Managing an ecommerce business is no easy task. Many merchants believe that the absence of a physical structure makes an online store cheaper. However, there is a series of costs implied when it comes to maintaining a healthy and efficient operation. Antifraud is one of them, even though it is often seen as a tool that harms the website’s conversion rates and simply prevents suspicious orders. That is not quite true…
Of course, if your ecommerce is a target of illegitimate purchases and the number of chargebacks is starting to worry you, it is past time to put an antifraud solution in place. However, this tool will only be efficient for a fact if it is capable of maximizing an online store’s conversion rates and approving the largest number of orders at a low-risk rate. We will show you below four pieces of evidence that make an antifraud tool indispensable for your ecommerce business.
But, before we get started, why is it important to have an antifraud solution?
Simple answer: to avoid frauds, and, consequentially, reduce losses with chargebacks – which occurs when a client does not recognize a purchase and requests from the bank or the credit card operator a refund for the transaction.
There are two problems with this: when it comes to ecommerce businesses, the merchant will bear the loss of a chargeback (and not the bank or the credit card operator). Further, there is no specific legislation when it comes to internet fraud, leaving stores unprotected and with no legal support.
It’s tough to imagine an ecommerce business that doesn’t work with antifraud now, isn’t it? But, as promised, we want to introduce you to four more reasons that make an antifraud solution so important for online stores.
- Avoids unnecessary costs with logistics
Besides having to bear the costs of the product, merchants also have to face losses with shipping costs.
Shipping a fraudulent order means the online store must pay all related costs applied to the transportation, including for employees or logistics service providers. Always remember to calculate these indirect costs.
Also consider costs related to packaging, labels, plastics, boxes… all these costs might not seem much, but they should also be considered.
- Avoids canceling legitimate sales
Having identified a significant number of ecommerce frauds, merchants often want to resolve the problem urgently, and therefore, adopt an austerity policy for order approvals.
But there is a harmful consequence to this attitude: canceling legitimate sales due to an unjustifiable suspicion. The fraud rate in Brazilian ecommerce has varied from 2% to 4% in the past years; if your canceling rate is much higher than this, you are certainly losing money.
- Protects your store’s credibility
This might not be a direct financial loss, but putting your store’s credibility at risk because of the high number of frauds is not a good idea.
Imagine that a real customer has their order denied because of an incredibly strict system. Not only will this generate losses, but also frustration.
Once again, avoiding too many orders does not mean your ecommerce is protected. This might actually mean that you are preventing legitimate sales and that you are throwing away all of your investment with marketing campaigns…
- Avoids your ecommerce entering a chargeback program
Credit card operators accept that your ecommerce has a fraud rate below 1% of your revenue. Once your ecommerce goes beyond this rate, or goes against the parameters stipulated by these companies, you might enter a chargeback program.
If the rate doesn’t lower, your ecommerce will be considered a higher risk and you will receive a notification with a deadline for you to enhance your rates until your parameters are reestablished.
If the rate doesn’t lower, your ecommerce will receive high fines and may even be disqualified from credit card labels. In a scenario where a large percentage of online purchases are completed with credit cards, losing this payment method represents a huge loss for your ecommerce business. Agreed?
How will I get over the damage caused by fraud?
Our advice is: prevention. Fraudsters are constantly updating their operations and committing crimes that are imperceptible to the common customer. Further, their actions aren’t isolated cases.
This way, there are clear difficulties for ecommerce businesses to act to oppose frauds without the help of companies specialized in antifraud solutions. As we have seen in this article, the losses aren’t only financial and must be avoided!
About the author
Felipe Held is Head of Marketing and Communication at Konduto. Journalist by the Cásper Líbero University and postgraduate in marketing at ESPM, he worked in sports newsrooms in Gazeta, UOL and Terra before joining the team of the best anti-fraud in e-commerce in 2015. He has interviewed Pelé, Maria Esther Bueno, Guga, Guardiola and Bernardinho, but the most incredible day of his career was when he presented Fraud Day.