Fighting Fraudulent Orders in the Wine Industry

Fraud is a harsh reality for wineries, both large and small. While it was once a problem mainly for big brands, today even mom-and-pop wineries are targets. Fraud hurts, just like all theft. Every act of fraud is a direct hit to a winery’s revenue, whether it happens online, in the tasting room, or during fulfillment.

At Commerce7, we recognize the impact of fraud on your business, and we’ve dedicated countless hours to studying fraud, consulting with experts, and developing solutions to mitigate it.

A Balancing Act: Customer Experience vs. Fraud Prevention

Preventing fraud is critical, but it shouldn’t come at the expense of your customers' experience. Striking the right balance is key. Here’s a look at how fraud has affected orders handled by Commerce7:

(Fraud orders are either chargebacks due to Fraud, or winery reported Fraud using the Commerce7 fraud reporting). 

Fraud in early 2024 has notably increased compared to the same period in 2023, though it remains under 0.02% of total orders. Despite its low percentage, it is still important to us and we recognized that in 2023, it cost our customers nearly half a million dollars.

Industry Context

According to our primary gateway, Fullsteam, the industry average for revenue lost to payment fraud is 2.9%. Commerce7’s figures are 100 times better than this average. Here’s how Fullsteam compares: 

Our Efforts to Combat Fraud

At Commerce7, every fraud incident is taken seriously. Each and every fraudulent order triggers notifications to our support team, and product manager. We regularly review our settings and processes to strike the right balance between preventing fraud and allowing legitimate orders through, and have implemented several measures to accomplish this. 

We ban certain IPs, limit single users to five orders within 30 minutes, and block users with five bad card attempts from placing additional orders. We also use Google silent reCAPTCHA, shadow ban certain accounts, and employ AWS firewalls and other protections. Additionally, we enforce CVV verification, pass level 3 data to gateways, and continuously monitor our systems. All these measures and more are integrated into our product at Commerce7.

Unfortunately, sometimes these measures mistakenly block legitimate customers. If a real customer complains about a 'token' error, it's likely our system erring on the side of caution.

Commerce7’s Streamlined Checkout and Fraud Risk

Commerce7’s streamlined V2 checkout, which omits the billing address, shows a 19% higher conversion rate compared to V1. Additionally, 13% of orders utilize Apple Pay/Google Pay, which also forego billing addresses.

Our analysis over 14 months indicates no significant difference in fraud rates between transactions with and without billing addresses. Stripe’s data suggests a 1% fraud reduction with billing addresses, equating to just 4 saved orders out of 6.7 million in 2023. This demonstrates that optimizing the checkout experience can enhance conversion rates without significantly increasing fraud risk, but it all comes down to finding the right balance. 

Looking Ahead: The Future of Fraud Prevention at Commerce7

Our team is committed to continuously improving our fraud prevention measures while maintaining excellent customer experiences. Several companies specialize in blocking credit card fraud, and we have been exploring various options to best serve our diverse customer base. For instance, we partnered with Opus One to implement Forter for fraud detection. However, Forter doesn't cater to smaller wineries, which includes many of our customers.

With other wineries, we've tested reviewing high-value orders among other solutions and strategies. This year, we plan to integrate a third-party fraud prevention solution. We are currently collaborating with Fullsteam on a new fraud prevention product that is in beta and evaluating NoFraud as another potential vendor.

At Commerce7, we’re dedicated to staying ahead of fraud trends and protecting your business so you can focus on what you do best: making and selling great wine.