What Ecommerce Startups Need To Know

Ecommerce startups face a range of legal and stolen-data issues that can hamper long-term sustainability if they are not properly handled. In recent years, the e-commerce market has grown remarkably. This growth comes at a time when companies that accept debit and credit card payments face stringent legal and regulatory requirements that go over and above PCI compliance.

If you own or manage an e-commerce startup, failure to adhere to the ever-changing laws and regulations could land you in hot water. You have to stay abreast with the legal and regulatory requirements or risk facing hefty fines and penalties, closures, lawsuits, or even product recalls. Here are some legal and stolen-data issues that startup entrepreneurs ought to know.

Your Site’s Security is Essential

Taking your business online presents you with an exciting growth opportunity. Nonetheless, with all the opportunities that an e-commerce startup brings, various legal and regulatory issues are bound to spring up along the way. Critical among them is your e-commerce website’s security.

Failure to implement proper security measures puts your website and its customers at the risk of payment fraud. Even if your startup caters to only a small target market, you might find yourself exposed if you leave a gap in your online security framework.

According to research, 20% of e-commerce startups fall victim to hackers who target their websites. A large number of e-commerce startup stores that fall victim to cyber-attacks go out of business within one year. An attack not only makes you lose business opportunities but also dents your reputation.

To improve your website’s security, ensure that your e-commerce software is continuously updated to avert vulnerabilities from new viruses and malware. Similarly, you should use an address verification system to separate fraudulent transactions from legitimate ones. Card valuation value can also help you flag fraudulent transactions.

Customer Data Should Be Secured

Ecommerce businesses must adhere to the data privacy (CCPA, GDPR) law, which aims to ensure that companies protect customers’ data. The law concerns itself with how businesses can collect, use, and share customer data.

Your e-commerce startup collects tons of information from its customers. If you accept credit card and debit card payments, in particular, you need to follow PCI guidelines. Non-compliance means you could end up paying hefty fines for failing to protect customers’ data adequately.

In this regard, you should have a strategy for protecting information that travels through your network. Moreover, credit card data needs to be encrypted, especially if it moves on open systems to your payment processor from the point of sale.

Unless it’s necessary, avoid storing customers’ credit and debit card information on your server. If storing customers’ payment data helps to expedite future purchases, ensure that the data is encrypted and secured. Likewise, avoid storing the 3-digit validation number printed on the backside of customers’ credit cards.

Due to the high number of risks that faceInternet-based businesses, e-commerce startups should implement data security, maintenance, and breach strategy. For instance, encouraging a culture of regular corporate-wide password changes can go a long way in thwarting hacking attempts. Besides this, consider establishing a data breach drills that help you prepare for attacks.

Have a Compliance Officer on Speed Dial

Getting and maintaining PCI compliance can be a tall order, especially for e-commerce startups. Laws and regulations on cardholder data are revised regularly. Also, employing a full-time compliance officer can be burdensome. If you can’t afford a compliance officer, ensure that you outsource one.

Having a compliance officer on speed dial comes in handy in the event of a data breach. The role of these professionals is to determine the nature of the data breach and your responsibility. A compliance officer will also guide you on what to do to comply with international, federal, state, and local data breach regulations after experiencing a data attack.

Always Draft Operating Agreements

When running an e-commerce startup, you should always do everything the right way. To protect your interests when the business starts to scale, ensure that you get operating agreements. These agreements are meant to safeguard the interests of startup entrepreneurs by delineating them from their businesses.

An operating agreement decreases your liability, thus mitigating legal red tape. Typically, this document outlines procedures such as business operations, finances, ownership, voting rights, profit and loss distribution, and buy-sell guidelines that relate to your business.

Although it is not mandatory to have this an operating agreement, startup entrepreneurs are advised to draft it. Likewise, the Small Business Administration recommends that this agreement remains confidential since it may contain personal information.

Building an e-commerce startup comes with lots of challenges. Entrepreneurs in the e-commerce industry have to adapt to an increasingly dynamic regulatory and legal environment. Apprising yourself with these laws and regulations will help you avoid many legal and stolen-data issues.