The two most common types of payment fraud—and how to address them
The global eCommerce market is forecasted to total $5.5 trillion this year. With so many shoppers making payments online, payment fraud is on the rise—and fraudsters are frothing at the mouth at the sight of the expanding landscape.
These days, if you’re running or starting an online store, then ecommerce website security needs to be top of mind. Building your store on a secure platform is paramount to protecting you and your customers from fraud, plus ensuring that your buyers feel secure when making a purchase on your store.
This article will delve into key data privacy policies and how they impact online merchants. We’ll also cover best practices for protecting your online store from fraudulent transactions that threaten revenue.
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Two common types of payment fraud in eCommerce
01. Credit card fraud
Credit card fraud isn’t a new issue in eCommerce—and unfortunately, it won't be going away anytime soon. While payment details are often stolen from customers through phishing schemes, online sellers who save their customers' payment details for future purchases present a specific target for hackers.
It goes without saying that a single hack can have devastating consequences, ranging from several thousands to several millions of stolen credit card numbers. As a result, the payment industry is continuously upping security requirements, which you as a seller need to be aware of.
One major industry standard is the Payment Card Industry Data Security Standard (PCI DSS), a set of requirements aimed at making sure that all companies that handle credit card information maintain a secure environment for their customers.
PCI DSS provides guidelines on how to safely handle cardholder information and covers six main requirements:
Maintain a secure network
Protect cardholder data
Maintain a vulnerability management program
Implement strong access control measures
Regularly monitor and test networks
Maintain an information security policy
PCI DSS applies to all organizations that process credit cards from the major card networks—American Express, Discover Financial Services, JCB International, MasterCard, and Visa. Therefore, if you want to accept payments from these networks, your eCommerce platform and hosting must be PCI compliant.
How to mitigate credit card fraud with Wix
Building your eCommerce business on a secure platform that is already set up to meet PCI compliance will put your mind at ease. For example, Wix eCommerce invests significantly in website security to maintain a PCI DSS Level 1 Merchant and Service Provider, which is the highest compliance level.
This compliance extends by default to all stores powered by Wix. Small business owners who build their business on Wix eCommerce are able to save valuable time and money to focus on growth, instead of having to sort through the complexity of securing their software and hosting.
Special considerations for European sellers
If you sell in Europe, it’s important to be aware of the Payment Services Directive 2 (PSD2). PSD2 is a set of laws and regulations for payment services in the European Union (EU) and the European Economic Area (EEA). The requirements may affect any online entity processing payments where both the seller and buyer’s banks are located in the EEA.
PSD2 was passed in 2015, but the most important aspects for online payments came into effect in stages from 2019 through 2022.
The directive includes new requirements for making online payments more secure than ever. As a result, online shoppers might need to go through a quick verification process before they can complete their payment.
The verification process for customers may vary from bank to bank. If you sell with Wix eCommerce, you don’t have to worry about the complexity of implementing these new regulations. All Wix stores are already compliant.
02. Fraudulent transactions and chargebacks
While taking measures to protect your customers, you’ll also want to protect your business from fraudulent transactions. This includes situations where someone purchases an item from your store with stolen credit card details, which can result in a chargeback.
There are two main types of chargebacks:
Service related - when the customer claims they did not receive the goods or feels that the quality of the product was not as described
Fraud related - when the customer claims they did not authorize the charge
Chargebacks are the primary tools that banks use to resolve credit card disputes. If the bank feels that the consumer’s claim is valid, they will initiate a chargeback to reverse the payment.
Online sellers who fall victim to fraud can lose the merchandise that was ordered as well as the money from the sale, and, depending on their payment provider, may also need to pay a chargeback fee.
How to mitigate fraudulent chargebacks with Wix
One effective way to limit fraudulent transactions is to choose a secure payment provider for your online store.
Wix eCommerce offers a range of 50+ secure payment providers to choose from, including Wix Payments, a native payment solution. A multilayered security ecosystem—a secure platform coupled with a secure payment provider—helps protect you from potentially fraudulent transactions that may result in a chargeback.
If you have proof that the purchase was valid (the product was delivered and quality was as described), Wix Payments makes it easy to dispute fraudulent chargeback. You can file a chargeback dispute directly from your Wix Payments dashboard and easily track the chargeback status. If the issuing bank agrees with your position, funds will be returned to the Wix Payments account.
Get the best defense against payment fraud
Building your eCommerce business on a robust platform that includes a strong security infrastructure makes it much easier for you to protect your business and customers. An eCommerce solution like Wix eCommerce provides you with all the tools necessary for running a secure online store, saving you time and money so that you can invest in scaling your business.
Writer, Wix eCommerce
Sarit is a marketing writer for Wix eCommerce, where she helps to connect merchants with the latest tips, tools, and resources.