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Comment: Creating an e-commerce platform - Avoiding the pitfalls
In 2010, there is a surge of hope that this year will be better for business than 2009. IMRG online retail figures have grown in spite of the recession, with UK shoppers spending £5.46 billion online in December 2009, an increase of 4% from the previous month, and up 17% year-on-year.
By Michael Norton
It is fair to say that e-commerce is showing promise in spite of hard times. Obviously these facts put forward a great case for setting up business online. People are using the web more than ever and online shopping is increasingly seen as a more convenient and cheaper alternative to the high street. Retailers should grab this chance to use the web to attract new customers, gain previously unexplored market share and, ultimately, boost their revenue.
As exciting as all this sounds, there are still retailers who are nervous about joining the e-commerce revolution. The greatest barrier appears to be the fear of online fraud. With the monumental growth of ecommerce and the pervasiveness of chip-and-pin technology in the high streets, fraudsters are increasingly targeting the internet, making fraud a major problem for online retailers. Latest figures from APACS, the UK payments authority, show that total card fraud losses amounted to £609.9 million in 2008. The National Fraud Strategy estimates that card fraud costs every person in the country £10 per year.
The threat of fraud is ubiquitous and warrants decisive steps to protect merchants from lost revenue and reputational damage.
Depleted earnings is only part of the headache – there is also the loss of the goods or services sold, the time taken to handle the administration created by fraudulent transactions and finally the processing fees levied by the card issuers. In response to these very serious consequences the rules for protecting cardholders’ data are getting tighter and tighter. Since June 2008, all businesses accepting card payments must conform to the Payment Card Industry Data Security Standard (PCI DSS) – not a trivial task and especially difficult for smaller businesses.
What is most concerning however, is that whatever the cause of fraud, the customer will blame the inconvenience of the situation on the retailer. This means that they will associate bad experiences on a site directly with the merchant, regardless of fault. The lesson being, the responsibility for creating a safe trading environment sits squarely on the shoulders of the merchant, regardless of how daunting a task this might be for some retailers.
So, what should retailers be doing to reap the benefits of e-commerce, but avoid suffering from fraud-related problems? The easy answer is to look to the experts. There are a number of options available to businesses that will help ease their transition from ‘offline’ to ‘online’ payments. Firstly, businesses should look to sign up to a payment provider that supports Mastercard SecureCode or Verified by Visa. These password-based schemes, (also known as 3D Secure), add an additional step to the payment process, but shield the merchant from fraud and the threat of chargebacks.
In addition, businesses can set up pragmatic fraud rules with their payment service provider that will limit the chance of online fraud, but at the same time ensure legitimate payments are processed.
For example, PayPoint.net’s FraudGuard solution ensures all payment transactions are scored according to a wide range of metrics relating to the customer and their transaction. These include personal details, geographic location, card issuer, internet connection, payment and chargeback history.
Rather than simply eliminating a proportion of all suspicious deposits, the FraudGuard tool can also be used to quarantine dubious transactions for further checking without needlessly having to forfeit payment – a feature that will comfort many online retailers who have lost out on cancelled transactions in the past.
What makes this technology so effective, is that it evaluates each payment on the criteria set by the retailer and makes an educated view of the perceived risk. PayPoint.net merchants using FraudGuard are offered the expertise of fraud and chargebacks analysts, who are at hand to help set these parameters.
Fraud management protects the retailer to a certain extent, but totally removing the need for online card transactions will eliminate the risk of fraud and open up the market to an even greater degree. Being aware of this, PayPoint.net developed PayCash, the payment option that allows those who did not previously transact online, to do so.
Online cash payment methods, such as PayPoint.net’s PayCash, remove the need for card transactions online. Customers simply select the PayCash option at the checkout when purchasing online. They then print out the receipt that includes a barcode and take it to one of 22,500 PayPoint convenience stores in the UK and Ireland, where the barcode is scanned and the customer hands over the cash. The customer’s product is then automatically dispatched and there is absolutely no risk of their bank details being stolen or their account compromised.
In short, there is ample opportunity for retailers to increase customer base and revenue through setting up trade online and they should not miss out on this chance because of fear of the unknown. In 2010, retailers and customers are beginning to move on from the recession and anticipate a growth in business; by moving trade online and allowing the experts to protect you from fraud, your business can be at the forefront of this evolution.
Michael Norton is MD, PayPoint.net
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