Online payments VS VPN | The challenge

The online landscape is a double-edged sword for merchants. It offers incredible reach and growth potential, but it also comes with inherent risks. Fraudulent transactions can eat away at your bottom line and damage customer trust.

That's why payment providers, banks and card schemes work tirelessly behind the scenes to implement robust security measures. From fraud scoring systems to 3D Secure authentication, these measures are designed to protect your business and ensure smooth transactions for legitimate customers.

However, even the most sophisticated security systems can sometimes create unintended obstacles. One such example is the use of Virtual Private Networks (VPNs) by customers.

What's in this article?

• The high cost of fraud
• The VPN challenge
• Solutions for minimising failed VPN transactions
• The bottom line

The high cost of fraud

Fraudulent transactions are a major financial burden for online merchants. According to Juniper Research, losses from online payment fraud are expected to exceed $362 billion globally over the next five years.

But merchants aren't just losing money to fraudsters; they're also dealing with chargebacks, extra security costs and potential hits to their reputation. This highlights the importance of addressing potential security vulnerabilities and minimising declined transactions due to enhanced security measures.

The VPN challenge

Many customers, particularly in the GCC region, use VPNs for work or personal reasons. While VPNs enhance online privacy, they can sometimes trigger false positives in fraud prevention systems. Since a VPN masks the user's true location, a payment gateway might flag the transaction as suspicious, leading to a decline.

This scenario highlights the importance of striking a balance between security and customer experience. Declined transactions due to VPN usage represent lost revenue opportunities for your business. Here are some ways to mitigate this issue:

Solutions for minimising failed VPN transactions

 While declined transactions due to security measures can be frustrating, it's important to remember that these systems are in place to protect your business from financial losses. Instead of viewing declined transactions negatively, there are a few solutions to reduce the impact:

Clear communication is key: Educate your customers about potential issues with VPN usage during checkout. A simple but clear notification on your website informing them about temporarily disabling their VPN for a seamless transaction can go a long way.

• Leverage dynamic routing: Many payment gateways offer a feature called "dynamic routing". This sophisticated tool analyses various factors beyond location (e.g. purchase history and device information) to create a more nuanced risk profile. This allows the gateway to potentially approve legitimate transactions even if the customer is using a VPN. By dynamically routing the transaction through different processing channels based on real-time risk assessment, payment acceptance rates can increase.
• Prioritise customer experience: A smooth checkout process is crucial for customer satisfaction and repeat business. While security is paramount, explore ways to minimise friction during the payment process.

By implementing these strategies, you can ensure that your security measures are effective without creating unnecessary hurdles for legitimate customers. Remember, every declined transaction represents a lost sale and a potentially dissatisfied customer.

The bottom line

Fraudulent transactions are a constant threat, but they shouldn't come at the expense of legitimate sales. By adopting a balanced approach to security and user experience, you can create a secure and frictionless shopping experience that fosters customer trust and boosts your bottom line.