Accessibility to uninterrupted internet services has fueled the growth of the eCommerce industry. However, like two sides of the coin, along with numerous advantages, there are some risks that the eCommerce industry has to encounter such as eCommerce fraud and the ways to prevent eCommerce frauds. Such illicit and illegal activities on digital shopping platforms result in heavy financial losses. But more importantly, it leads to loss of customer trust and loyalty, leading to far-reaching effects on your business and must be tackled at the earliest.
According to research, global eCommerce fraud losses in 2021 were estimated to be around $20 Billion. These losses further indicate that there was 18% growth in the global eCommerce fraud losses from 2020 to 2021. Such glaring numbers suggest the immediate need of best-in-class eCommerce fraud prevention techniques to offer safe shopping experiences to their customers.
What is eCommerce fraud?
Also known as purchase fraud, eCommerce fraud constitutes deceitful online transactions performed by cybercriminals. Victims of these kinds of frauds can be merchants and customers, often leading to discontentment, financial loss, reputation loss, resource loss, and unwanted stress. Some common eCommerce frauds are:
- Apart from the above-mentioned eCommerce frauds, there are many other ways cybercriminals try to inhibit business revenue and make unlawful use of customers’ sensitive information. It is why retailers need to be agile and active in their preventative measures to identify, abstain, and implement Commerce fraud prevention best practices.
- What is eCommerce fraud detection?
- eCommerce fraud protection is a high-priority task that all eCommerce businesses must perform to ensure that their customers have a secure shopping experience. And, it begins with eCommerce fraud detection. Such measures involve applying specialized techniques to detect vulnerabilities on the eCommerce website and strategically preventing them. The challenge is to determine fraudulent activities before they cause severe damage to retailers and consumers.
- eCommerce fraud detection is also necessary because it increases the chances of higher ROI for eCommerce businesses. Statistics show that companies that implemented fraud prevention programs reduced their fraud attack response expenses by 42% and their remedy expenses by 17% compared to companies that did not have an eCommerce fraud prevention strategy in place.
- How to detect eCommerce fraud online?
- eCommerce frauds are not unconventional; however, the number of malicious actions and their intensity has recently soared, reinforcing the need to implement solution-centric eCommerce fraud prevention techniques. Brands worldwide compete to provide an omnichannel shopping experience to their customers, but such diverse shopping solutions also increase the number of entry points for online fraudsters.
- State-of-the-art eCommerce fraud detection tools present retailers with solutions that help them detect potential risks related to possible transaction fraud. Here’re the most effective eCommerce fraud solutions that can expedite online fraud detection and mitigate vulnerabilities within the digital transaction process.
- #1: Preventing eCommerce frauds with Machine Learning
- Machine Learning (ML) is a subset of artificial intelligence, where computer algorithms use training data to learn decision making. This technique can be instrumental in eCommerce fraud detection, as ML algorithms can effortlessly distinguish felonious transactions from legitimate ones. They can successfully study numerous transaction patterns on several eCommerce platforms and remember them for detecting any fraudulent transaction. Additionally, it can comprehensively and cost-effectively handle data overloads via trained algorithms without any human intervention.
- #2: Predictive analytics
- While machine learning utilizes real-time information and training data sets to detect eCommerce frauds, predictive analytics uses past trends, data and other functional variables to devise powerful eCommerce fraud protection and detection techniques. Predictive analytics is a versatile solution that can be integrated seamlessly into eCommerce platforms, effectively reducing shopping cart abandonment rates, increasing customer loyalty and lead conversion rates. By studying customer behavior, buying patterns, browsing habits, transaction history, etc., predictive analytics helps curb online frauds and build a resilient eCommerce platform.
- #3 Graph technology
- Graph technology is a connected analysis approach that presents different data sets such as consumer behavior, transaction data, channel related data in graphical format. The nodes in these graphs are connected via edges, and data analysts can fire a query on these data points to gather information related to eCommerce frauds and suspicious transactions.
- This intuitive approach provides insights into multiple layers of data breaching. Data scientists can use graph technology to get notification alerts in case of fraud detection, analyze real-time data to prevent eCommerce fraud and work on visual representations to provide advanced eCommerce fraud prevention techniques.
- Steps to prevent eCommerce fraud
- With the outset of online shopping channels, there is a tremendous surge in global payments fraud and other cybercrimes. Thus, the foremost task that a retailer of an eCommerce store must carry out is implementing superlative eCommerce fraud prevention techniques.
#1: Regular eCommerce website audits
Online merchants should chalk out a detailed plan for conducting regular site security audits and thoroughly check the eCommerce website for the following parameters:
- Presence of malware
- Current status of SSL certificate
- PCI (Payment Card Industry) compliance
- Password protection
- Encryption algorithms
- Updated versions of all the software and plugins used by the eCommerce site
Adobe Commerce platform uses intelligent monitoring and machine learning to minimize the impact of fraud on their customers and businesses. Adobe Commerce also imparts fraud education and awareness to its clients and customers to detect and prevent eCommerce fraud.
#2: Implement multi-layered security
One of the best practices to prevent eCommerce fraud is implementing multi-layered security by incorporating the latest software and technology tools to strengthen the security of your eCommerce store. Multi-layered fraud prevention solutions can be implemented by combining two or more eCommerce fraud solutions such as biometric identification, tracking geolocation of the consumer, address verification service (AVS), 2FA using OTPs or verification codes, and more.
Salesforce Commerce Cloud uses Multi-Factor Authentication (MFA) to provide secure access to user accounts and protect eCommerce sites built on the SFCC platform from cyber attacks such as phishing and credential stuffing.
#3: Maintain detailed order records
Retailers can prevent chargeback frauds by keeping the record of every order that they have received, shipped, and accepted return. Keeping track of all the customer touchpoints during their buying journey is an excellent way to prevent fraudulent activities in your eCommerce store. It is recommended to have digital copies of all the documents involved in the purchasing process for easy and quick access when required, such as in case of an ATO attack.
Shopify Plus helps brands deal with chargeback fraud with its fraud protection technology called Fraud Protect. Fraud Protect charges a reasonable fee to the merchants to protect their orders and, if there is a chargeback as a result of fraud, then Shopify Plus will reimburse the order amount and the fee to the merchants.
#4: Carry out CVV checks
Card Verification Value, commonly known as CVV, is a three or four-digit code; which is present on the credit and debit card of a customer. Merchants should always ask for CVV while accepting credit or debit card payments to ensure an authorized transaction. CVV identification code is never stored by merchants in their customer database, which makes this a very secure way of doing online transactions and preventing eCommerce frauds.
#5: Set limits on the number of declined transactions
Hit and trial is one of the many ways in which fraudsters execute unauthorized transactions. They try different combinations of identification codes, verification codes, and CVV to initiate a fraudulent transaction. eCommerce store owners should limit the number of attempts a customer makes to complete a legitimate transaction, thus reducing the chances of eCommerce fraud.
#6: Check for anonymous addresses
It is often observed that defrauders use PO Box or other anonymous addresses to receive orders. Retailers should treat this as a red flag and cancel the order immediately if the physical shipping address is suspicious or untraceable.
#7: Arrange anti-fraud training
Customers usually interact with an eCommerce business through their website, app or customer service. While there are a number of ways to prevent frauds on digital mediums, it is equally important to arrange for anti-fraud training for customer service representatives. Brands should ensure that their customer service representatives are well-trained to identify different types of fraud indicators and escalate any suspicious cyber activity immediately.
Prevent eCommerce frauds with these best practices
Adding security measures to prevent eCommerce fraud might introduce some friction in the customer shopping experience, but, in the long run, it will be beneficial to eCommerce businesses and their customers. Implementing eCommerce fraud prevention techniques secures the online buying process, boosts sales, revenue generation, and online business growth, and increases customer loyalty and retention rates.
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