudulent order you received was $10, it would have ended up costing you $27 once everything is said and done. That was almost 3 years ago. The numbers have only gone up.
Research has also found that those retailers selling on multiple platforms are at a higher risk of falling victim to fraud, ultimately costing them more. The more order avenues you make available to your customers, the easier it is for a fraudster to slip through the cracks.
Knowing that this fraud costs our retailers their own money, the Fraud Protection team here at Doba has set up some great guidelines that retailers can follow to help avoid being defrauded which, in turn, helps you save money you might otherwise lose.
- Only accept orders that are drop shipped directly to the end consumer
- Verify the ship-to address matches the end consumer’s billing address
- Only use payment methods that are a reliable source such as a credit card merchant accounts or an online payment processor— retailers should not accept orders funded with a money order, cashier’s check, personal check, or cash
- Only accept PayPal payments if they come from a verified PayPal account. Also, only ship the product to the PayPal confirmed shipping address
- If a payment is accepted through a credit card merchant account, make sure it has passed both an AVS (Address Verification System) and three-digit security code check
In addition to following those steps, it's also good to know how credit/debit cards work on your website.
In order to accept credit and debit cards on your own website, you’ll need a merchant processor who will take on the transaction work for you. The processor will take the payment information from your customer, check it with the issuing bank and then let you know whether this specific customer has the amount of money you require to complete the purchase.
Processors also run the AVS (address verification system) check in order to determine whether the billing information provided by the customer matches up with the bank’s records. This task usually prevents stolen credit cards from being used on your site. However, an AVS check doesn’t guarantee some clever fraudster won’t sneak an order or two past you or your processor. That’s why most responsible online merchant processors have their own “Fraud Protection Program.”
Be knowledgeable about any stipulations your processor imposes on coverage for your business. And follow the bank’s guidelines to ensure coverage on most transactions. That way, if someone does slip something past you, you’re covered.
Doba offers yet another backup plan for online retailers through its fraud prevention team. Doba’s Fraud Protection Program can cover you up to $500 per loss if you are operating your business safely and within Doba’s guidelines. Among these guidelines:
- Shipping the product directly to the end buyer, instead of shipping it to yourself and then forwarding it. The ship-to address must match this shipping destination.
- Payments must pass the AVS check and the three-digit security code check.
- A PayPal or credit/debit card must be used to pay for the orders. Orders paid for with a money order, cashier’s check or cash will not be covered.
To learn more about Doba’s own Fraud Protection Program, visit our site here.
Starting your own online business can be intimidating, and knowing that fraud is unavoidable might make you think twice about pulling the trigger. However, when retailers follow the above steps they greatly reduce the amount of time, money, and energy spent dealing with fraudulent orders, and instead are able to focus their efforts on growing profits.
You can find more under the ‘Education’ tab in your Doba account about how to spot potential fraud, in addition to other great articles that can help you successfully sell products online.