How To Protect Your Business From Online Fraud

Avoid Online Fraud

As we shift to a cashless economy, today there are multiple payment methods we can choose from. Payment platforms/gateways allow us to pay and collect money online. However, many of us are unaware of the risks involved in collecting payments online. Here is what you can do to avoid online fraud.

Unlike Point of Sale (PoS) machine transactions (where both the cardholder and the merchant are physically present and the payment is done when the order is fulfilled), online transactions happen without anybody’s presence which makes it vulnerable to different kinds of fraud.

Who commits online fraud?

Online fraud can be committed both at the buyer level as well as merchant level.

Buyer level fraud involves usage of stolen credit card credentials to make a purchase, abuse of seller’s refund/return policies etc. On the other hand, merchant fraud involves non-fulfillment of order after receiving the payment, phishing and vishing attacks and failing to resolve customer grievances etc..

I am a genuine merchant. Why should I be bothered about online fraud?

Your customer’s banks have a dispute resolution system that lets buyers file a complaint/chargeback on a particular transaction. The most popular reasons could be:

  1. Unauthorized purchase
  2. Not able to recognize the transaction
  3. Product not as described.
  4. Service not rendered/Product not delivered

There are several ways a buyer can cheat you:

  1. He could be using a stolen card to make the transaction.
  2. He could be making a false chargeback on his Credit Card – he buys a product, receives it but requests a refund and issues a chargeback claiming he never made the purchase.
  3. The buyer could be exploiting your return policy. He could return your product replacing it with a fake or just free-rent your product within your return-policy time period.

As a merchant, you are expected to clear up the complaint/chargeback by producing valid fulfillment documents. In case you fail to back yourself up with relevant proof, you’ll be asked to refund the money.

How do I avoid online fraud?

We all have a few unhappy customers. Your business is not super-human and errors are bound to happen. Sometimes, the error may not be from your side. However, if you go pointing fingers at your customers, you might lose out on a big chunk of business and earn a bad name.

The good news is, you can take measures to minimize fraud on both ends. These pointers can help you steer clear of fraudulent transactions if you are a seller on Instamojo:

  1. Always maintain a solid proof of delivery.
  2. If your business is offline, then collect a signature of the customer on the invoice acknowledging the receipt of product/service.
  3. If you’re selling a physical product online, maintain a record of the courier tracking information and an acknowledgement mail from the customer if possible.
  4. For high value international payments, collect the payer’s ID proof.
  5. Know your customers before fulfilling the order. Keep a look out for restricted domains, spam numbers. Not sure about the authenticity of a transaction/customer? Please write to compliance@instamojo.com before fulfilling the order.
  6. Always be the first point of contact. Share your contact information with the buyers so that they’ll contact you and not the bank in case of any query. Or you can use Instamojo’s free Dispute Resolution centre which significantly reduces your Chargeback rate.
  7. Change your sign in password of your payment platform profile frequently to prevent account takeovers.
  8. While opting for international payments, always opt for 2FA (2Factor authentication) enabled cards as 1FA cards are prone to chargebacks and frauds.
  9. Please have a comprehensible refund policy and stick to it. Don’t have a refund policy yet? Write to support@instamojo.com.
  10. If you spot a suspicious transaction, you can always reach out to Instamojo’s support team requesting to investigate the transaction.

There may be risks in online business, but there are more advantages than disadvantages. At Instamojo, the risk and compliance team goes out of the way to ensure every transaction is valid, secure and legal.

Instamojo is the easiest way to collect payments online if you are an online seller! Don’t have an account? Start your Instamojo experience now!


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This post was penned by Guru Prasant, Risk and Compliance Lead at Instamojo

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