As online transactions have grown, so have the complexities of managing payment processing, preventing fraud, and ensuring customer satisfaction. These challenges are even more pronounced for businesses that rely on recurring payments.
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Why are the complexities greater for businesses that rely on recurring payments?
With recurring payments, the frequency of transactions increases, increasing the chances of fraud. Moreover, subscription models that break payments into smaller instalments face a higher risk of customers defaulting. Each recurring transaction presents a potential for disputes and fraud attempts, necessitating constant monitoring and verification by businesses.
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Common types of fraud subscription businesses encounter

• Chargeback Fraud: Customers dispute legitimate charges, claiming they did not authorise the transaction or did not receive the service, leading to chargebacks.
• Subscription Chargeback: Customers subscribe, use the service, and then file a chargeback, claiming they did not authorise the subscription or were unsatisfied, often after consuming significant value.
• Synthetic Identity Fraud: Fraudsters create fake identities using real and fictitious information to open subscription accounts.
• Stolen Credit Card Fraud: Fraudsters use stolen credit card information to sign up for subscriptions, resulting in chargebacks when the real cardholder disputes the charges.
• Unauthorised Reselling: Fraudsters subscribe to services with the intention of reselling them at a lower price, violating terms of service and undercutting the business.

By understanding the types of fraud that commonly affect subscription businesses and implementing comprehensive fraud prevention measures, companies can protect their revenue, maintain customer trust, and ensure long-term success.

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How to prevent fraud for subscription businesses?

An easy-to-implement and reliable way to protect your company is through online real-time credit checks. These checks can effectively shield your business from issues like non-payment after shipping goods or chargebacks from customers’ banks, which can be especially frustrating if you’re just starting out.

Understanding how credit checks work

E-commerce businesses use credit checks to evaluate the creditworthiness of their customers and mitigate risks associated with non-payment and fraud. Here's how credit checks are integrated into e-commerce operations and how they function.

How credit checks work in E-commerce

• Obtaining Consent: Before performing a credit check, e-commerce businesses must obtain the customer’s consent. This is typically done during the account creation or checkout process.
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• Requesting the Credit Report: Once consent is obtained, the business requests the customer’s credit report from a credit bureau. The request includes the customer’s identifying information, such as name, address, and Social Security number.
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• Generating the Credit Report: The credit bureau compiles the customer’s credit history, including information about credit accounts, repayment history, outstanding debts, and any public records like bankruptcies. This data is used to generate a detailed credit report.
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• Calculating the Credit Score: The credit bureau also calculates a credit score based on the customer’s financial behaviour. Factors influencing the score include payment history, credit utilisation, length of credit history, types of credit accounts, and recent credit inquiries.
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• Reviewing the Report: The e-commerce business reviews the credit report and score to assess the customer’s creditworthiness. High-risk customers may be flagged for additional verification or may be required to provide alternative payment methods.
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• Making Informed Decisions: Based on the credit report, the business makes informed decisions regarding the transaction. For example, they might approve or decline financing options, adjust credit limits, or request a different form of payment.

By incorporating credit checks, e-commerce businesses can better manage financial risks, prevent fraud, and offer tailored services that enhance customer satisfaction and loyalty. This proactive approach not only protects the business but also contributes to a more secure and trustworthy shopping experience for customers.

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circuly + CRIF to prevent subscription fraud

circuly has partnered with CRIF Buergel to support circuly's customers in preventing chargebacks and subscription fraud. Learn more about subscription fraud prevention through credit checks.

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Learn more about circuly's credit check and fraud prevention for subscription-based business models.

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About circuly

circuly is a B2B subscription management software solution that enables companies to launch, manage and scale a subscription-based business mode and thus brings sustainability and circularity to e-commerce. With the help of the circuly solution, retailers and manufacturers of consumer durable products can make their business circular, add a recurring revenue stream, extend the product lifecycle, reach new customer segments and achieve their sustainability goals. circuly makes the process of renting products online as seamless and scalable as traditional sales, revolutionising the way businesses operate in the digital landscape.