Customer trust VS Data trust

Trust in Customers versus Trust in Data

Do you sell products or services from an online store? If yes, then you need to read on. Today, we are going to cover when to trust your customers and when to perform due diligence for fraud orders. As long as there have been e-commerce sites, there have always been incidences of fraudsters trying to make purchases with stolen cards or stolen identities. Online merchants are only humans. Humans have biases and preconceptions that color how we trust our online customers.

So, do you trust your customers? Or do you trust data?

How do bias and preconception influence who we trust?

Familiarity can breed a sense of trust, however misleading it might be. A good example is the name used by the customer when ordering from the online store. We tend to let our guard down whenever the name is similar enough to those used by people in our region. Meanwhile a foreign sounding name will have the opposite effect. That’s one form of bias.

In the case of preconception, Japanese people are generally perceived to be trustworthy folks. A customer with a Japanese sounding name will tend to make the online merchant think it’s a legitimate order.

Imagine a fraudster is aware of all these then he or she is able to manipulate the merchant to process the order as a legitimate one.

Does this mean merchants should screen all order?

For a merchant operating a medium-sized to large online store, manually screening every order is highly taxing on the human employees. Of course, they can do a quick screening like checking if the email address used in the order is a disposable one. They can also check if the IP address used is a proxy server like a VPN.

Beyond these simple checks, it is just not practical to perform further checks for potential fraud. Each check takes time to perform in a manual fashion. Meanwhile, a legitimate customer could be waiting impatiently for his order to be released and processed. In addition, using humans to perform fraud checks will inevitably incur human errors with incorrect flagging of orders as fraud or letting fraudulent transactions slip through.

Obviously, without an automated fraud screening tool, the merchant can only perform a random sampling of the orders for possible fraud. This is neither a sustainable nor cost-effective way to catch fraudsters. Every fraud that goes through means refund or even chargeback. Leaving fraudsters to run rampant on the online store will just end up in massive financial losses for the merchant.

Legitimate accounts can be compromised

Another headache for merchants is that even legitimate existing customers’ accounts can be compromised via phishing and hacking. How would a merchant know that a previously good customer is now a fraudster posing as said customer?

Some merchants only screen orders from new customers. In those cases, this form of fraud will escape the fraud checking mechanism.

The easiest solution – identity verification

One of the easiest ways to deter would-be fraudsters is to require an identity verification by using SMS One-Time-Passcode (OTP). Banks and other financial institutions rely on SMS OTPs as a fast way to verify one’s identity.

Online merchants can integrate the SMS verification solution before allowing any customer to perform checkout. Often, this would be enough to make the fraudsters think twice as they will have a hard time coming up with many mobile phone numbers.

Mobile phone numbers might also be registered to a person, thus making them traceable by law enforcement if need be. Definitely, anyone looking to commit payment fraud on the web store will move on to easier websites to target.

By making every customer perform SMS verification before every transaction, the risk of fraud will go down.

The best solution – automated fraud screening

While the SMS verification is an easy way to prevent fraud, it is not fool proof. Determined fraudsters can use mobile phone farms or even use disposable SMS services.

A proper automated fraud screening solution is still the best bet to reduce the risk of fraudulent orders to a minimum. An automated solution has the benefit of being able to complete multiple checks in a matter of seconds, in addition to being free of human errors.

There are many fraud checks that can be performed by a robust fraud screening. The common ones are below:

  • IP address geolocation to see if the country matches the shipping address country
  • detects if the IP address belongs to a proxy server
  • whether the credit card is in a blacklist
  • determines if the email address or phone number is in a blacklist
  • velocity checks to see if a particular IP or email is making multiple orders within a short time
  • checks whether the email address or phone number is disposable

Implementing such solutions can drastically improve the profit for the online merchant by reducing refunds and chargebacks.


FraudLabsPro is one of the automated fraud screening solutions available on many online shopping platforms. Setup is fast and minimal configuration is required. After that, fraudulent orders will be automatically caught and dealt with.

The best news is the FraudLabsPro has a free Micro plan that allows fraud screening of up to 500 orders every month. Hence, any online stores without a fraud screening mechanism should integrate the FraudLabsPro service and discover the benefits it can provide.

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