Best Buy Tackles Online Payment Fraud

Shoppers who make a purchase on BestBuy.com(NYSE: BBY) will encounter a new payment engine designed to speed the sales process and minimize fraud.

Developed by ClearCommerce,the payment processing andsecurity software will provide real-time credit cardauthorization, as well as payment processing, forelectronic checks and automated clearing house (ACH) payments.

Fraud Prevention

Gartner analyst Avivah Litan told the E-Commerce Timesthat Best Buy likely chose to implement theClearCommerce engine, which is used by more than40,000 merchants including e-tailers PetSmart and SonyOnline, due to concerns about fraud.

“They fall into the category of a site that is highlyprone to fraud attacks because of the nature of themerchandise they sell, and they are likely to movetoward delivering electronic content like CDs, so theyneeded a vendor who was very strong in fraudprotection,” Litan said. “ClearCommerce has alwaysbeen a leader in preventing fraud.”

The ClearCommerce engine guards against securitybreaches with a feature called FraudShield, whichdouble-checks both e-mail and physical addresses,locks out users who repeatedly try to make purchasesusing suspect information, and uses a series of otherrules to screen transactions.

Improved Flexibility

Preventing fraud is one thing, but doing so withoutinconveniencing customers and losing potential salesis another. “When you’re fighting fraud, you don’twant to hold up all the sales that look suspicious,”said Litan.

According to a Gartner study of companies that sellmore than 25 percent of their goods or services on theInternet, 7 percent of online sales are rejected forpotential fraud, but just 1.13 percent are actuallyfraudulent. The ClearCommerce engine can minimize thenumber of valid transactions that are rejected, Litansaid.

With ClearCommerce, Web merchants like BestBuy.com areable to choose whether to authorize a credit card atthe time of the sale or just before shipping, whichmeans that buyers can complete the transaction even ifthere is a problem with the sale.

The Web site canthen send a message to the buyer asking for additionalidentifying information such as a mother’s maiden name, orrequesting that the buyer call customer service tocomplete the transaction. “It’s all about the consumerexperience,” said Litan.

Increased Sales

The growth of the site may also have something to dowith the choice. Gartner analyst Kenneth Kerr said theClearCommerce engine is a viable solution forhigh-volume e-tailers with a monthly Web transactionvolume of more than 10,000, which is ideal forBestBuy.com.

“Best Buy needed a proven, reliable payment processingsolution that would scale with our business,” saidDan Lagermeier, director of Finance for Best Buy.”ClearCommerce provided us with a software solutionthat supports BestBuy.com’s growth.”

Austin-based ClearCommerce has been delivering paymentprocessing systems since 1995. The company hasreceived $54.5 million in funding from investorsincluding Hewlett-Packard (NYSE: HWP), Intel Capital and VeriSign(Nasdaq: VRSN).