Retail, CPG and Logistics
8 best practices for ecommerce fraud prevention
Shopping on Amazon or Target is convenience exemplified! Features including convenient ordering, multiple-device-friendly apps, no-questions-asked return policies, and timely refunds keep customers hooked to e-commerce stores. The market has seen exponential growth, but it is not without challenges.
E-commerce attracts fraudsters and cybercriminals. Disputed transactions are inevitable. They result in chargebacks for retailers. This means that the retailer is responsible for making up losses on a credit card transaction when challenged by a credit card issuer. When are credit card transactions disputed? Below are some scenarios:
- Transacting with stolen credit card information (transaction fraud): Almost all e-commerce sites support card-not-present (CNP) transactions. This situation is highly vulnerable to interceptions.
- Disputing authorised transactions (friendly fraud): Cardholders forget goods/services purchased or intend to exploit policy gaps.
- Taking over accounts (account takeover fraud): Cybercriminals hack into e-commerce accounts and gain control over them.
- Exploiting return policies (refund fraud): Scammers use a product (usually clothing) and return it once the purpose is served, or return damaged goods instead of the original ones.
- Faking a sale (triangulation fraud): A fraudulent seller posts an item for sale on a legitimate e-commerce website. A buyer places an order. The seller pockets the money, purchases a similar item from another e-commerce merchant with stolen credit card information, and has the item delivered to the buyer.
An ideal situation would be a fraud-free world! However, since this is overly ambitious and wishful thinking, e-commerce companies must take strict measures.
The eight safety measures for businesses and consumers
- Use a secure website
- Keep fraud prevention software current
- Follow PCI standards
- Conduct regular audits
- Are the necessary security certificates that make the website HTTPS-ready up-to-date and functional?
- Is the store PCI-compliant?
- Have the inactive plugins been removed?
- Are the shopping cart plugins current?
- Does backup happen regularly?
- Are admin passwords strong?
- Are the anti-virus and anti-fraud programs current?
- Invest in address verification services (AVS)
- Implement required card authentication protocols
- Put strict account access rules in place
- Leverage Artificial Intelligence (AI) and Machine Learning (ML)
Internet communication can be compromised with specific hardware and software meant for the purpose. This challenge can be dealt with by encrypting data. Security certificates for websites facilitate this, making your website HTTPS (Hypertext Transfer Protocol Secure) ready. This is one of the first indicators of a secure transaction.
The battle between fraudsters and anti-fraud software is ongoing. Anti-fraud software monitors, investigates, and blocks malicious activity. For example, it can track IP addresses of compulsive fraud bases, monitor inconsistent billing and shipping information, etc. As threats evolve, software releases security patches that protect against fresh perils. So, the software must be updated frequently and kept current.
Companies must maintain a secure environment in order to handle, store, or transmit credit card information. This was made possible by the establishment of the Payment Card Industry Data Security Standard (PCI DSS), which published a set of guidelines that enhance account security throughout the transaction process.
Regular security audits ensure you find security holes before the bad guys do. The audit must ask the following questions:
Unsavoury customers ship things to non-existent addresses. Businesses can benefit by investing in an Address Verification Service (AVS) to avoid such incidents and build customers’ trust. The system matches the cardholder's (customer's) billing address against the issuing bank's billing address. In the event of a mismatch, it either rejects the transaction or flags it for further investigation.
Going the extra mile to verify credit cards is always worth the effort. By requesting Card Verification Value (CVV) or Card Security Code (CSC) from every buyer for each transaction, you guarantee that clients have the physical card with them. These codes are three- or four-digit numbers on credit and debit cards.
A combination of strong passwords and multi-factor authentication (MFA) is extremely effective in double-checking a user's digital identity. When users access their accounts from random devices, businesses can authoritatively confirm that the account is accessed by authorised users only.
Relying solely on human decision-making is not the most effective approach to detect and prevent e-commerce fraud. AI tools that can emulate the experience of experienced fraud analysts while also eliminating human error repose confidence about the e-commerce environment’s security. ML models can be trained to identify new fraud attacks, evaluate fraud risks, and act accordingly. AI and ML not only help prevent fraud but also minimise manual reviews and gain greater control.
Safeguard and stay ahead with ecommerce fraud prevention
E-commerce is growing alarmingly. It is not surprising given the widespread availability of the Internet and the increasing preference for convenience shopping. However, trouble is also close behind. Global e-commerce fraud is also increasing. By 2027, fraud losses are estimated to cost e-commerce businesses $40.62 billion.
E-commerce businesses can safeguard themselves and their customers the help of retail outsourcing companies with best practices for fraud prevention, such as implementing multi-factor authentication, monitoring transactions in real-time, staying current on fraud trends, educating staff and customers about fraud prevention, and investing in fraud prevention software.
It's crucial to remember that preventing fraud is a continuous process that calls for constant vigil and remaining ahead of evolving fraud strategies.
* For organizations on the digital transformation journey, agility is key in responding to a rapidly changing technology and business landscape. Now more than ever, it is crucial to deliver and exceed on organizational expectations with a robust digital mindset backed by innovation. Enabling businesses to sense, learn, respond, and evolve like a living organism, will be imperative for business excellence going forward. A comprehensive, yet modular suite of services is doing exactly that. Equipping organizations with intuitive decision-making automatically at scale, actionable insights based on real-time solutions, anytime/anywhere experience, and in-depth data visibility across functions leading to hyper-productivity, Live Enterprise is building connected organizations that are innovating collaboratively for the future.
