4 reasons why anti-fraud measures are an indispensable tool for e-commerce businesses.

Here are 4 reasons why anti-fraud measures are an indispensable tool for e-commerce businesses.

Maintaining an e-commerce business It's not a simple task. Many entrepreneurs are misled into believing that the absence of a physical structure makes an online store inexpensive to maintain. However, there are a number of costs inherent to an efficient and healthy operation. One of them is... anti fraudThis is often seen as an "evil" tool that undermines a website's conversion rate and serves "only" to block suspicious requests. But that's not quite the case...

It's clear that if your e-commerce business is being targeted by fraudulent purchases and the number of chargebacks is starting to become a concern, it's high time to implement an anti-fraud system. However, a risk management system should go further and will only be truly effective if it's able to maximize the... e-commerce conversion, approving the largest possible number of requests given the lowest risk rate.

Next, Konduto will show you four reasons why an anti-fraud system is an indispensable tool for an online store.

But first of all, why is it important to have an anti-fraud system?

Simple answer: to prevent fraud and, consequently, reduce losses from chargebacks – which occur when a customer does not recognize a purchase and requests a refund from the bank or card issuer.

There are some aggravating factors here: in e-commerce, it is the merchant who bears the loss from chargebacks (and not the banks or credit card companies). Furthermore, there is no specific legislation regarding internet fraud, leaving stores unprotected and without legal recourse.

It's hard to imagine an e-commerce business without an anti-fraud system after knowing this, isn't it? But, as promised, we want to present you with four more reasons why anti-fraud is so important for an online store. Shall we?

1. Avoid unnecessary logistics costs.

In addition to covering the cost of the product, the shipping cost is also factored into the refund for a merchant.

Sending a fraudulent order means paying for hidden and indirect shipping costs, such as your own employees or the amount paid to a shipping company. Always remember to calculate these indirect costs, including counting every penny!

Also consider costs for packaging, labels, plastics, boxes... expenses that seem insignificant, but are added to the total.

2. Do not cancel legitimate sales.

It's common that, when identifying a significant number of frauds in your e-commerce business, you want to resolve the problem urgently and, therefore, adopt a stricter policy for approving orders.

But there is a downside to this attitude: canceling legitimate sales due to unwarranted suspicion. The percentage of attempted fraud in Brazilian e-commerce has varied between 2 and 4% in recent years; if your cancellation rate is much higher than that, you are certainly losing money.

3. Protects your store's credibility.

This isn't a direct financial loss, but jeopardizing your store's credibility due to a high number of frauds is not a good idea.

Imagine a real customer having their order denied because of an extremely strict system? Besides the financial loss, this generates frustration.

Once again, blocking many orders doesn't mean your e-commerce business is more protected. On the contrary: it can mean you're losing sales and throwing away all your investment in marketing campaigns…

4. Do not participate in chargeback programs.

Credit card companies accept that an e-commerce business must have a fraud rate below 1% of its gross revenue. The moment your online store exceeds this percentage, or fails to meet the parameters stipulated by these companies, you may be subject to a chargeback program.

If your e-commerce business fails to maintain acceptable fraud rates, it will be considered a higher risk, and you will receive a notification with a deadline to improve your rates until they return to the standard.

If the percentage doesn't decrease, your e-commerce business could receive fines (heavy ones, in dollars!) or even be deregistered with credit card companies. In a scenario where the vast majority of online purchases are made using this payment method, losing it is a huge loss for your online store. Do you agree?

But then, how do you overcome the damage caused by fraud?

Our advice is prevention. Scammers are constantly updating their methods and carrying out increasingly imperceptible frauds to the average consumer. Furthermore, their actions are not isolated cases.

Therefore, e-commerce businesses face clear difficulties in combating fraud without the help of specialized anti-fraud companies. As we have seen in this article, the losses generated go beyond financial losses and can be avoided!