Why Brands Must Pay Closer Attention to Risk

Brands with their own ecommerce store are attuned to some level of risk and potential fraud around online transactions. But for the most part, merchants are woefully undervaluing the financial, reputational and functional dangers involved until it’s too late. Before they know it, they’re facing unexpected and entirely avoidable payment processing barriers. 

Here’s why merchants must pay closer attention to risk and fraud – starting today. Plus, we’ll outline some ways to talk to your internal teams about fraud to make sure everyone is on board and comprehends the gravity of the situation.

Image of a beach with a sign in front of water that says "Shark sighted today, enter water at own risk"

Financial Risks Are Deceptive

The costs associated with risk are far-reaching. There’s the potential financial impact of shipping products to fraudsters and missing out on genuine sales to consider, for starters. If you’re a small to medium business and have limited inventory, this is a very real concern. You may recover the cost, but you’ve lost out on building a relationship with an actual customer who could have become a repeat purchaser. Are you accounting for those losses? You should be.

And yes, you’ll likely be covered by your processor up to a certain extent, but you’ll start to incur fees, and possibly fines, depending on the processor. And what if they no longer want to work with you, because you’re so careless when it comes to rooting out fraud - and they no longer want to assume the financial risk themselves?

And then what kind of attention are you directing toward uncovering fraud? There’s a cost there as well, in some way, unless it’s built in to your processor’s fees. If you’re paying someone internally to handle fraud, how are they doing with it? Paying for fraud monitoring that isn’t up to snuff is common, unfortunately. 

Very likely, you’re not aware of these risks, as they’re lurking below the surface. And they’ll continue to until they bubble over and cause real damage . . .


Reputational Risks Go Unseen... Until They’re Felt

If you’re handling fraud detection in-house, or have it on auto-pilot with certain services, you’re likely creating a lot of unnecessary purchase friction for genuine clients attempting to make valid purchases. Or, conversely, you’re unwittingly promoting your brand to a whole slew of people as a rogue merchant who allows fraudsters to make purchases and doesn’t really care about the fallout. 

Imagine this: Someone opens their credit card statement and finds a fraudulent charge made to your company. Are you to blame? In their mind, you are, certainly. And you can be sure they’ll be posting all about it online. So now, other potential clients looking for you online will come across these complaints and avoid you, because who needs that headache in a world full of global ecommerce options?

Consumer Complaints Can Kill Your Business

It gets worse: The more this happens, the more solidly your reputation is tarnished. You’ll see consumers complaining over missed mortgage payments and other associated costs they had to bear due to your carelessness. And trust that those posts will happen – and those same complaints will likely be lodged with reporting agencies like the Better Business Bureau, rating sites and (very probably) bloggers seeking salacious topics to share with readers and increase click-through rates. Your very avoidable misfortune will grow exponentially if left unchecked. It’s really just a matter of time.

All of that is bad enough, but there are processing channel relationships to keep in mind as well. 

Processing Channels Can Refuse to Work with You

As all of this fall-out is happening, you can expect a call from your processing channel. It will go something like this: “Hi Retailer, we noticed you’re letting lots of fraud through. What are you doing to stop this?” And you can be certain they’ll want a solid plan in place or will refuse to continue processing payments for you as it’s a reputational and financial risk for them as well. 

How will you sell things if you lose this processor? Who will process your payments? You know for sure that they, much like consumers, know other acquiring channels and will share your negative history with them, as most have a reciprocal relationship in an attempt to combat fraud. So, now what? There goes your reputation – and your ability to sell.

Best to be sure your fraud prevention is working. Is it? Some merchants are skeptical when news is good, rather than when it’s bad. And it’s a puzzling mindset. Let’s explore it!


When Fraud Prevention is Working

There’s a huge misperception that merchants have around fraud monitoring. And it’s something they actually get completely backward. Merchants assume that payment processing platforms, like Reach, are paid per fraud instance stopped – this is absolutely not the case. 

For example, we’ve had clients call to inquire about canceling the fraud check portion of their service to save money, as they “clearly don’t have any fraud,” because they haven’t experienced any! The reason why they haven’t, of course, is because we’re stopping it all and not allowing fraudulent charges to make it through to them. We then offer a list of fraudulent transactions we’ve canceled to demonstrate how well our efforts are working.

And then the concern shifts . . .

Mistaking Valid Transactions for Fraud

Two people sitting in front of laptops. One is pointing to something on the screen and explaining to the other person.The conversation soon becomes one where merchants expect that we must be stopping valid transactions as well and charging a premium for the service. And here’s the rub: payment processors, including Reach, are only paid per completed transaction. So, if we stop legitimate customers from purchasing, we’re paid less, not more! Not only that, we know this would create friction and long-term issues with genuine customers. And no one wants that to happen, as it results in reduced profit margins all around.

Merchants perform manual reviews and create rules to prevent fraud, but that is far from enough in today’s digital age. Fraudsters are smart. They’re applying machine learning-powered algorithms to breeze past merchants’ outdated defenses. The market-specialized artificial intelligence (AI) Reach offers is precisely what merchants need to combat fraud today. 

But we definitely don’t overdo it. It would be counter-intuitive on many levels. 

It’s a delicate balance, and one that merchants should be cautious around entrusting to just any partner. There are some processors who take a less thorough approach, as their margins allow for letting some fraud slip through in the name of profit. 

So, yes - paying attention to fraud, or not, is entirely up to you. But if you don't look into it now, you will be vulnerable. And sooner or later, those losses will catch up to you, and they may just cost you your business!


Reach out and we’re happy to talk through ways we can help head that off – starting today. 


Reach simplifies cross-border ecommerce for forward-thinking organizations with ambitious global expansion goals.