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As the ecommerce industry continues to grow and online activities continue to increase, ecommerce businesses must find ways to secure their ecommerce platform and protect customers from ecommerce fraud.
In 2021, ecommerce fraud cost an estimated $20 billion US dollars. Also, for online retailers in North America, around 2.6% of total revenue was lost to ecommerce fraud. These statistics only further highlight the importance of protecting your ecommerce platform from fraudulent online activities.
An attack on your ecommerce platform poses a huge threat not only to your business but also to your customers.
In this guide, we will look at some ecommerce fraud prevention best practices to keep your ecommerce platform safe and secure.
Ecommerce fraud is a deceptive or fraudulent activity that occurs during an online transaction. It involves the theft of personal or financial information, making unauthorized purchases, or making false claims about a product or service.
An ecommerce fraudster or cyber-criminal aims to get financial gain from the ecommerce business at the expense of the merchant. They also target payment systems and customers which results in financial losses, and loss of business reputation, among other dire consequences.
Cybercriminals use various methods to carry out ecommerce fraud. These include sending deceptive emails and texts, installing malicious software on a computer, collecting information, and selling to other criminals, amongst other methods.
Ecommerce fraud can happen in various ways and being aware of their methods can help you prevent it. Here are some of the most common types of ecommerce fraud:
Phishing involves sending deceptive emails or texts to trick individuals or companies into providing sensitive information including passwords and credit card numbers which then opens them up to fraud or security breaches.
Account takeover is a type of identity theft fraud where cyber criminals use stolen personal information to carry out unauthorized transactions that affect unsuspecting victims. For example, a cybercriminal may have access to your social media app and trick your contact into carrying out online transactions.
This type of fraud starts with receiving emails or text messages requesting personal information. After which they use your personal information to take over your account and carry out unauthorized transactions. This can affect your business’s reputation and incur costs that can affect your business.
This type of fraud involves the use of credit or debit cards. With credit card fraud, the criminal typically gets unauthorized access to your credit or debit card information and then uses it to make online transactions.
These fraudsters will first defraud the cardholder and also defraud the merchant who intends to refund the unlawful sale.
In banking, customers can request chargebacks where credit card funds used in a transaction are returned to the buyer. This can happen in genuine situations where someone’s credit card details are stolen and used to make unauthorized purchases.
However, this can happen fraudulently. Someone can make a purchase, receive the order, and claim the transaction was made without their knowledge. So, the intent is to get the product or service for free.
Chargeback fees can be bad news for ecommerce business owners. Some payment processors can stop you from accepting payments from some credit card companies. Chargeback fees can also affect your revenue and cripple your business.
With refund fraud, cybercriminals try to get a refund for online transactions due to illegal reasons.
Some criminals may claim that the order never arrived or claim that the box arrived empty or with defects. Some fraudsters may use a stolen credit card to make unauthorized transactions and request a refund through another alternative, claiming that they do not have access to the original credit card.
With fraudsters so unrelenting, it has become so important to protect your ecommerce business from fraudulent activities. Here are some preventive measures you can take to protect your business and customers from fraudulent activities and avoid unnecessary losses:
Payment gateways help to facilitate online transactions among businesses, customers, and financial institutions. As an ecommerce business owner, your payment gateway will help process all online transactions that happen on your ecommerce site.
To prevent fraudulent activities, it is important to invest in secure payment gateways. These payment gateways ensure that credit card and bank account information is encrypted and transmitted securely to avoid fraud, data breaches, or unauthorized access.
An SSL or Secure Sockets Layer certificate protects sensitive data that moves from a person’s browser and website server. So, an SSL certificate ensures that information remains secure from any unauthorized access. They authenticate a website’s identity by confirming that the domain name corresponds with the organization.
Websites with an SSL certificate come with a padlock icon or green address bar indicating that the connection is secure.
By obtaining an SSL certificate, you can build trust with your customers by demonstrating that your site is secure and their personal information is safe. Ultimately, this improves customer trust and loyalty.
A multi-factor authentication (MFA) or two-step verification (2FA) is a process that requires that users provide at least two forms of identification to verify their identity when logging in or completing a transaction. This provides extra layers of security, making it difficult for unauthorized users to have access to your account.
Typically, multi-factor authentication can include a combination of passwords and pins, hardware tokens, fingerprints, etc.
For example, a user can provide a password and also need to provide a verification code sent to their phone number before completing a transaction. This makes it very challenging for fraudsters to gain access.
Machine learning and artificial intelligence have become powerful technologies used to spot ecommerce fraud. Due to their ability to work with large volumes of data, you can use them to detect fraudulent activities.
Machine learning can analyze large amounts of data and detect any suspicious activity that deviates from the usual pattern. ML can also use this data to predict potential ecommerce fraud which can help you take preventive measures.
AI can also identify high-risk transactions by assigning risk scores to certain transactions based on factors like user behavior and transaction history.
Address and card verification systems can help your business confirm the authenticity of your customer’s billing information to reduce fraudulent transactions.
An Address Verification Service (AVS) is commonly used by payment processors to validate the billing address on their file with the card issuer. If there are any discrepancies, the transaction may be declined, reducing the risk of fraud.
Card Verification Value (CVV) is another security measure for credit and debit cards. Users will typically be required to put in the CVV code during the checkout process. This helps to verify that the card issuer is in physical possession of the card, reducing the risk of fraud.
Monitoring transactions and user behavior is a simple and effective way to reduce the risk of ecommerce fraud. So, tracking activities like login attempts and transaction patterns can help detect potential fraud.
You can do this by real-time monitoring which involves tracking user behavior in real time. Analyzing user behavior like mouse movements and browsing patterns can help detect fraudsters or bots whose behavior may be different from a normal customer.
Biometrics and behavioral analytics offer a powerful way to verify customer identity and prevent fraudulent activities.
Biometrics uses physical characteristics like fingerprints, facial recognition, and voice patterns to verify the user’s identity. By incorporating biometrics into your ecommerce business transactions, you can increase customer verification accuracy and reduce unauthorized access.
Behavioral analytics studies user patterns, browsing habits, keystroke dynamics, and mouse movements. By analyzing these patterns, you can spot a fraudster and respond faster to minimize damages.
Training your employees on how to detect and prevent ecommerce fraud is a security strategy that can positively impact your business and reduce the likelihood of fraudulent attacks.
You want to train your new employees from the word go on the organization’s security policies. You also want to regularly update your employees on the new technologies and best practices to prevent ecommerce fraud.
Employees should use strong passwords and MFA to reduce the risk of unauthorized access to sensitive data. Employees should also be trained to identify phishing emails and text messages.
You want to assess the effectiveness of these training sessions and ensure they remain relevant to your employees.
To reduce the risk of ecommerce fraud, you also want to educate your customers by providing them with useful information on the various ways they can detect and prevent fraud.
For example, you want to encourage your customers to use strong passwords, use secure payment methods, monitor activity on their accounts, stay updated on the latest security features, and report any suspicious activity.
Carrying out regular security audits can help you identify potential threats, check the effectiveness of your security systems, and stay up to date with the latest security features.
You want to regularly scan and test your ecommerce site to identify any vulnerabilities that could be explored by cyber criminals.
You also want to ensure that your ecommerce site complies with security standards like PCI DSS, and General Data Protection Regulation (GDPR).
Update your security policies to adapt to the latest security threats. You can also employ the services of third-party vendors to assess your security measures and identify vulnerabilities that could be exploited.
Ecommerce fraud has cost a lot of businesses their finances and worse still their reputation. Having robust security measures can help detect and prevent fraudulent activities on your ecommerce site to protect your customers and business.
You’ve probably already considered selling on Amazon but its way easier than you think.
Call Us Now