Fraud is nothing new - it has existed across all business types, and online stores are no exception. To help you reduce the risk, we’ve created a guide on how to effectively prevent fraud.
As a webshop owner, there are many things to monitor, and fraud is one of them. It’s not just consumers who fall victim to fraud. According to a survey by FDIH.dk, 6 out of 10 webshops have experienced fraud, with around 30% of affected owners losing more than DKK 10,000 per month.
Most online fraud occurs in peer-to-peer transactions, which isn’t relevant to webshop owners. However, the second most common type is payment card fraud. This is where you can prepare your webshop and take action when necessary.
Monthly Losses from Fraud-Affected Webshops
Fraud loss per month:
What Is Credit Card Fraud?
Credit card fraud refers to fraudulent activities carried out using a payment card. There are several types of credit card fraud, generally falling into three categories:
- Friendly Fraud: Mistakes made by customers who dispute transactions due to confusion or forgetfulness. This isn’t malicious fraud but rather an error on their part.
- Chargeback Fraud: Intentional disputes where a customer makes a purchase with the deliberate intention of defrauding the webshop. This is comparable to shoplifting in a physical store.
- Clean Fraud: Occurs when a lost or stolen card is used by someone else. The fraudster may have either the card’s 16-digit number or the physical card itself. This is outright theft.
7 Red Flags to Watch For
It’s not always easy to spot fraud, but there are some signs that can help you stay vigilant. Here are some of the most obvious indicators that warrant a closer look:
- High-Value Purchases: Orders that are significantly more expensive than usual.
- Unusual Locations: Orders from countries where you typically don’t receive business.
- Multiple Cards: Customers trying several different cards before successfully placing an order.
- PO Boxes: Orders sent to a P.O. box instead of a physical address.
- Rush Delivery Requests: Orders with urgent delivery requirements.
- Multiple Orders: Several orders placed with different cards but sent to the same address.
- Address Mismatch: The billing and shipping addresses don’t match.
While these red flags don’t necessarily confirm fraudulent activity, they should prompt further investigation before fulfilling an order.
Pro Tip: Ensure test cards used for transaction testing are disabled in your payment gateway. Leaving them active can expose your store to unnecessary risks.
How to Handle Fraud
If you suspect fraudulent activity, it’s good practice to contact the customer (cardholder) for confirmation. Start by calling the phone number provided, and if that fails, try email or social media. Here's how to address different types of fraud:
Unfortunately, some fraud is unavoidable. About 30% of fraud involves lost or stolen cards, and recovering financial losses from these cases is nearly impossible unless the transaction went through full 3D Secure authentication. The remaining 70% of fraud cases - friendly fraud and chargeback fraud - can often be contested if you can present strong evidence.
Webshops that invest time in establishing robust purchase-handling processes can recoup these losses more effectively.
By proactively safeguarding your webshop against fraud, you’ll spend less time dealing with disputes and avoid unnecessary chargeback fees. Detailed insight into transactions also reduces the likelihood of fraudulent claims.
How pensopay Can Help
Our integrated fraud prevention system is included in our solution at no extra cost. It flags suspicious activity based on factors such as high transaction values, mismatched IP addresses, and repeated use of the same card.
We also offer customizable 3D Secure settings tailored to your business needs. The EU has set a limit of €30 (approximately DKK 225) for mandatory SCA (Strong Customer Authentication), but you can choose a lower threshold for additional security.
This service is free of charge and easy to set up.
All data is logged in the payment solution, enabling you to monitor fraud indicators like multiple failed attempts, card usage patterns, and transaction locations. By setting specific requirements for triggering 3D Secure, you can better protect your webshop against fraud.
While no system can completely eliminate fraud, pensopay significantly reduces the risk. With 3D Secure options like “Mastercard SecureCode,” “Verified by Visa,” and “Secured by Nets,” liability shifts from the webshop owner to the payment provider.
Have you enrolled your payment card in the following security service?
3 Steps to Take If You Suspect Fraud
1. Investigate the Transaction: Check your gateway for fraud alerts.
2. Contact Your Payment Provider: Reach out to pensopay for guidance and support.
3. Enable 3D Secure: Protect all transactions with 3D Secure - it’s included at no extra cost.
If your webshop has experienced fraud, contact us at +45 77 344 388 or support@pensopay.com for assistance.
Remember: Online fraud is a criminal offense and should be reported to the police. Denmark’s SØIK (Special Crime Unit) specializes in online fraud investigations. Reporting incidents promptly helps authorities take action against fraudsters.
You can report fraud to SØIK at saoek@ankl.dk.
Team pensopay
