Online fraud surges, but do merchants have to pick up the bill?


Written by Editorial Team

Published June 2020

In this article...

We’re living in unprecedented times. For merchants, the impact of Covid-19 has changed the way they interact with their customers. In order to survive, many who’d viewed an ecommerce offering as a “nice to have” have been forced to act quickly and decisively, moving into unchartered territory: by becoming a fully-fledged online retailer. Of course, amidst such dramatic change and uncertainty, this is when fraudsters can thrive

Many businesses might dismiss payment fraud as only applying to large corporates, but that is simply not the case, as every business will encounter fraud, whether they know about it or not. According to Retail Times last month, fraudsters are using the surge in online activity to target unsuspecting consumers and merchants. The average ticket price of attempted fraud increased by £14 in May ‘20, driven by electronics and retail goods. During the period from January to May 2020, the fraud attempt rate by value increased to 4.3%. Significant, by any standards.

So, in light of the dramatic increase in online fraud, merchants need to be conscious of customer contested card payments (“chargebacks”). The intention should be to minimise chargebacks as much possible and the threshold for this is around 1%, though the target should be 0.5%. However, when a merchant’s chargebacks go over 1% this becomes a red flag for many card acquirers. This can result in higher security or rolling reserves, higher charges and, worse case, the card acquirer serving a merchant notice. To put this into context, according to Chargebacks911, only 18% of chargebacks are even contested by merchants, because they don’t have the internal resource or the technology to contest them. Repeat fraud is also assured, since 2 of out every 5 consumers who commit this type of ‘’friendly fraud” will do it again within two months.

So, where do merchants start? Many businesses are not even aware that they are being targeted or think that the costs of preventing card fraud will be greater than the fraud itself, which is usually not the case at all.

Pay360’s Optimize Fraud Platform is a state-of-the-art solution that can easily fit into businesses of any size and scale. It is a sophisticated, but easily integrated fraud rules engine where merchants can apply rules that will vet key data of the transaction. Put simply, this ensures merchants accept the payments they want and reject those that would damage them. Merchants can even tailor the rules: like velocity, e-mail address, card number and many more to ensure protection that suits their own business.

We have Fraud experts who can guide you through the rules process and how to get the best out of the platform for your business and your customers experience. Furthermore, you pay for what you use with a pence per transaction pricing model, so your costs are in harmony with your sales performance.

Despite Optimize being a new platform, it has already helped businesses like Go-Ahead and NowTel save thousands of pounds in lost revenue, chargeback costs and administration time, and enhanced the right customers payment experience.