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.

Ecommerce attracts fraudsters and cybercriminals, ecommerce fraud prevention a crucial priority for businesses. Disputed transactions are inevitable in the realm of payment fraud. They result in chargebacks for retailers, which can be a significant consequence of various types of ecommerce fraud . This means that the retailer is responsible for making up losses on a credit card transaction when challenged by a credit card issuer, especially in cases of credit card fraud. 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. It is is one of the most prevalent types of ecommerce fraud today.
• 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 focus on ecommerce fraud prevention by taking strict measures.

Ecommerce Fraud Prevention Best Practices for Businesses and Consumers

Use a secure website to Prevent Ecommerce Fraud

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 and a foundational step in ecommerce fraud prevention.

Keep Your Fraud Prevention Software Up-to-Date for Maximum Protection

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. Keeping the software updated is vital for robust ecommerce fraud prevention.

Follow PCI standards to Safeguard Ecommerce Transactions

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, adhering to these standards is a critical aspect of ecommerce fraud prevention.



Secure your business with top ecommerce fraud prevention practices!

Conduct Regular Security Audits for fraud detection

Regular security audits ensure you find security holes before the bad guys do. The audit must ask the following questions related to fraud prevention tools:

• 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 to prevent potential types of fraud?
• Does backup happen regularly?
• Are admin passwords strong?
• Are the anti-virus and anti-fraud programs current?
  
  

Invest in address verification services (AVS)

Unsavoury customers ship things to non-existent addresses, a tactic often seen in affiliate fraud. 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.

Implement required card authentication protocols

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.

Put strict account access rules in place

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.

Leverage Artificial Intelligence (AI) and Machine Learning (ML)

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.

Ecommerce Fraud Prevention Strategies to Stay Ahead in a Growing Market

Ecommerce 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 ecommerce fraud is also increasing. By 2027, fraud losses due to payment fraud 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 that specialize in ecommerce 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 ecommerce fraud prevention is a continuous process that calls for constant vigil and remaining ahead of evolving fraud strategies.

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