How well do you know your customers? If yours is an ecommerce-based business, chances are you face a variety of challenges in getting to know your customers. With fraud instances at an all-time high, it’s more important than ever that businesses have know-your-customer (KYC) policies in place. By ensuring that your policies verify the identity of each customer, you can protect yourself against fraud.
Related: 10 Fraud-Prevention Resources
But how can a growing business possibly monitor every single transaction? The key is to set up automated processes that identify suspicious activity -- but capturing that data is useless unless you put it to use.
Here are some nontraditional ways you can put KYC controls in place in your own business.
1. Pause suspicious transactions.
When your processes identify activity that needs your attention, they should also be set up to pause everything until it can be manually reviewed. Many businesses make the mistake of pulling reports on alerts over a given time, but by the time those reports are extracted, it’s usually too late. Products have been shipped and transactions have probably been reversed or disputed.
Businesses should have policies in place that catch suspicious activity immediately. In the event that a questionable transaction is detected, supervisor authorization should be required before the transaction can be sent to the next step, which is usually fulfillment. If you find your system is catching more transactions than is necessary, you can always tweak the settings over time to stop fewer transactions.
2. Capture customer data history.
How much information does your software capture on each customer? You should, at the very least, be able to see each customer’s purchase history. For example, at Hostt we use purchase history to see everything that's been going on with a particular customer (including IP addresses). This information helps us to spot any questionable transaction or logins, since we're able to compare previous purchases to ascertain if we're seeing normal behavior. A longtime customer is less likely to defraud you than one who has never shopped with you before.
You should also ensure that your payment-processing provider uses address verification to confirm that the mailing address on an order matches that customer’s credit-card billing address. If the two don’t match, the transaction should be declined. This is an important first step in avoiding transactions using stolen credit-card information.
3. It may be time to change your payment-processing provider.
If you’re especially concerned about fraud, it may be time to check the quality of your payment-processing provider. Review your provider’s options and make sure you’re being offered the latest technology in fraud detection and prevention. If you’re dissatisfied, consider ending your contract at the end of its term and switching to a service with a more satisfying selection of services. For smaller businesses, switching may be the best option since such enterprises lack the resources available to source specialized software and sophisticated database setups.
Advanced services like Trulioo's GlobalGateway for identity verification offer an additional layer of protection against fraud. With identity verification, a retailer’s system can verify that the order is being placed from the location the user specifies. This is especially beneficial to global ecommerce providers, which may receive orders from the other side of the world, with no other way of verifying that the customer is where he says he is. This technology can also be used directly on a business’s website using XML Direct.
KYC is a great way to prevent fraud by learning customer patterns and identifying suspicious behavior. When the right processes are in place, a business can reduce its risk and keep losses at a minimum. This benefits both the business and its customers, since it keeps costs low and facilitates the best customer service possible.
Businesses should check their current systems to see what they currently have in place to determine what areas can be strengthened for better fraud prevention.