9 Crucial Tips to Protect Your E-commerce Store From Fraud

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Many people nowadays prefer to shop online, but as it’s as easy for business owners to set up a site, it’s also easier for them to fall for fraud and hacking. Yet, despite these cyber threats, many businesses still take the risk of setting up an ecommerce site and putting their brand out there.

So what is one of the best ways to secure your online store from fraud and hackers? 

If you want to build an online store for your products and services, here are some of the best ways to keep it safe and secure: 

What is e-commerce fraud?

E-commerce fraud, which is also known as payment fraud, is a deceptive activity that takes place on an ecommerce platform. This can include anything from stealing credit card information to identity theft.

Ecommerce fraud is a form of deception done during commercial transactions online. The goal is for the fraudster to get financial or personal gain while negatively affecting the merchant’s bottom line. Another name for it is payment fraud. 

You need to remember two things with ecommerce fraud: the target is an online merchant, and the deception is intended to stay undiscovered. 

Different Types of E-commerce Fraud

9 Crucial Tips to Protect Your E-commerce Store From Fraud

Photo by Tima Miroshnichenko

There are various types of ecommerce fraud, all aiming to make a profit at the merchant’s expense.

1. Identity fraud

Identity theft will always be a significant concern for everyone, especially with banks, credit card companies, and online merchants. Hackers usually steal the account owner’s identity and make purchases. A good example would be stolen credit card information. 

If they have the person’s personal details like their name, address, phone number, and other credit card details, they can buy whatever they want online at the credit card owner’s expense. 

2. Chargeback fraud

This type of scam is usually committed by the customer rather than the criminal. Usually, it’s up to the customer to file a claim on their purchase, whether it arrived damaged or didn’t arrive, and they can demand a refund. 

Once the claim is approved, the customer can get their purchase reversed, and the merchant can refund them the order. In this case, the customer takes advantage of the ecommerce platform. 

3. Friendly fraud

This usually happens when the customer purchases something via your ecommerce site and then files a chargeback with their bank. 

In this scenario, shoppers might illegitimately claim that what they bought was not delivered, looked different from what they previously ordered, or canceled after placing their order. Avoid bogus buyers in your shop as well, as much as you can. 

4. Account takeover fraud

In this type of raid, the fraudster gets the saved log-in details of the user on an ecommerce store. Once the fraudster gets the user’s passwords and other personal information, they can access the account information, allowing them to make transactions or even withdraw cash. 

Now, the implications of this type of deception can be devastating in the long run. In this scenario, the unauthorized user’s goal is to commit as many fraudulent transactions as possible before the victim can shut down their account or change their payment method. 

5. Triangulation fraud

The rise of online marketplaces worldwide has also given consumers and sellers plenty of opportunities to buy and sell goods and services with just a click. 

This type of convenience also provides a unique kind of fraudulent activity in the ecommerce world, known as triangulation fraud. With this type of fraud, it’s relatively easy for the cybercriminal to set up a fake website tricking a person into making a false purchase. 

The catch is that these goods don’t exist and are never shipped to the customer. Consumers then lose their credit and bank information; on top of that, they won’t get the goods they’ve bought. 

Usually, the fraudster will get the person’s credit card details and use them to make fraudulent purchases. This type of fraud victimizes several involved parties- the consumer, the merchant, and the seller. 

6. Clean Fraud

This type of fraud usually refers to transactions that may appear to be legitimate. This type of fraud has been increasingly common to retailers as the transaction usually doesn’t get flagged or blacklisted. This may involve stolen credit card details to impersonate the card owner. 

Usually, fraudsters can get ahold of these details by convincing the owner of the accounts to purchase fake sites, and intercepting messages between transaction parties. Sometimes, they might even purchase them on the dark web, and specific browsers can only access them. 

7. Affiliate Fraud

Through this type of fraud, cybercriminals can manipulate traffic and sign up. They can make the merchant think they’re getting the attention of their consumers, but in reality, they don’t exist. 

Many companies have affiliate marketing programs that generate commissions through shared links and content. Unfortunately, this type of fraud can be as simple as refreshing the webpage several times or sending popups or spam emails to create a false sense of high traffic. 

10 Tips to Prevent E-commerce Fraud

9 Crucial Tips to Protect Your E-commerce Store From Fraud

Photo by Tima Miroshnichenko

So now that you know the basics, here are nine tips to prevent ecommerce fraud. This will help you identify ecommerce fraud, how to handle the problem, and ways to avoid major financial losses. 

1. Set limits on total purchases

Orders in high quantities are a red flag for cybercriminals using stolen credit cards to make fraudulent purchases. 

You can limit the chance of these orders going through by limiting the total number of units a consumer can purchase. You can also analyze your previous sales data to know the average number of units you sell daily. Make sure that you automatically block orders that go beyond this volume. This reduces the chance of hackers committing fraud in your online store. 

2. Invest in verification software

Another telltale sign of ecommerce fraud is when the customer’s billing, shipping, and card details don’t match up. Make sure that you have a verification system that automatically identifies these orders: 

  • Card verification number (CVN): Cybercriminals only need to see a credit card’s front in making purchases online. So make sure you place a three or four-digit pin or CVN as a necessary field in your ecommerce checkout. Adding this extra layer of security is one of the most popular fraud detection features utilized by more than half of merchants. 
  • Address verification system (AVS): This verifies the customer’s billing address on the card they’re using. Many cybercriminals will use various cards to purchase at a single address. Usually, an ASV will catch them. 

3. Exercise common KYC tests

One of the most common concerns for many online businesses is identity theft. To make sure that you prevent these frauds, incorporate common KYC practices and kyc compliance every now and then. 

Here are the most common KYC checks to prevent identity fraud: 

  • Sending confirmation codes or emails to validate an email address. 
  • Validate phone numbers using two-factor authentication. For instance, sending a code on mobile via SMS or voice calls. 
  • Requiring and validating public records like credit card bills, utility bills, passports, etc., to verify the person’s physical address. 
  • Authentication via video consent verification. For example, a person can record a live video of themselves holding their identity document or a handwritten verification code sent via the customer’s mobile phone. 
  • These checks are essential for every type of online business out there. There are some other tests as well that you can use to prevent identity theft.

4. Make sure to follow PCI standards

Payment Card Industry (PCI) standards help secure your business and customers from ecommerce fraud. 

The Payment Card, Industry Security Standards Council is the one that strictly enforces these standards. These are required for online retailers. Most large payment processors need to comply with PCI standards. However, businesses and merchants must also research before picking a third-party payment 

5. Require card verification value (CVV) numbers

CVV numbers are usually three or four-digit security codes at the back of most credit and debit cards. This is also known as the Card Verification Value or CVV. 

When all purchases are required to give this code for every transaction, it ensures that customers physically have their actual credit card at hand. Using this code requirement for every purchase as an additional security measure will keep your online store and customers safe. It also decreases the chances of fraud. 

6. Implement multi-factor authentication

Using this method, users must authenticate their log-in attempts by entering a one-time password (OTP,) answering a security question or using their fingerprint. 

According to Microsoft, multi-factor authentication can block up to 99% of cyber threats. Thus, setting this up is an excellent strategy to boost your ecommerce security. You can activate multi-factor authentication by installing a security plug-in or a third-party app like Google Authenticator.

7. Monitor your transactions regularly

Another way you can protect your ecommerce store from fraudulent activity is to monitor your transaction regularly.

Make sure that you regularly monitor it for possible red flags like inconsistent shipping and billing information, as well as the physical location of your customers. This is one of the best ways for you to detect any strange activities that could be happening. Detecting these things is a great and effective tool that you can use to prevent fraud. 

8. Reject non-physical shipping addresses

When making illegitimate orders like using stolen credit cards, cybercriminals will pick a non-physical shipping address to reduce the chance of getting caught. 

One of the most common ways they do that is by entering the details of a post office box as the shipping address. While this, in a sense, doesn’t indicate that the activity is illegal, it’s something that definitely increases suspicion. 

9. Only collect necessary customer data

This one’s pretty self-explanatory. Cybercriminals can’t steal information that they don’t have. In the case of ecommerce stores, make sure that you limit the data that you collect to what’s only necessary for completing the transaction.

In case a scam happens, you can still limit the damage. For instance, although names and addresses are important, you most likely don’t need to input your customers’ birthdays in your system. 

10. Provide security training to employees

Your employees need to know that they shouldn’t email or text sensitive data, nor do they have to reveal their customers’ private information on chat, as none of these communication methods are secure. 

They need to be properly educated on the different laws and policies that could affect customer data and trained on the actions needed to keep it secure. 

Over to You

So there you have it. These are the most important tips that you need to keep in mind to protect your online store from fraud. Ecommerce fraud can be increasingly complicated. That’s because cybercriminals are intelligent and can think outside of the box to reach their goals. 

Fortunately, if you’re vigilant and follow these ecommerce fraud prevention methods, you can stop most of these fraudsters on their tracks. It also helps you use a high-quality solution with a fraud detection and management system to protect yourself from these malicious attacks. Good luck! 

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