South El Monte, CA lies just 20 miles northwest of the Richard Nixon Library & Museum. Richard Nixon, of course, was the President of the United States who once famously said: “I am not a crook.”
Apparently, there are a lot of crooks in South El Monte, as Experian ranked it as the #1 city for combined shipping and billing fraud in 2016. Some other shipping
destinations that Experian flagged as tricky for eCommerce businesses:
- Delaware, Oregon, Florida, Alaska and Washington, D.C. are the five destinations where fraudulent orders are most likely to be shipped.
- Miami, Florida had 17 out of the top 100 ZIP Codes for eCommerce shipping fraud and 20 of the top 100 ZIP Codes for eCommerce billing fraud.
- Alaska, Colorado, New Mexico, Idaho, North Dakota, Maine, Montana, Iowa, South Dakota, and Wyoming saw increases of over 100% in shipping fraudulent orders.
Chances are that your online automotive, powersports, aftermarket product, and performance and accessories business has customers in all those places. And you’d probably be happy to get new customers in those places, too.
But if you’re about to ship a $4,000 order of Lexani Forged rims to one of these risky spots; or a $2,300 set of Crutchfield speakers; or an $800 FiTech Fuel Injection system; or even a $45 set of brake pads, no one would blame you if you thought twice before releasing those products to the loading dock.
And that is the triple-edged sword with which fraud skewers businesses selling parts online.
- If you do ship, and the order turns out to be fraudulent, you’re out some very expensive merchandise. Plus chargeback fees. Plus lost shipping fees. Plus packing materials. Plus the time spent by your employees processing, picking, packing, and shipping the stolen goods.
- If you don’t ship due to fear of fraud, you are likely missing out on revenue by not selling to borderline—yet ultimately legitimate—customers. In fact, a recent Javelin study found that at least 15% of all cardholders have had at least one transaction incorrectly declined, which represents annual revenue losses totaling nearly $118 billion.
- If you decide to manually review all those orders to try and catch fraud, you end up spending lots of hours and lots of money on fraud prevention. After all, manual reviews are typically the most expensive item in fraud prevention budgets.
As a merchant once joked, the one sure way to eliminate 100% of eCommerce fraud is to never approve or ship an order. Of course, that’s not realistic.
Instead, the most profitable approach is to approve the maximum number of orders while stopping the most fraud possible and spending as little as you can. How do you do that? Here are 6 proven strategies:
- Superior Fraud Screening and Analytics. Get a fraud system that can analyze hundreds of data points per transaction, using multiple, integrated technologies. The more data you can analyze, the more likely that you can detect fraud in these suspicious locales, as well as identify legitimate customers who may only look suspicious due to their (unfortunate) location.
- Real-time Data. Fraud moves fast and many types of fraudulent orders can look legitimate, especially from fraudsters in high-risk places who are likely to be on the leading edge when it comes to stolen accounts, fraud techniques, and sophisticated technology like malware and identity cloaking. You need to be able to check borderline transactions against third-party data and capitalize on the network effect of Big Data in real-time to separate good transactions from bad transactions.
- Advanced AI and Machine Learning. With nearly unlimited computing and storage capacity, AI and Machine Learning can spot patterns undetectable to humans. They never forget a face. Or an IP address. Or a device ID. Or a credit card account number. Or an email address. And they can use the insights from Big Data to automate decisions in real-time in order to reduce manual reviews, cut operating costs, and correctly approve more borderline—but valid—orders.
- Expert Human Intelligence. Fraudsters are adaptable, strategic adversaries, especially the bad guys working in these known danger spots. You need to partner with experienced fraud prevention professionals who know the intricacies of fraud and can help you set up your systems so that they deliver the best results for your individual business.
- Chargeback Alerts. Cooperative networks like Ethoca can alert you to chargebacks within minutes of them being reported, allowing you to halt shipments and cancel “bad” transactions even after they’ve been approved, so you can avoid product losses and chargeback fees. This lets you approve more borderline orders to dubious destinations, knowing you can stop them before they ship and avoid stolen merchandise losses.
- Simple, Affordable SaaS. Are you in business to sell automotive, powersports, aftermarket, performance and accessory products? Or are you in business to become a fraud prevention company? If it’s the first option, then Software-As-A-Service removes the burden of developing and supporting a robust fraud prevention capability. This helps you avoid IT integration hassles, minimize cost and complexity, and gain certainty over costs.
Want to know more about tuning up your fraud prevention system? Check out our next live webinar, "How to Reduce eCommerce Fraud for Automotive & Powersports" on August 16th at 11:00 am PDT.