Incidents of ecommerce fraud have been steadily rising over the years and continue to worsen. According to the LexisNexis Risk Solutions report, retail fraud attempts have doubled over the last 12 months with small retailers and mid-sized retailers selling digital goods being hit the hardest. To discuss how retailers can defend themselves against fraudsters while still increasing conversions, Internet Retailer spoke with KC Fox, senior vice president of technology services at Radial, a global omnichannel technology and operations provider.

IR: What common mistakes do retailers make when it comes to fraud prevention?

KCF: Many retailers tend to not invest enough in their fraud prevention strategies. And that may be for a few different reasons. First, they think they won’t have a fraud problem. A men’s underwear merchant, for example, might think that fraudsters are only targeting expensive items, but studies have shown that they often go after lower cost items to make their money.

Second, retailers often don’t recognize that they might already have a fraud problem. They think they’re doing a great job preventing fraud—and they probably are. But they are doing it at the expense of sales by declining what may be perfectly good orders out of fear those orders are fraudulent. And finally, many fraudsters manage their fraud on the cheap. Instead of investing in robust fraud prevention tools, they try to handle it internally—delegating the task to lower level employees. Fraud prevention is very complex, so this strategy will never work.

IR: What are the most complex challenges retailers face when trying to manage fraud?

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KCF: There is a very delicate balance between declining potentially fraudulent transactions and approving valuable sales. That’s where retailers struggle. They need the tools and expertise to delve deeply into those particularly questionable sales to determine whether they should approve or decline those transactions.

Additionally, fraudsters are amazingly sophisticated. They’re intelligent, they adapt, and they’re good at figuring out where the holes are in your system and taking advantage of them. Therefore, retailers need equally sophisticated tools to combat fraudster attacks.

IR: What strategies can retailers implement to better manage ecommerce fraud and decrease chargebacks?

KCF: First, they need to either become fraud prevention experts or hire fraud prevention experts. Chances are fraud prevention isn’t the focus of their business. And it can be detrimental to your relationship with a customer when you decline a sale that looks like fraud but is actually legitimate. You will insult the customer, and they likely never buy from you again. So retailers really need to invest properly in finding outside sources that can effectively handle fraud prevention for them.

An ideal fraud prevention partner, such as Radial, understands how fraudsters work. They can identify retailer’s fraud vulnerabilities and set in place the appropriate measures to thwart attacks. But on top of that, they can implement strategies that help retailers optimize for taking more risk with the questionable transactions to increase sales.

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IR: How can retailers increase good conversions?

KCF: In addition to working with fraud prevention experts and investing in the right tools, retailers need to plan for attacks. Understand the various attacks, then have a plan in place ahead of time for handling those attacks. The easiest way to do this is to understand your customers really well. The more you know about your consumer and how they behave normally, the easier it is to identify whether what may seem like a fraudulent transaction is actually how they behave. That helps you increase conversions.

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