Experts Warn of a Surge In Fraud Due To Rising Online Use

May 12, 2020

Merchants should consider chargeback insurance to protect themselves from online fraud. 

With the COVID-19 pandemic sweeping the country and the world, consumers are now looking online for goods, services, and entertainment. This sudden change in consumer purchasing behavior has great implications for eCommerce businesses. 

On one hand, eCommerce businesses have seen an explosion of sales. ACI Worldwide’s research has found that transaction volumes just in the retail sector saw a 74 percent spike in March as compared to the same time period last year. Online gaming has seen an astonishing increase of 97 percent. 

Although this is really good news for an online merchant’s bottom line, one should not start celebrating just yet. As any type of crisis has shown, merchants will also see an upsurge of fraud. 

What the research has also shown is that, with the increase of online activity, fraudsters are honing in their tactics against unwitting consumers and merchants. 

Merchants have already reported a growth in phishing activities, “stolen credentials released into the eCommerce payments chain”, and friendly fraud.

So What Can A Merchant Do To Protect Themselves From Potential Fraud?

As research experts have already sounded the alarm on the imminent attack, merchants must implement the necessary security to combat fraud while still delivering the excellent customer service that is expected. Here are some ways that online merchants are placing security at the forefront of their business:

  • Some businesses are staving off fraudulent purchases by offering Express shipment and the “Buy-Online-Pickup In-Store” as delivery methods. These methods have seen a tripled growth in just two weeks, making this a preferred and secure way for customers to obtain their items. 
  • Another method is the use of “customer profiling” and “time-on-file” techniques to preserve the customer experience for “valued customers” while also accepting good transactions. 

Chargeback Insurance

Finally, while the aforementioned tactics are incredibly useful and effective methods to combat fraud, it is inevitable that not all fraud will be caught. This is where Chargeback Insurance can be added to your arsenal. 

So what is Chargeback Insurance? With chargeback insurance, a merchant is reimbursed 100% of the cost of the chargeback. This ensures that the merchant is able to sell its goods and services without fear of losing their sales to fraudsters. 

It is important to note, however, that chargeback insurance is not a magic wand that makes all your chargeback woes go away. These are some things you will still need to content with:

  • If your ratio of chargebacks to approved orders is too high, your payment processing account will be placed in the high risk merchant account program.
  • Chargeback insurance will not refund you the payment processing fees tied to servicing chargebacks.
  • There will be an excessive amount of time needed to review your orders with a tool. 

Also keep in mind, like many insurance policies, chargeback insurance has its limitations and can only reimburse you for “qualifying” orders. Some examples of qualifying orders include:

  • Stolen debit or credit cards – These are standard fraud practices where the purchase is made via a debit or credit card without the owner’s permission.
  • Synthetic Identity Fraud – Here, a fraudulent identity is created, then used to apply for credit cards and used to purchase online.
  • Friendly Fraud –  This is where the lawful owner of the card purchases an item, then files a chargeback.

Get Informed And Protect Yourself

As mentioned, more eCommerce fraud is coming and in many forms. It is critical that you educate yourself on the many types of fraud that can wreak havoc on your bottom line. Although chargeback insurance can grant you peace of mind, it’s important to carefully examine its pros and cons to ensure that you are fully protected.

Let us help you get a high risk merchant account today!

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Having a merchant account allows an account holder to take advantage of merchant cash advances. When a merchant is approved for an advance, the business agrees to receive a lump sum of cash in exchange for an agreed-upon percentage of future credit card sales.

Pricing varies depending on the merchant’s industry, past credit card processing history, the type of business seeking the account, average ticket sales, and average transaction volumes.

Yes, EMB works with merchants who are building their credit, as well as those who have poor credit. EMB also approves merchants that have no credit card processing history and businesses that have lost their merchant accounts due to high chargebacks.

Several factors influence a merchant’s risk level. Though only one factor likely will not get a merchant classified as high risk, a combination of these may: business size, location, and industry, credit score, credit card processing history, a industry’s reputation for excessive chargebacks, a prior history of high chargeback ratios, and whether a merchant exclusively sells online.

Virtual terminals are stationed on a merchant’s website, making it easy for customers to make a payment or purchase online. Merchants or a payment processor can easily set up virtual terminals, so online businesses can accept credit and debit card and e-check transactions.

A merchant account is a business account with an acquiring bank. Without this business account, which actually works more like a line of credit, a merchant cannot accept and process credit and debit card transactions. Businesses need a merchant account to accept major credit cards via a static point-of-sale terminal, mobile card reader, or through a virtual payment gateway.

After filling out EMB’s simple online application and submitting any necessary, requested documents, many merchants get approved within 24 and 48 hours.

EMB specializes in working with high-risk merchants. EMB works with many merchants, including but not limited to businesses in these industries: gambling and gaming, adult entertainment, nutraceuticals, vaping and e-cigarettes, electronics, tech support, travel, high-end furniture, weight loss programs, calling cards, e-books and software, and telecommunications.

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