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April 10, 2017

How to choose a system to manage payment risk in your e-commerce service

How to choose a system to manage payment risk in your e-commerce service

It is likely that if the gross margin is low, the tolerance to payment fraud is limited and the risk level is medium or high but in practice, the history of payment fraud determines the actual exposure to payment fraud.

Next, we describe the possible options for an e-commerce service if it has a:

  1. low;
  2. medium; or
  3. high risk.

Low risk

If the business is low risk (or is just starting out), it might simply do without a fraud prevention system. Alternatively, it could also enable 3D Secure, which would prevent any chargeback to materialize.

Some examples of low risk e-commerce services are those that sell customizable or products that are hard to resell on the black market.

Medium risk

If the business has a medium risk, an in-house solution is generally inadvisable. However, the merchant might consider 3D Secure and/or a legacy or dedicated fraud detection system.

The best choice depends on the overall ex- posure to payment fraud and the tolerance to the risk. Some examples of medium-risk e commerce services include most of the re-tail industry that sells online (e.g., clothing, branded products, entertainment).

High risk

Finally, if the business has a high risk, it should definitely opt for a dedicated fraud detection system, with or without 3D Secure.

Some examples of high-risk e-commerce services are those that sell high-tech products, the game industry, and online travel agents.

Credits : Image by Gerd Altmann from Pixabay