Launching a new business or taking an existing business online requires a new set of skills for companies used to a more traditional bricks-and-mortar retail environment. There are new ways to market, deliver product and ensure one does not become the victim of thieves or fraudsters.
These six questions will go a long way to uncovering risk in a prospective online business.
1. Is my product physical or virtual?
Delivering a physical object - a book, a camera or a piece of jewellery - carries different risks from delivering a virtual product like music, software or airtime. Only when you understand the risks properly will you be able to develop effective protection. When there is a physical product to deliver, you have more time and opportunity to check that your buyers are who they say they are.
2. How easy is my product to resell?
The easier it is to resell, the more tempting a target you will be. Electronic goods are among the most risky. They are in great demand and their value is high, so they are quick and lucrative for a fraudster to sell on before you ever discover they were bought with a stolen credit card. Things with lower value or appeal that is more limited are less vulnerable - it is harder to sell on a book, a pot or an artwork.
3. How quickly is my product dispersed?
Fraudsters are attracted to products that are delivered quickly. Airtime, for example, is delivered in seconds, can be easily sold and is in high demand. Someone who buys it with stolen money can afford to sell it below market value, which makes it even easier to get rid of. Gift vouchers suffer from similar vulnerabilities.
4. Is the product easily transferable?
Is your product tied to a particular identity such as a name, an address, an ID number or a cellphone number? If not, as with the example of airtime above, it can easily be transferred from one person to another and is another tempting target.
5. How well can you know your customer?
If you add anonymity of the buyer to a product that is valuable, quickly delivered, transferrable and easy to sell, you have an almost irresistible target. Customers may not like having to register before they can buy on your site, but it is an essential protection. You may also want to limit the number or value of transaction for a new customer, or create a waiting period. This is also means repeat customers can enjoy extra benefits.
6. How much risk are you willing to accept?
You cannot eliminate risk - you can only manage it. Once you have a good understanding of the risks your online business faces, you need to decide how much you are willing to accept. Every protection you create will cost money, inconvenience your customers or possibly both, so you cannot just lock it all down, you will need to choose wisely to suit the needs of your own operation.
Answering these questions is not always easy, so you will probably need to talk to experts. Your payment services provider should be your first port of call. It is the one with the experience, knowledge and contacts to advise you on what will work but if they cannot deliver the advice you need, it may be time to change providers.
Brendon Williamson is CSO at DPO PayGate, which processes payments for over 25,000 online merchants in Southern Africa. DPO PayGate (previously PayGate, VCS and PayThru) is a subsidiary of The Pan-African payments Group, Direct Pay Online (DPO).
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