Fraud is a big problem and it costs US merchants billions per year. According to Forbes every dollar of fraud a merchant experiences can cost them over $3 making it one of the most expensive costs of doing business for certain merchants.

A lot of our customers have handled this problem in painful ways. For instance, it is not uncommon for clients to come to us and say that they just don’t accept orders from certain countries, like China, Nigeria and others. This is troublesome for growth considering:

  1. China is the largest population in the world, hands down
  2. Not every Nigerian customer is trying to steal your stuff, hopefully

However we understand. It’s a problem and it’s easier to just completely turn down those orders than do the grueling work to verify if the order is correct and exposing the company to the risk of chargebacks, which are a double hit, losing revenue and inventory.

The process goes something like this, your CS team or fraud agent receives an order that looks a bit fishy, either a mismatched billing and shipping address, a strange or foreign shipping address, inability to verify a reconcile credit card information or just a peculiar looking order. The list goes on. After careful inspection with as many tools as a merchant can muster, you make a go/no go decision leveraging your instincts and experience. Afterwards you pray to the chargeback gods.

On the other side of this equation is the consumer who may live in one of those obscure parts of the globe. They have a terrible time acquiring their US wares online. It’s sad really. The impact on lifetime value with these foreign market customers is so undervalued. Not only are merchants accusing them of being thieves but brand impact is grossly underestimated. Many customers are highly active in social media and instead of making a brand ambassador you now have a brand defector.

Enter today’s fraud protection companies like Signifyd, Sift Science and Riskified.

While there are several fraud protection companies out there, we believe the decision today comes down to 3 things, the network, assumed liability on fraudulent orders and cost.

Why does the Network Matter?

Barring your use or consideration of the traditional rules-based fraud detection companies, one of the primary considerations a merchant should be thinking about is the strength of the network of their fraud prevention solution.

Think of it like this, you wouldn’t use Facebook or LinkedIn if no one else did, right? Well because machine-learning algorithms get better over time and with more information you really want to be with providers that analyze a lot of transactions and see a lot of consumer purchasing data. This can help bring the power of an AirBnB or to your business with little effort on your part.

Reduced Liability and why it’s HUGE for your business?

Skye Spear, VP of Partnerships at Signifyd states that working with them can “help grow your business 3% almost immediately.” That sounds unrealistic, but let’s think about it. If a fraudulent order costs 3x the amount in resources of a normal order, what makes it so expensive?

  • The lack of security and clarity around potentially fraudulent orders takes time to verify
  • Wholesale denial of potentially viable orders can impact your brand
  • Customer lifetime value can take a hit in some cases
  • Not to mention the amount of time a money it costs dealing with a chargebacks

What is life like when you don’t have to worry about chargebacks?

This is what Skye was saying. When fraud protection companies take 100% liability for your orders, you can eliminate most of these worries and focus on growing your business around the globe.


Clearly a fraud prevention company that takes on liability is most likely more expensive than one that doesn’t. This is a major consideration. If a company provides the Network at a lower cost, it certainly gives a merchant something to think about.

These aren’t easy questions. They need to be thought about. Feel free to give us a call if you want to talk through some concerns and ideas.

freeeadvice freeeadvice At Free Ecommerce Advice, we provide merchants unbiased, insightful advice on software and service providers. Our goal is to help ecommerce merchants grow and save time by having someone to get guidance, feedback and 2nd opinions. Our team has worked with clients from mom and pop shops to major brands like Kohler, and Nikon. Give us a call at 818-392-4263, if you have questions. Visit Website

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