High-risk businesses are often plagued by above-average chargebacks. Consequentially, merchants focus a lot of energy on identifying and rejecting fraudulent orders before the charges are submitted. However, in the process of trying to be extra-vigilant in their fraud prevention, sometimes merchants go too far the other direction and cancel legitimate orders because they didn’t quite fit the standard mold. Some of this discretion comes with time, but even experienced card issuers and merchants struggle with this. In fact, according to Business Intelligence, businesses lose an estimated $8.6 billion a year from false declines, as opposed to only $6. 5 billion from fraud, making false declines an even greater financial problem than the problem it was supposed to prevent!
Fortunately, there are ways to minimize these declines without throwing caution to the wind and opening your site up to abuse by credit card thieves. Here are just a few ways e-commerce merchants can tell the difference between an odd, but legitimate order and a truly fraudulent order.
1. Check for positive as well as negative indicators
Many merchants enter the order review process with a suspicious mindset, looking for things that seem out of place. And while it’s important to note these things, it’s also important to balance it with an equal amount of vigilance aimed at spotting things that could be positive indicators as well. For example, if you only take the negative indicators into account, a high-dollar order with a U.S. billing address and an overseas mailing address may look suspicious. But if you dig a little deeper and notice that the buyer used a discount code and sent the package to “Private Jack Porter,” it gives quite a different story.
Positive indicators may include:
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- Old, established email accounts
- Emails that are difficult to illicitly obtain, such as country- and organizational-specific
- Small town IP addresses
- Coupons or promo codes used
- Company or military credit cards
- School addresses
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2. Track and test your own trends
To further refine your detective skills, keep a log of every order you decline and place a note with the order indicating why you rejected it and how certain you were it was fraudulent. After you’ve done this for several months, compare your declines to confirmed fraudulent orders or credit card numbers. In order to reduce false declines, it’s important to note areas where you’ve been over-vigilant and make adjustments for the next quarter.
3. Reach out to the customer
The best way to avoid rejecting legitimate orders is to speak to the customer directly. Call the credit card owner and verify the order before rejecting it whenever possible. Since fraudsters rarely leave their personal number, if you are able to reach a live person and confirm these orders, this is also a very good positive indicator that they’re good orders and therefore genuine.
Helping High-Risk Businesses Succeed Is Our Mission
Whether it’s helping high-risk businesses reduce chargebacks and reduce fraud losses or dial back their hyper-vigilance to regain lost profits, our goal is to help merchants succeed. If you’ve just started your business or have been in business for years but are ready to take it to the next level, call us for high-risk merchant accounts, chargeback mitigation, fraud detection, and more at 1-800-570-1347.