Why eCommerce Sites Need Background Checks | Hacker Noon


Dan Stein Hacker Noon profile picture

Dan Stein

Editor at the Startup Thread

Formal credit checks are typically associated with scenarios such as creditworthiness, insurance, employment/pre-employment screening, tenant screening, firearms purchases, and due diligence before business decisions. Interestingly enough, less-formal public records reports are used in many unconventional ways to navigate through the new normals brought on in the post-pandemic world.

In the past, most background check services were utilized by people and companies with deep pockets, and these days, they are more accessible than ever for anyone with an Internet connection. There are even free background check services that ethically present public records information that is not subject to the strict Fair Credit Reporting Act (the “FCRA”) guidelines that limit the reasons people can obtain formal credit reports.

Valid concerns on both ends

Background checks benefit both suppliers and customers for eCommerce transactions.

According to a Juniper Research report, eCommerce retailers risk losing over $20 billion in 2021 due to fraudulent online activities, which is 18 percent more than the losses during the pandemic 2020.

Research by Sift found that the average value of attempted fraudulent purchases increased 69 percent year-over-year, bringing about the need for increased security measures. 

Consumers also had their share of woes, with more than 2.1 million fraud reports in the U.S alone, with consumers losing $3.3 billion to fraud. While this was mainly due to cybercriminals, there were also plenty of sketchy merchants lurking.

Merchants and consumers are looking into safer and more secure ways before proceeding with digital transactions. Background checks provide a safe way for merchants and consumers to get the public info needed to proceed with confidence.

How consumers can make use of background checks?

Consumers are beginning to use background check services on vendors to verify that they are indeed licensed and have current licenses. They are also using it to gain insight into the business history of the vendor if there is any doubt. 

When digging deep into the business history of a vendor, additional information can also come up, such as whether the vendor previously operated under a different name. The latter would raise questions about whether a merchant’s business had shut down due to bankruptcy, negligence, or any wrongdoing. 

Conducting a background check on vendors also offers a glimpse into the general sentiments of the brand through past customer reviews. When it comes to contract work and digital services, this is particularly handy. In this case, it is ethical to inform the vendor beforehand of the background check conducted in the name of due diligence. 

Of course, it is crucial not to be swayed by a few scattered unfavorable reviews. If anything, an endless list of positive reviews may indicate that the vendor is using a paid service for positive reviews. 

How merchants and vendors can make use of background checks

Depending on the type of service and transaction at hand, merchants are also beginning to use public records background check solutions to confirm the identity of clients. 

Background check solutions often take place before contracts. If a client signs a contract under a different name, the contract essentially becomes null and void. It is essential to verify that they are the principal point contact for the company they represent. 

Businesses are also noticing that conducting such a background check would uncover details such as whether the client has a history of legal disputes.

As the world continues to go increasingly digital, it becomes that much more important for everyone, both on the merchant and consumer side, to proceed with transactions with caution. The most efficient way to go about doing this is by conducting background checks.