Startups in the eCommerce world have one goal and that is focused on acquiring customers and generating revenue. Innovative businesses want their interactions to be frictionless for their customers. However, the repercussions can be devastating when an eCommerce startup fails to include a fraud strategy in their risk operations.

To make matters worse for these growing organizations, the majority of small businesses that suffer fraud losses have no recourse to recover losses of services, products, fees, time and overhead. These losses are the most valuable assets of any eCommerce startup.

Small organizations with fewer than 100 employees are by far the most vulnerable to ecommerce fraud.

A well developed fraud strategy should not be viewed as introducing friction in the sales and conversion process — it’s about taking proactive steps to limit the business’ exposure to risk and fraudulent chargebacks.

Fraudsters look at ecommerce startups as a way to make easy money.

Ecommerce startups can be attractive to the fraudster community because they know these companies tend to have an unsophisticated fraud strategy in place, if any at all. Small businesses are at particular risk, as fraudsters can key in on small merchants that often lack the time and resources to implement comprehensive fraud and risk detection protocols.

The first step for startups to prevent fraud is to understand the nature of fraud threats.

Simple card fraud: Simple credit card fraud is the most typical threat merchants grapple with. Friendly fraud includes a customer seeking a chargeback from their bank after buying goods and then claiming it was not a purchase they made or they did not receive the product.

Card testing: Criminal networks steal thousands of transaction and card details either physically or using techniques such as phishing. Because not all stolen cards will work, fraudsters will choose websites to ‘test’ cards to see which are valuable. By using this tactic, this opens merchants up to multiple types of fraud if their own security is weak. Fraudsters may even attempt to test the cards with donations on charitable websites.

Account takeover: If your site has account maintenance tools built-in behind login credentials, you are also at risk. If a fraudster gains access to your systems, they can make purchases or simply steal customer details to use elsewhere

How an instant-on solution can help prevent fraud for startups:

Often times, fraud mitigation is a reactionary move companies find themselves haphazardly trying to solve after the very real financial liability of customer chargebacks has surfaced.

By the time startups begin assessing their potential losses, the company is already a known target shared in dark web credit card trading forums, compounding the problem by driving even more undesirable traffic in their direction. This typically results in several months of downstream impact even if a company is able to make near term fraud prevention changes.

Having an instant on fraud solution in place before a company becomes a target can save your business time, money, energy and stress by being adequately prepared for anything fraudsters will inevitably throw at you.

Fraud prevention is like any other kind of prevention. Don’t put something off until it becomes an issue.

There’s no better time to shore up your fraud strategy and begin protecting against a potential chargeback liability than right now. Ecommerce startups consistently underestimate the threat of fraud – yet studies show they face a tremendous risk. Protecting your small businesses from fraud is crucial to protecting the brand and customers of your growing company.