Top 4 Payment and Fraud Challenges in the Online Health & Beauty Market

April 11, 2018

The online health and beauty world covers a wide range of market segments: health supplements, cosmetics, natural products, nutraceuticals and much more.

Regardless of market niche, every online health and beauty business faces many of the same challenges that other eCommerce operations do: friendly fraud, card-not-present fraud, account takeover (ATO), fraudulent account creation, and much more.

However, online health and beauty sellers also encounter a number of fraud challenges that are unique:

  • Subscription billing. 38% of US consumers who regularly purchase health and beauty products online utilize subscription billing. This method tends to have higher chargeback rates due to friendly fraud and other factors.
  • Social buying. While Forbes called Instagram “the world’s most powerful selling tool,” the dramatic increase in recent years of account takeover crime (up 16%) and fraudulent account creation means higher risk for social selling and buying.
  • Commission fraud. As businesses seek more ways to drive revenue, they’ve expanded into new sales channels. The use of Direct Sellers and/or Affiliates introduces new and unexpected risks, including consultant fraud, plus the operational difficulties of using antifraud solutions not suited for direct sales and commission scenarios.
  • Omni-channel. At the same time that traditional brick-and-mortar Health and Beauty retailers are expanding into online sales, eCommerce operations are also building stores with physical locations. Because of these omni-channel sales models, both are aggressively pursuing click-and-collect and/or click-for-delivery sales, which are popular with customers. Nearly half of U.S. consumers (44%) want the option to collect their purchases at a physical store immediately after purchasing online. Yet these purchase methods have higher rates of fraud than card-present or traditional eCommerce sales.

As a result of these unique challenges—as well as the more conventional ones—online Health and Beauty businesses can incur a number of ugly, fraud-related costs:

Fortunately, online health and beauty businesses can employ proven fraud-fighting practices to combat fraud and reduce losses…while actually helping boost sales through the reduction of false positives.

  • Never Too Much Data. The more data analyzed, the better the accuracy of fraud detection.
  • Multiple Fraud Screening Technologies. Static, single-factor tools can be easily defeated by sophisticated fraudsters and bots.
  • Artificial Intelligence and Continuous Machine Learning. Together, these advanced technologies change the game when it comes to detecting emerging threats.
  • Real-Time Risk Assessment. Criminals rapidly changing devices, IP addresses, proxies, etc. to escape detection get tripped up by real-time capabilities.
  • Policy-Based Decisions. Don’t surrender control to blind algorithms or “black boxes.” Establish rules and policies that deliver maximum profitability for your unique Health and Beauty business.
  • Chargeback Management. Improve win rates by integrating chargeback dispute processing into your all-in-one fraud prevention solution.
  • Determine Benchmarks and Goals. The optimal chargeback rate, decline rate, or manual review rate is different for every business. Dial in your optimal rates using data, not hunches.
  • Experienced Human Intelligence. Countering ever-changing fraud tactics and rapidly-evolving technologies requires industry experts on the leading edge of online fraud prevention and risk assessment.

Address the top payment challenges for your online health & beauty business by reducing fraud and welcoming more legitimate orders. Download the eBook “Nourish Sales and Exfoliate Fraud.”