How to Protect Your eCommerce Business from Fraud

When you sell online with Square, you have the advantage of serving customers who are located all across the globe. The downside, however, is that you don’t get to know them face to face. That can open the door to fraud, as you can’t see your customers’ credit cards, check their IDs, or obtain signatures during online transactions.

Fortunately, you can still tap into eCommerce growth opportunities while managing the risks that come with taking eCommerce payments. Here’s a checklist and tips on what to look for in your Square Online Store to help you get started.

1. Create and post your store policies.

Before you start accepting eCommerce sales, clearly post your shipping policy, return policy, and terms of service on your website to ensure that you and your customers are on the same page from the start. A return policy helps to manage customer expectations by answering the following questions:

  • How long does a customer have to return an item?
  • What is the procedure for a return or exchange? How do customers contact you, and how long does the process take?
  • Who pays to return items back to you?
  • Are there any items that are not returnable, such as sale items or items that have been opened or used.
  • Do you offer full refunds, exchanges, or store credit?

Pro tip: You can add store policies to be shown during checkout in your Checkout settings (go to Store > Checkout > Store Policies).

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2. Run a test payment.

Run a test payment to identify what information is available to you in your Square Dashboard. Reviewing your customer’s information to verify an order’s authenticity is an important step to take before shipping out goods. Knowing ahead of time where to locate declined eCommerce payments, as well as customer information, helps to streamline your review process.

3. Verify what you can.

Online payments don’t require a signature for verification, but one way to monitor for authenticity is to check that the customer’s billing and shipping addresses match. In the event of a dispute, the card issuer may want to confirm that the true cardholder completed the transaction on your website, and they’ll ask for proof that the order was shipped to the customer’s correct billing address.

If you receive an order where the addresses don’t match, contact the customer to inquire why. It might be a practical reason, such as someone sending a gift. Question anything unusual, such as a “gift” order that includes multiples of the same item or a large commercial order being shipped to a residence. Use caution with customers who ask that an order be rushed; it could indicate they’re in a hurry to complete the transaction before the stolen card information is reported.

Pro tip: You get to decide what risk level you’re willing to take on. Some sellers elect to deny international shipments or unusual orders, while others review transactions on a case-by-case basis. Remember that you’re ultimately responsible for all eCommerce payments taken through your account, so checking orders up front can help you prevent loss down the line.

4. Keep a paper trail.

Keeping good records is a good business practice, but it’s essential when goods or services are exchanged online. If a customer initiates a dispute, your only available recourse is to provide proof that the order was fulfilled.

Be ready to provide all the supporting information about a disputed transaction so that Square can challenge the claim with the cardholder’s bank on your behalf. Keep tracking information for shipping and delivery. Square’s built-in eCommerce tools automatically save shipping and fulfillment details for easy retrieval. Require a signature upon receipt for large orders. Itemize your receipts to show exactly what was sold, and keep any email between you and your customer for 18 months.

5. Monitor declines.

Credit card issuers mitigate fraud by declining payments that look out of line, either geographically or contextually against other card activity. You can check your own declined payment history to help spot a potential problem.

When you receive an order from a new customer — particularly if it’s a large payment — navigate to your eCommerce sales history on your Square Dashboard and select Transaction Status from the sidebar. Look for recently declined payments of the same amount within a short span of time.

Pro tip: Multiple declines can be a strong indication that credit card information has been stolen and is being used as part of a scam. If you see multiple declines on different cards, hold off on shipping the product until you reach out to the buyer and verify their identity.

6. Understand Square’s security safeguards.

Square Online Store has systems in place to help you reduce your risk. Square Secure uses machine learning and human expertise to look for suspicious transactions. We also handle disputes for you so you can use your time for what matters — serving your customers.

Ultimately, it’s your responsibility to keep your business safe and limit exposure to disputes. If you suspect an order might be fraudulent, don’t hesitate to ask a customer to verify their identity by providing a copy of their driver’s license or photo ID and a copy of the credit card. If you’re unable to contact the customer, take a better-safe-than-sorry approach and refund the payment, so you won’t be liable for a dispute.

You worked hard to build your business. Protect it from fraud, so you can better serve the customers who love what you offer.