e-Commerce Credit Card Fraud in Australia

Credit card fraud is a big problem for Australian e-commerce businesses but perhaps the most insidious thing about this form of fraud is that it is mostly hidden. It’s almost like no one wants to talk about it. And the worst thing is that it’s the business victims of crime that are the most silent.

And let’s be clear here, I am talking not about the consumer being defrauded, I am referring to fraudulent actors stealing credit card information and using the stolen credit cards to buy goods or services online.

If you are a business that trades online, you need to read the attached report from Stripe which is a global payment processing company and very active in processing credit card payments in the e-commerce space.

Some of the key takeaways for e-commerce businesses are:

• According to the survey, 64% of global business leaders say that since the onset of the pandemic it has become harder for their businesses to fight fraud. We believe this is due, in part, to an increase in types of fraud and overall fraud volume.
• At the start of the pandemic, we observed a temporary 156% increase in product-related disputes, such as “product not received” and “product not acceptable” dispute codes. We hypothesize that customers were requesting chargebacks after sellers were taking weeks, or even months, to fulfill orders due to supply chain disruptions. • We also saw that 40% more businesses experienced attempted card testing attacks. Thousands of new eCommerce businesses were created during the pandemic, and we believe this growth created new opportunities for fraudulent actors.
• Recurring revenue businesses—specifically B2C companies—struggled the most with fraud. More than 75% of B2C subscription businesses reported that their manual review load increased and that they had to divert more resources to fight fraud in the last year. We believe that these consumer-facing businesses have more brand awareness, meaning their products are easier to resell. As a result, fraudulent actors are more likely to target them.
• The business impact of fraud goes beyond financial losses. Our Stripe analysis found that the more fraud a business tries to prevent, the more likely they are to block legitimate charges as well—reducing their payment conversion rates. In an effort to reduce these false positives, businesses can manually review flagged payments, but this adds additional operational overhead.
• We predict that businesses will adapt to these trends in four ways: 1) Interventions, such as 3DS, will play a bigger role; 2) Richer sources of data will help businesses make faster, more accurate decisions; 3) Issuers and businesses will collaborate more to streamline disputes and reduce false declines; and 4) Consumer payment preferences will continue to shift, changing the fraud landscape.

Best practices for preventing product-related disputes:

1. Make your return policy clear, transparent, and reasonable. For example, start the return window when a customer receives the item instead of when the item is shipped.
2. Add your company name directly in your credit card descriptor.
3. Establish a formal dispute process.
4. Notify customers before processing their payment. For subscription companies, make sure customers receive at least one reminder of their upcoming payment.
5. For eCommerce businesses, require a customer’s signature when delivering their order.

Recommendations to reduce the operational overhead of eCommerce fraud:

1. For smaller businesses without dedicated fraud teams, a chargeback guarantee solution (where a third party guarantees to cover chargeback costs) can be particularly helpful.
2. For medium-sized to large eCommerce businesses, a machine learning solution can help fight fraud at scale, without requiring extra engineering resources.
3. Large enterprises often use a handful of point solutions (like specific tools to support CAPTCHA or card scanning) in conjunction with fraud software or as inputs into their own fraud models.

More tips to prevent ecommerce credit fraud:

• Collect more information during checkout: Asking customers to provide more relevant information at checkout will help you better verify their legitimacy. For example, make sure to collect the customer’s name and email address.
• Explore other payment methods: The right set of payment methods can offer flexibility to customers and reduce the risk of fraud. Digital wallets, like Apple Pay or Google Pay, require additional customer verification (such as biometrics, SMS, or a passcode) to complete a payment, resulting in lower dispute rates. Similarly, most bank debits—where you pull funds directly from a customer’s bank account—require customers to agree to a mandate or to verify account ownership, adding an extra layer of security and reducing the possibility of disputes.
• Implement 3D Secure (3DS) to add 2-factor authorisation to the checkout process.
• Manually review high-risk payments: Manually review suspicious payments can help you take action more accurately before a potential dispute occurs. For example, if you’re unsure about a payment when you’re reviewing it, you can contact the customer by phone or email. Or, if you suspect a payment is fraudulent, you can refund it

Read the Stripe report about eCommerce credit card fraud: