Thinking about selling online? Learn business compliance first.
Online sellers from new stores to multi-million-dollar enterprises have to understand business compliance. Without proper security, fraud prevention, and transparency an online business is a disaster waiting to happen.
Plus…
Compliance doesn’t have to be hard or expensive. In fact…
It’s typically less expensive than getting hit with fines or fraud.
Compliance can save a store from crippling fines, fraud losses, and permanent shutdown.
Here’s what you’ll learn:
- Why Online Sellers Need Compliance
- Payment Processing Compliance Guide
- A Complete Compliance Checklist for Online Sellers
- Best Practices for Staying Compliant
Why Online Sellers Need Compliance
Online selling has become huge. But with that explosive growth comes growing pains.
The problem is that most sellers don’t worry about compliance until it’s too late. Maybe a customer disputes a charge. Or perhaps hackers infiltrate systems and steal consumer data. Or, the results of neglecting compliance catch up and the store gets slapped with a fine by Visa, Mastercard, or the payment processor. In any of these cases, the store already faces steep losses.
It’s no secret that online fraud continues to rise each year. Latest statistics show that merchants lost US $115.32 billion due to e-commerce fraud in 2024. While fraud hurts businesses of all sizes, smaller online sellers are affected most. Without proper fraud prevention measures or protection from a payment processor, these stores suffer the most financial damage.
Compliance is more than just following rules and regulations. A truly compliant store cares about protecting the integrity of the business, safeguarding customer data, and ensuring a safe shopping experience. Customers appreciate transparent privacy policies and security measures. Rewarding that trust comes in the form of:
- Lower chargebacks
- Fewer payment disputes
- Higher conversion rates
- Stronger banking relationships
…and keeps the doors open longer than stores that cut corners.
Remember, think of compliance as the foundation. All other parts of the business are built on top of it.
Payment Processing Compliance
One of the biggest areas of compliance for online sellers involves payment processing.
If a store accepts credit cards, it’s required to comply with PCI DSS standards. PCI stands for Payment Card Industry and the Security Standards Council (SSCC) is made up of American Express, Discover Financial Services, Mastercard, UnionPay International, and Visa Inc.
The PCI Security Standards Council released version 4.0.1 in January 2024. Full compliance with PCI DSS v4.0.1 will be required starting March 31, 2025.
Many online sellers make the mistake of thinking their payment processor will handle everything for them. While partnering with a trustworthy provider like Adaptiv Payments takes a giant weight off a store owner’s shoulders when it comes to PCI Compliance, an owner is ultimately responsible for their own store’s security. Working with payment processing providers who are already PCI compliant makes complying with PCI DSS a lot easier, but sellers are ultimately responsible for their store and environment.
PCI DSS has four different levels of compliance which are determined by the number of transactions a business processes per year.
- Level 1 = Over 6 million transactions per year
- Level 2 = 1 million to 6 million transactions per year
- Level 3 = 20,000 to 1 million transactions per year
- Level 4 = Less than 20,000 transactions per year
Most smaller online sellers fall into Level 3 or Level 4. That means passing an annual self-assessment and quarterly network scans. Failing a PCI assessment can result in fines anywhere from $5,000 to $100,000 per month from the merchant account provider. Nobody wants that bill.
Online Seller Compliance Checklist
PCI Compliance isn’t the only thing online sellers should be concerned with. There are a handful of other compliance categories to be aware of.
Data Privacy & Customer Information
As mentioned earlier, customer data needs to be protected.
Online sellers need to comply with data privacy laws such as GDPR (Europe) and the California Consumer Privacy Act (CCPA). This doesn’t just mean having a Privacy Policy on the website. Sellers need to be upfront with customers about what data is being collected and how it will be used.
Additionally, make sure to:
- Encrypt sensitive customer data
- Restrict access to customer data
- Create a plan to handle data breaches
IBM Security’s 2024 data breach report found that the average data breach cost $4.88 million. That’s an increase of 10% from the prior year. If a business gets breached, will it still be in business?
Sales Tax
This one can be a headache for many online sellers. Sales tax laws vary from state to state and change often. For international sellers, tax laws for each country must be learned.
The good news is that there are solutions that can automate sales tax calculations right into the payment processing platform. This takes all the guesswork out of sales tax and makes sure the right amount is always being charged.
Consumer Protection Laws
Online sellers are responsible for complying with consumer protection laws just like brick-and-mortar stores.
Make sure customers are provided with:
- Clear refund/return policy
- Accurate product descriptions
- Shipping times
Violating consumer protection laws can result in chargebacks, upset customers, and penalties from government agencies like the FTC.
Fraud Prevention
Fraud prevention goes hand-in-hand with payment processing compliance.
Online stores should implement fraud protection tools such as:
- Address verification
- 3D Secure authentication
- Transaction screening
These tools protect the seller, and banks and payment providers like to see that precautions are being taken.
Staying Compliant (The Easy Way)
Keeping up with business compliance doesn’t have to be difficult or time-consuming. Implementing the proper processes and tools into the business from day one will make staying compliant painless.
Here are some best tips for staying compliant:
First, use a payment processing provider that does the heavy lifting when it comes to PCI compliance. This alone will eliminate a lot of PCI headaches.
Second, automate, automate, automate. Automate tax calculations, fraud screening, everywhere possible. Manual processes open a business up to human error which can lead to compliance issues.
Lastly, perform check-ups. Sit down and review the privacy policy, security measures, and payment processing setup quarterly.
Wrapping Things Up
The importance of business compliance for online sellers can’t be overstated.
Every aspect of an online store should focus on operating within legal requirements and protecting customers. With so many internet scams happening every day, customers are hyper-aware about where they share their information.
Hopefully, this guide has helped shed some light on business compliance for online sellers. Start with payment processing compliance first, then layer in as many protection features as possible.
The business will be better for it.
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