Article | July 28, 2017

What Your Online Business Needs To Know About Magento, Chargeback Protection, And Fraud

Fraud Insight

By Rafael Lourenco, EVP, ClearSale

Online commerce is booming — good news if you’re starting or running a small business online. Millennials made more than half their purchases online in 2016, and that percentage will probably grow as brick-and-mortar retailers close more locations.

But young consumers aren’t the only ones flocking to online sellers. Professional fraudsters also target online and mobile channels for card-not-present fraud. Magento and other e-commerce platforms help their clients by offering integration with third-party fraud-prevention solutions to stop fraud and reduce expensive chargebacks. If you’re starting an online store with Magento — or already have a store you want to protect better — here’s what to know about choosing fraud screening tools.

How Third-Party Fraud Tools Can Protect Your Magento Store

Many new online sellers mistakenly think they’re too small or unknown to be fraud targets. But fraudsters know new stores often lack comprehensive fraud protection, so they’re easy targets for card-not-present fraud. While small-business owners are learning the basics like what is a chargeback on a credit card, fraudsters may already be inflicting chargebacks, usually in two ways.

Card-testing fraud happens when thieves make small purchases to test stolen card data or increasingly larger purchases to test credit limits. Fraudsters often target small stores for card testing because they assume there won’t be proper data-entry and fraud controls in place to spot large numbers of attempts to place orders during short amounts of time. Once the criminals have validated the card information, they can move on to larger fraudulent orders. These fraudulent orders are often placed for items with high resale value such as designer clothing, accessories, and jewelry.

When the real cardholder disputes the fraudulent charges—either the small card-testing transactions or the larger orders of goods to resell—the seller faces a potential chargeback. With each confirmed chargeback, your business loses the revenue from the sale, loses any shipped merchandise, and faces a chargeback fee from the bank. If the number of chargebacks rises too high or too fast, your business may pay higher payment-processing fees or lose your merchant account on short notice. To prevent these outcomes, owners of even brand-new and small online stores should protect their businesses with robust CNP fraud prevention tools.

What To Look For In A Magento-Integrated Fraud Protection Solution

Magento clients have multiple options for integrating fraud-prevention tools, and sorting through them all can be daunting. Any solution you choose should include:

  • Full chargeback protection so that if any fraudulent chargebacks slip through, the fraud-prevention provider covers the cost — not you.
  • Scalable protection that keeps pace with overall order volume growth and with sales peaks during the holiday season and flash sales.
  • Up-to-date protection against constantly evolving fraud methods.
  • Customized protection based on your industry, markets, and customer behavior.
  • Manual, expert screening of all flagged transactions to reduce false declines and collect data to further tailor your fraud screening process.
  • Complete coverage of CNP orders placed online, via mobile, or over the phone.

By starting out with comprehensive fraud protection, your business is free to grow while avoiding chargebacks, maintaining a low-risk rating with payment processors, and building strong relationships with good customers. By outsourcing fraud prevention to a third-party team of experts, you can keep your focus where it needs to be — on growing your business.

How To Integrate Fraud Protection With Your Magento Store
While fraud prevention is complex, adding fraud-prevention tools to your Magento store is easy and usually takes just three steps. The first is to find the plugin for your chosen fraud-prevention service on Magento Connect. Once you’ve installed the new extension, you’ll enable the plug-in module and add your account information in your store’s Magento configuration settings. The final step is to monitor your orders on your dashboard. A good fraud-prevention plugin’s dashboard will include data on your store’s total number of orders, order approval rate, and order trends over time so you have real-time information on your transaction processes.

As a new business owner, your time and attention are at a premium, and the learning curve can be steep, especially with your first business. By using an established e-commerce platform and a strong fraud-prevention provider, you can focus on your core business goals, protect your revenue stream, and give your new business the best possible start.

About The Author

Rafael Lourenco is the Executive Vice President at ClearSale, a Card-Not-Present fraud prevention operation that protects e-commerce merchants against chargebacks. ClearSale is the only solution of its kind that does not auto-decline, its manual review process ensures that suspect transactions are never denied outright which provides the highest approval rates industry-wide and virtually eliminates false positives. Follow on twitter at @ClearSaleUS or visit https://clear.sale/.