One basic problem for the electronic companies is to differentiate between genuine and fraudulent customers. Another important issue is security. Both of these lead to unauthorized use of somebody else’s credit card or fraudulent transaction. For this the online merchant has to implement various security measures and fraud detectors, which can find out if the customer is genuine or not, or the person using the credit card is the actual owner of the card. Through the entire process of confirming purchase order to delivery of the goods, the customer and the e-merchant has to share valuable information which can be stolen.
The companies face various risks while doing online businesses. – Security Risk; which is usually due to a hacker attack or any kind of virus can cause severe damage to the network system of the company. Information of other customers can be stolen from their data base and used in many fraudulent cases. The customers can sue the company because of their poor security measures and the online merchant can go bankrupt. Virus attacks can hamper smooth flow of the business operations and the customer can loose confidence in the company.
– Payment risk; after the entire transaction has been done and the goods are delivered then due to some little problem in the validation of the customer’s identity the company might not receive payments due to payment dispute. These disputes are very common in online transactions. This can be due to disagreement over currency conversion or the customer does not like the goods etc. – Fulfillment risk; if the customer does not like the goods he receives it can raise the issue of fulfillment.
Sometimes when soft wares are sold on the internet there is a risk of these soft wares getting copied or hijacked. In such case also fulfillment risk may arise. How can the electronic merchants minimize these risks? The electronic companies should always have a proper and concise outline for risk management. It should be noted that risk management cannot be taken as a one time effort but it is a continuous and ongoing process and has to be implemented till the company exists. All the processes should be well documented.
The electronic merchants should save customers data for and adequate period or time in order to track any fraudulent orders. Due to lack of resources companies usually do not keep data of customers more than a month or maximum six months. A proper security management policy can not only prevent fraud cases but also track down any frauds if committed somehow. If the company is big enough to have a proper staff and department, than it should have a separate risk management department which should deal with such issues. The staff should be communicated with the policies and regulations issues of the company.
Electronic merchants should also have various fraud detection and identity validation software and technologies. This will help minimize the risk and even if such incident occurs will help to solve the case . IMPACT OF E-COMMERCE FRAUD According to United Nations, the top ten countries with highest internet and e-commerce penetration rate include Japan, South Korea, Australia and Singapore, Finland, US, Sweden, Netherlands, UK and Canada . These countries also have the highest rate of e-commerce frauds. The figure below shows the name of the countries with most number of digital attacks.