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May 24, 2017

Conditions to avoid all frauds at an e-commerce service

Conditions to avoid all frauds at an e-commerce service

There are various methods of incurring absolutely no payment fraud. Below, we describe three approaches, i.e., to accept no payments at all; to accept only payments that bear no fraud risk; and to adopt a practically ideal solution.

  1. Do not accept payments anymore;
  2. Accept only risk-free payment methods; and
  3. Dynamically optimize cost benefit.

Do not accept payments anymore

Cutting all inflow of payments is the most obvious (and most impractical, in most cases) way of stopping all payment fraud. While it seems silly to mention it, it can be useful to have this corner-case laid out. When payment fraud spins out of control in an e-commerce service, the ultimate option is to close the valve.

A tradeoff is to restrict aggressively the range of payments accepted. In this case, the valves of the revenue machine are still open, but less so.

Accept only risk-free payment methods

Alternatively, e-commerce services may decide to limit the payment methods accepted to those that are risk-free.

Risk-free payment methods tend to be those in which the customer pushes the money to the merchant, e.g., direct banking, International Bank Account Number (IBAN), or wire transfers, which is the opposite of payment methods that pull funds like payment cards.

However, direct banking, IBAN, or wire transfers are not yet as available as payment cards. In addition, the design of their authentication mechanisms is likely to limit one-click checkout, which is known to simplify and boost conversion.

Dynamically optimize cost benefit

The ideal and practical fraud detection solution does not detect 100% of all fraud attempts. However, it dynamically optimizes the cost benefit of letting through fraudsters and rejecting real clients. We will go into more detail in the next chapter.

Credits : Image by Hans Braxmeier from Pixabay