5 Themes for small e-commerce businesses in 2013 – Theme 3 – Fraud

In the third blog in the series of 5 we examine the third theme from the Sagepay report on e-Commerce for 2013, Fraud

For 2013 five themes were identified that small e-businesses should be focusing on right now. These are

  1. Social
  2. Mobile
  3. Fraud
  4. PCI Compliance
  5. International Trade


Fraud remains as big a problem as ever with 38% of small businesses having lost money in the last 12 months. Knowing what to look out for will help you mitigate the risks.

Fraud concerns almost everyone involved in e-business. With margins tight and competition fierce, the prospect of losing money haunts many e-businesses and especially smaller ones.

Fraud is now a full-time job for many criminals who have learnt to look more and more like legitimate customers as well as to hide in the data during peak trading times. Sadly, the battle to prevent fraud is never over. So what are today’s e-businesses doing to stay on top?

protecting your business

When it comes to protecting against fraud, three key tools lead the pack. CV2 (card verification value) is used by 77% of small e-businesses with 3D Secure employed by 67% and AVS (address verification system) by 47%.

As we can see from the above, small e-businesses are doing really well in terms of mitigating fraud and the majority are using the most common fraud prevention tools (which some payment service providers include as part of their offering). When suspecting fraud, small e-businesses are most likely to contact the customer directly (39%), look into it further themselves (38%) or contact their payment service provider (32%). Interestingly, only 13% of small e-businesses will automatically cancel the transaction. Large e-businesses have no such qualms – 40% will simply hit void

losing the fight against chargebacks

Chargebacks are another way you can lose money and just over a fifth of small e-businesses have fallen victim. For many, the cost is relatively small – under £10 for 24% and under £40 for half. However, fewer companies are successfully defending against them – just 20% this year against 45% in 2011. This is where services such as 3D Secure can help as this passes liability back to the card issuer.

what is a chargeback?

A chargeback is the return of funds to a consumer, forcibly initiated by the consumer’s issuing bank. This means that the consumer does not lose out financially if their card is stolen or cloned, it is the merchant who must ultimately foot the bill. Using 3D Secure on your site does offer a degree of protection against these chargebacks so as an online seller, it’s worth looking into.

beyond the usual tools

Here are our top five tips for protecting your e-business going forward:

þ Check the telephone number and delivery address against the billing address. Call the number to check that it’s genuine and, for landlines, check that the area code matches. You can even go one further and look it up on Google Street View to check whether the building matches your expectations.

þ Be wary of a low-cost transaction followed by several high-value ones. Fraudsters will often test the water with a small purchase before becoming more ambitious. They will also choose to strike during times of peak online activity so that they can hide in the data and go unnoticed. Be extra vigilant around your busiest trading times.

þ Be extra cautious of ‘high risk’ countries. This is especially relevant as more e-businesses than ever are expanding their reach.

þ Check the email address to make sure it’s valid (you’ll get a bounce-back if it isn’t) and be more suspicious of free, temporary and anonymous email addresses.

þ If everything checks out but you’re still suspicious, consider sending goods by registered post to ensure you get a signature and avoid non-delivery claims.

Remember, you can always choose to void the transaction.