E-commerce Credit Card Fraud Protection – How to Make it Easy for Customers and Hard for Fraudsters


It’s the question on many e-commerce merchants’ minds as the holidays approach: How do I balance creating a great customer experience online with protecting my enterprise from fraudsters who might see the holiday shopping rush as an opportunity to take advantage of my business?

Signifyd’s Mike Cassidy lends his expertise in this guest post.

Don’t fear your customers

It’s natural during the holiday season to tighten up the necessary requirements to approve and ship an order. After all, retailers are seeing the number of orders they receive rise by a staggering amount. 

It’s not unusual for some retailers to see several times their normal order volume in the holiday season. During the 2017 Black Friday weekend, Signifyd protected more than $1 billion in orders. On Thanksgiving Day, order values broke the $1-million-a-minute barrier.

Not only that, but holiday season orders are anything but ordinary. Merchants will see an unusually high number of first-time customers — those shopping for others on sites they’ve never visited. Delivery addresses will frequently be different from billing addresses. And given gift-givers generous nature, merchants might see more high-value orders than they ordinarily would.

But the holiday season is exactly the wrong time to tighten up fraud standards. We’ve outlined why holiday shoppers are especially valuable. The last thing you want to do is cause friction in the buying process. 

OK, that’s the second to the last thing you want to do. The last thing you want to do is incorrectly decline holiday shoppers’ legitimate orders and lose them as customers for life. 

Get some help

Traditionally, retailers have brought on contract workers to help manage the dramatic increase in orders that November and December bring. But temporary workers aren’t fraud experts. And the focus during the holiday is getting orders out quickly, to meet shipping deadlines and to make sure packages arrive in time for the holiday.

The tendency, given the pressure of the season, is to turn conservative, to not blow it. The thinking goes: When in doubt, decline the order. Which is a good way to lose a customer for life.

Declining good orders, known as false declines, can actually be more costly than suffering fraud losses, especially when you consider that you not only lose that initial sale, but you also likely lose a customer and any future sales that customer represents. 

In fact, Business Insider reported that in 2016 retailers would lose $8.6 billion to false declines, $2 billion more than the $6.5 billion in fraud they’d prevent.

There is an answer: A relatively new model of fraud management called guaranteed fraud protection, relies on big data, machine learning and domain expertise to shift liability for fraud from ecommerce merchants to the fraud-protection provider. 

As the name implies, it also comes with a guarantee, a promise that the fraud-protection provider will make a merchant whole for any approved order that later turns out to be fraudulent. It’s a sure-fire way to remove the urge to be overly conservative.

And because the model relies on smart machines to identify fraudulent and legitimate orders, it can scale up to meet the holiday order spike. The guarantee model produces ship/don’t ship decisions in milliseconds and eliminates the need for a mechant to perform manual reviews.

Fear causes friction

The holiday season is associated with many feelings — joy, reverence, nostalgia, love — but for retailers, there is also fear. For some, the holidays shopping season accounts for as much as 40 percent of sales. It is the time to shine. The time to profit.

But fear causes friction. Merchants who are worried about being taken advantage of erect barriers to avoid turning the biggest time of the year into the worst time of the year. And those barriers destroy the memorable customer experience they’ve worked all year to establish.

Cumbersome manual reviews that delay orders or false declines, which result in legitimate orders being canceled, are the worst possible customer experience.

Finding an automated solution, like guaranteed fraud protection, can remove the fear and stress that come with high order volumes. The model is a way to handle the significant increase in holiday orders, no matter how dramatically the number of orders increases. And it promises to make a merchant financially whole for any approved order that later turns out to be fraudulent, including reimbursing chargebacks, fraud charges and the cost of the goods shipped.

In short, it’s one way retailers can make sure that the holiday are happy not only for their customers but for themselves, too.