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Detecting Fraud and Preventing Chargebacks in Magento

From announcing our partnership to attending our first Magento Imagine conference this year, Magento is a company that is top of mind for Pro and many of those in the e-commerce sector. So what is Magento and how does it relate to Pro and e-commerce? In short, Magento is an open-source content management system that allows companies to set up customizable online storefronts. As a strong partner for Magento, we’ve created a solution that helps agents quickly validate if an online order is fraudulent. Speaking from my personal experience with fraud management systems, I’ll tell you why the Pro extension is the perfect complement to Magento and fraud detection.

Learning fraud management the hard way

Before joining Whitepages in March of 2015, I managed all e-commerce activities for a Seattle nonprofit, InterConnection.org. Our online customers were other nonprofits and upon registration, the nonprofit’s 501c3 status was verified before allowing them to purchase.

In June of 2014, I launched an online store that individuals could buy from. A few months later, the chargeback notifications started rolling in and we weren’t prepared. We were already utilizing an address verification system (AVS) and we added credit value validation (CVV) checks. It helped to an extent, but didn’t come close to eliminating our fraud problem.

We learned to look for fraud indicators like billing/shipping address mismatches, obvious fake email addresses and other things like expedited shipping requests. We also used free people search and address validation websites, including Whitepages.com, in an attempt to determine if a transaction was fraud. We even called the customers to get explanations for questionable order details. After all of that, fraud was reduced, but still too high. Manual order review was taking too long and we needed a better tool like Magento. 

So what exactly is Magento? 

Magento is an open-source content management system for e-commerce businesses. It was originally developed by Varien in 2008 and purchased by eBay in 2011. Magento has two well-known editions; The Community Edition, which allows small to mid-sized e-commerce companies to set up a store for free, and the Enterprise Edition, which has more features and includes technical support, but requires an annual maintenance fee.

Who uses Magento?

All sizes of e-commerce companies use Magento, including huge e-commerce sites such as Nike, Samsung, Vizio, Ford and Lenovo. As of April 29, 2015, Magento held a market share of 26% of e-commerce companies in Alexa’s List of the top one million websites. Magento has been one of the most popular e-commerce platform since 2010.

Setting up a customized store is easy on Magento. Non-technical staff can complete basic customizations through the use of themes and backend settings. Plus, thousands of extensions exist that add features or improve workflows. 

Fraud tools for Magento

There are many extensions available that help Magento users detect and prevent fraud. Some providers even guarantee transactions, but this comes at a high price. These providers take a percentage of all transactions and do not guarantee all transactions. It’s up to the vendor to make the decision on these riskier transactions. By relying on these types of tools, vendors rarely learn how to properly review a transaction for fraud and sadly end up rejecting good orders.

A smarter configuration is to set up rules that accept good transactions through your credit card processor and flag questionable transactions for manual review. Most processors have this functionality for a minimal fee. We used Authorize.Net at InterConnection. The vendor removes the question and reviews all questionable transactions and makes a decision. That means profitability is increased and vendors are not relying on a third party to make decisions for them.

Either way, a manual review tool is a necessity for companies that hope to prevent fraud. Searching Google, social media and free consumer data sites to assess the validity of orders takes too much time.

Whitepages Pro Identity Check

Whitepages Pro has developed a solution for Magento that allows agents to quickly review all relevant details of a transaction for fraud. We have a Magento extension that will give you an idea of the risk associated with the transaction by scoring it from 0 to 100. We recommend that vendors rely on their credit card processor’s rules to auto-approve good orders and use our identity score as a tool for manual review. In the individual order view, our extension will give you details regarding the person’s addresses, phone, email and IP address.

We also have Web browser extensions available for Mozilla Firefox and Google Chrome that add a “Verify with Whitepages Pro” button to your order view in Magento. Clicking the button will take the review agent to our Whitepages Pro Identity Check website. All order details are pulled from the transaction. There is no need for copy and paste. Identity Check evaluates the billing and shipping addresses, phone numbers, IP address, and email address. If anything doesn’t check out, warnings are displayed in a user-friendly interface. Agents can click on suspicious addresses, phone numbers, or names to pull up more information. This tool can be used with or without the Whitepages Pro Magento extension or as a complementary tool to your current fraud solution

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