We have good news and bad news. The good news is there is a massive uptick in eCommerce sales. The bad news? The growth in online sales has led to an increase in eCommerce fraud.
There is so much fraud out there in the eCommerce world, and it’s important to know how to deal with it. Per Signal Sciences (a cyber security company) online retailers deal with an estimated total of 206,000 attacks on their platforms per month. If you operate or own an online business, it is of vital importance to protect yourself from fraudsters who can steal from your business, wreck your reputation, and hurt your profits.
Here, we will go over everything you need to know about eCommerce fraud protection—what it is, how it works, and what you must do today to protect your online store from the growing threats of fraud.
Let’s jump in.
What is eCommerce Fraud?
Ecommerce fraud is criminal deception conducted during a transaction on an eCommerce platform. The intent is usually financial or personal gain for the hacker. Some forms of eCommerce fraud include using a stolen or fake card, using a false identity, and affiliate fraud advertising.
Online fraud can easily be done with stolen credit card information since the card doesn’t need to be present for the transaction. In some cases, hackers even steal personal and financial information and sell it on the black market. The purchases online are done anonymously, making it way easier to not get caught. A factor of why eCommerce fraud is so prevalent today is because fraudsters are likely not to get prosecuted by the law due to multiple factors, seen here.
This is why prevention is so necessary. Integrating a high-quality fraud detection and prevention system will help detect and eliminate fraud on your platform and can significantly reduce fraud’s impact on your revenue.
Ecommerce fraud is becoming more sophisticated and ever-evolving as fraudsters employ more advanced tactics with every passing year. So how do you know where to look for it?
How to detect eCommerce fraud?
As an online seller, there are various ways to sniff out eCommerce fraud. Here are the most common red flags to look for:
Many transactions in a short amount of time: The customer is making multiple, back-to-back orders, and there’s no occasion that seems to call for it.
Inconsistent order data: Are you seeing inconsistencies with an order placed? Zip code and city don’t match? The IP address and email address don’t seem to make sense?
Larger order than usual: The order is way more than your client typically spends, and the client requested expedited shipping (AKA the crook wants to receive the order before getting caught.)
Unusual location: In the past, your customer has always made purchases from a certain location, and it randomly changes to a different location. (ex. From Wyoming to Nigeria).
Multiple Attempts/Denied Transactions: The purchaser makes multiple attempts to buy something without getting the card number, security code, or expiration date correct.
Here are 5 ways you can prevent eCommerce fraud on your platform:
Fraud Detection Solutions
One of the most effective ways to fight fraud is to hire a third-party company to help you detect fraud from the onset. Fraud detection companies are third-party vendors that identify fraudulent transactions and implement security protocols. These protocols protect eCommerce marketplaces from card testing fraud, friendly fraud, and chargeback fraud.
Here is a list of the top eCommerce fraud prevention companies – with pros and cons and notable features.
Maintain PCI Compliance
The Payment Card Industry (PCI) standards are a widely-known set of requirements ensuring companies storing and processing credit card information maintain a secure environment. PCI compliance requires taking basic security precautions for your eCommerce business, as well as safeguarding consumer data. PCI compliance is mandatory for online retailers, so it’s important to abide by the applicable guidelines to avoid sanctions or penalties. Examine your security protocols from time to time to ensure that you’re protecting customer data and protecting your business from scammers.
Monitor Your Site Regularly for Suspicious Activity
eCommerce merchants can protect themselves from fraudulent transactions by monitoring their online stores regularly for suspicious activity. You should be on the lookout for any red flags as well as use software tools that track customers’ IP addresses and alert you if something doesn’t match up. Frequent site monitoring can help safeguard you from suspicious activities that will negatively affect your business.
Partner with a Trusted Third-Party Payment Processor
Utilizing third-party payment processors is one of the easiest and safest ways to prevent eCommerce fraud. Third-party payment processors often manage things like customer chargebacks, security compliance, and data storage. Using a third-party payment processor keeps sensitive data out of your hands and can keep customers’ private information safe.
Use an Address Verification Service (AVS)
Credit card processors generally offer an address verification service (AVS) to detect suspicious transactions and prevent fraud. AVS codes flag and alert owners on discrepancies. AVS can reduce the occurrence of fraud by helping businesses to decide whether to accept, reject, or flag transactions.
To end off:
Keeping your online store secure from any fraudulent attacks may seem like a difficult task. However, if you proactively apply the correct tactics and know which red flags indicate fraud, you are in a much better position to fight it and minimize it.
Knowledge is power. Yes, fraudsters are becoming increasingly advanced and sly, but eCommerce merchants are also getting more sophisticated in how they detect and deter online crooks.
Now that you understand what eCommerce fraud is and why it is so prevalent, you can take the necessary steps to protect your online store from almost any scammer that comes your way.