Prevent Fraud at Each Stage of E-commerce Payments: Here’s How

Design a great payment flow and you’ll see some amazing results. Fail to secure it from fraud, and you could lose it all. A single event of fraud can mar even the best experience. Many merchants in Europe echo this – in fact, 41% see fraud as the biggest threat to their business. And preventing it is on everyone’s radar. And even as e-commerce soars in Europe, the sceptre of fraud looms – the region saw a 350% increase in e-commerce fraud in 2021. Hence you must take decisive steps to protect your customers and your brand. It means looking at each stage of the payment journey and optimizing your fraud setup. It means striking a balance – between strict anti-fraud measures and less friction in checkout. When you ensure your customers’ peace of mind, you win their trust and confidence. And a continued relationship. In this blog, we tell you how to prevent fraud at each stage of e-commerce payments – before, during, and after checkout. Your due diligence could make a big difference.

Read on to know more.

1. Beginning of transaction

You can protect your customers by securing them right from the start of checkout. When the customer hits the pay button, you can:

• Verify the identity of your customer using multi-factor authentication, or MFA. It requires a user to provide two out of three factors – a password, PIN, or biometric scan such as fingerprint/ iris scan, or voice/ face recognition – for a transaction to be verified. As per PSD2 law in Europe, all merchants have to apply MFA in payment transactions.
• Use the latest version of 3D Secure2. This tool allows you to apply MFA. It also shifts the liability for fraud from the merchant to the card issuer in case any issues do occur.
• Use other methods to verify and authorize transactions, such as:
• Address Verification Service (AVS) – requires the cardholder has to provide their full billing address.
• Card Verification Value (CVV) – requires the payer to possess the actual card.
• Device verification – checks if the payment is being made from the same device that was used for earlier purchases.

Also read: What is 3D Secure 2.3 And Why Do Merchants in Europe Need to Use It?

2. During the transaction

It is advisable to layer your 3DS2 tool with extra risk management tools for greater protection. These include:

• AI-based fraud engines — these are software tools that use AI and machine learning to analyze large volumes of transaction data in real-time. If they detect any suspicious activity, they can block the transaction. These tools use data to learn and adapt continuously. The richer the data, the better these tools work.
  Giving these tools access to data from across company functions will generate rich insights about your customers’ buying patterns and payment behavior. This, in turn, can help you design seamless and personalized experiences that will delight customers.
• Fraud rules — you can set specific set of fraud rules in addition to your AI fraud management tools. This ruleset can be used to flag any suspicious transactions. AI-based fraud prevention tools automatically generate a set of rules by analyzing your transactions. Based on these, you can decide which payments to accept and which to reject.

  The rulesets can also be combined to create risk profiles, and these are graded with positive or negative scores. These risk profiles can be further tested and improved as needed.

• Network tokens — Using tokens is another great way to safeguard against fraud. Tokens are unique digital tokens that replace sensitive card data into a set of random numbers, keeping customer payment data safe. Tokens cannot be used by hackers.

  Another advantage of using tokenization is that you don’t have to handle customer payment data directly. Instead, all customer card data is converted to tokens and is stored on your payment provider’s servers. This saves you the hassle of getting PCI DSS certification, and the costs related to PCI audits.

You might like:
How to Choose Your Fraud Management Tools: 6 Points to Consider
4 Ways How Tokenization Makes E-commerce Checkouts Smoother

3. After the transaction

Despite having multiple fraud prevention layers, fraud can still occur sometime. But despair not, because there are ways to fight fraud even after a transaction is authorized or goods delivered to the fraud actor.

• Hence, have a thought-through dispute management strategy in place. Chargebacks and return debits are a part of e-commerce and are not completely inevitable. However, the manner in which you handle a dispute, even if you choose to, can make a big difference. Managing disputes well means knowing when to settle or when to dispute.
• Choosing the right payment partner can help. For example, when you work with Novalnet, we offer you 100% payment guarantees from chargebacks and return debits, across a bunch of popular payment methods. This gives you extra security and protects your cash flows and your business.

Final thoughts on Fraud Prevention

Data is key in your fight against payment fraud. If you use it well, it can benefit you a lot. Hence, you must analyze your data to derive rich insights so that you know which areas to target for better fraud prevention. Go deep – know your customer, their preferences, and shopping behaviours. Using granular data helps you not only to fight fraud better, it also helps you streamline payments for your customers.
Because fraud prevention tools can add friction to the checkout, you must optimize your systems to offer the best of both worlds. Apply fraud tools dynamically. Test as much as you can so that you know where to deploy the appropriate solutions. Choose the right partner to help you with your payments setup.

How can Novalnet Help to Prevent Fraud?

If you are looking for a partner that understands your business and your market, we can help. We’ve made payment solutions simple so that you can avail the best of technology for your business, no matter where you are.
As trusted advisors to Europe’s leading brands on all things payments, our state-of-the-art technologies and methods help businesses like yours accept payments globally. From our instant payment plug-ins to our AI-based risk management tools, we have the resources to get you up and running with your payments in a short time, and with zero hassle.
Reach out to us today to know more.

Gowri Shankar Balasubramaniam

Gowri Shankar is the IT Application Security Manager at Novalnet with versatile knowledge in Programming and System/Security architecture. Having 11+ years of experience in the financial services industry, Cybersecurity, Payment Card Industry Data Security Standard (PCI DSS). Certified in Advanced Payment Card Industry Security Implementer (CPISI 2.0), Secure Software Lifecycle Professional (CSSLP) from (ISC)².