E-commerce Security and Fraud Prevention: Safeguarding Transactions in the Malaysian Market

Table of Contents

Get the latest e-commerce industry news, best practices, and product updates!

Reading Time: 11 minutes

In today’s digital world, cybercriminals are constantly using new and sophisticated methods to attack e-commerce businesses and their customers. E-commerce security and fraud prevention are vital measures that provide customers with a safe shopping experience.

Police statistics in Malaysia show that there were 98,607 online scam cases reported between 2017 and 2021, with losses totalling RM3.3 billion. In 2022 alone, there were 4,340 cases with losses amounting to RM665 million.

Given the high stakes, it is important for e-commerce businesses to allocate substantial resources to fraud prevention and security. By doing so, businesses can protect themselves from financial losses, reputational damage, and legal liability. Additionally, they can create a more secure shopping experience for their customers, which can lead to increased customer loyalty and sales.

This article will discuss the importance of e-commerce security and fraud prevention and some key steps businesses can take to protect themselves and their customers. We will also discuss some of the specific challenges facing Malaysian e-commerce businesses and how they can overcome them.

What Is E-commerce Fraud Prevention?

E-commerce fraud prevention is the process of identifying, detecting, and preventing fraudulent transactions in online businesses. It is a critical component of e-commerce security, as it helps to protect businesses from a wide range of adverse effects. Some of them have been discussed below:

  • Reduced financial losses: Online e-commerce businesses can reduce financial losses that result from phishing, denial of service attacks, and fraudulent transactions.
  • Improved reputation: E-commerce businesses can offer a safe shopping experience to customers, letting them know that they are committed to protecting their customers.
  • Reduced legal liability: Adequate fraud prevention measures can help e-commerce business owners reduce their legal liability by showing that they have taken reasonable steps to prevent fraud.
  • Increased customer trust: Enforcing fraud prevention measures can help businesses build trust with their customers by showing that they are committed to protecting sensitive information like billing and personal data.

Overall, e-commerce fraud prevention is essential to any successful online business. By investing in e-commerce fraud prevention measures, businesses can protect themselves from a range of threats and safeguard their financial interests, reputations, and customers.

Types of E-commerce Fraud

E-commerce frauds have largely impacted businesses due to the rise of online shopping and shoppers turning to online payment methods. There are a plethora of frauds being committed daily due to vulnerability in payment automation and other technological loopholes. Some of the most common ones have been listed below.

  • Fake listings: Scammers create fake listings for products that either do not exist or are of inferior quality. When a buyer purchases a fake listing, they will either receive no product at all or a product that is not as described. This can result in reduced store ratings and even suspension for repeat offenders.
  • Phishing scams: Scammers send fraudulent emails or SMS messages that appear to be from Shopee or Lazada. These messages may contain links to fake websites or ask for personal information such as passwords or credit card numbers leading to huge financial losses for the victim.
  • Payment fraud: Scammers use stolen or counterfeit credit cards to make purchases on Shopee and Lazada. Once the purchase has been made, the scammer will cancel the order or return the product in order to obtain a refund.
  • Refund fraud: Scammers purchase items on Shopee and Lazada and then return them, claiming to be defective or damaged, in order to obtain a refund. However, the scammers will often return counterfeit or damaged products.
  • Account takeover fraud: Scammers gain access to a customer’s Shopee or Lazada account and use it to make unauthorised purchases.
  • Fake seller reviews: Scammers create fake seller reviews in order to make their products appear more popular and trustworthy.
  • Fake shipping notifications: Scammers send fake shipping notifications to buyers to make them believe their order has been shipped. However, the order will never actually be shipped.
  • Fake delivery scams: Scammers pose as delivery drivers and contact buyers to collect their orders. However, the scammer will disappear once the buyer hands over the order.

Identifying Fraud in Your E-commerce Business

There are a number of ways to identify fraud in e-commerce. They have been discussed below in depth:

Suspicious Activity Indicators

E-commerce businesses in Malaysia should be vigilant about the following suspicious activity indicators:

  • Unusual order patterns: For example, a customer who suddenly places a large order for high-ticket items or places multiple orders for the same item within a short time.
  • Multiple declined payment attempts: This could be a sign that the customer is using a stolen credit card.
  • Shipping address inconsistencies: For example, if the shipping address does not match the billing address on the credit card.
  • Suspicious IP addresses: For example, if the customer is accessing your website from an IP address that is known to be associated with fraud.

Data Analytics and Monitoring Tools

Data analytics and monitoring tools can be used to track and analyse customer behaviour and transaction data to identify anomalies and irregularities that may indicate fraud. For example, these tools can be used to identify customers making purchases from multiple accounts or using different shipping addresses for each order.

Some specific data analytics and monitoring tools that e-commerce businesses in Malaysia can use include:

  • Fraud detection software: This software can analyse customer and transaction data to identify patterns that may indicate fraud.
  • Behavioural analytics software: This type of software can track customer behaviour on your website, such as the pages they visit, the products they view, and the searches they perform. This information can identify suspicious activity, such as customers browsing your website for high-ticket items but not making any purchases.
  • Risk assessment tools: These tools can assess the risk of fraud associated with each transaction. This information can be used to decide whether to approve a transaction or to subject it to additional review.

Manual Review Processes

Manual review processes can also play a role in fraud detection. Trained staff can assess transactions and buyer profile ratings for signs of fraud, such as unusual order patterns, inconsistencies in shipping and billing addresses, and suspicious email addresses.

Moreover, manual review processes complement automated fraud detection systems by providing a human element to the fraud detection process. Automated systems can be very effective at identifying patterns and anomalies in customer data and transaction data, but they may miss some cases of fraud. Manual reviewers can use their knowledge and experience to identify cases of fraud that automated systems may miss.

By combining automated fraud detection systems with manual review processes, e-commerce businesses can create a more effective fraud prevention strategy.

How to Prevent E-commerce Fraud

Now that you know what acts constitute fraud and how it can be a serious security threat, you need to know ways of fraud prevention that are effective for SMBs.There are a number of steps that e-commerce businesses can take to prevent fraud. These have been discussed below in depth.

Multifactor authentication (MFA)

MFA adds an extra layer of security to user accounts by requiring users to enter a code from their phone in addition to their password when logging in. This can help to prevent unauthorised access to user accounts, even if the scammer has the user’s password.

Machine learning and artificial intelligence

Machine learning and artificial intelligence (AI) can be used to develop fraud detection systems that can identify fraudulent transactions in real-time. These systems can analyse a variety of data points, such as the customer’s IP address, shipping address, and credit card information, to identify potential fraud.

Secure payment gateways

Secure payment gateways help to protect customer payment information from being intercepted by fraudsters. These gateways use encryption and other security measures to protect sensitive data.

SSL certificates and encryption

SSL certificates and encryption help to protect customer data in transit. This is important for preventing fraudsters from stealing customer information, such as credit card numbers and shipping addresses.

IP tracking and geolocation

IP tracking and geolocation can be used to identify customers who are attempting to commit fraud from locations where they are not known to be. This information can be used to block suspicious transactions or to conduct manual reviews.

Velocity checks

Velocity checks can be used to identify customers who are placing a large number of orders in a short period of time. This can be a sign of fraud, as scammers often place multiple orders in order to test stolen credit cards or to resell the goods.

Fraud prevention teams

Fraud prevention teams can investigate and respond to suspected fraud. These teams can also develop and implement fraud prevention policies and procedures.

Regular security audits and updates

Regular security audits and updates can help to identify and fix security vulnerabilities that fraudsters could exploit.

Employee training and awareness

Employee training and awareness can help to educate employees about the different types of fraud and how to identify them. This can help to prevent fraudsters from exploiting employee mistakes.

Customer Education

Customer education can help to educate customers about the different types of fraud and how to protect themselves. This can help to reduce the number of customers who fall victim to fraud.

Chargeback management

Chargeback management is the process of responding to chargebacks, which are disputes filed by customers when they believe that a transaction was fraudulent or unauthorised. By having a robust chargeback management process in place, businesses can reduce the number of successful chargebacks, saving them money and protecting their reputations.

Red Flags to Look Out for in E-commerce Fraud Prevention

The following are some red flags to look out for in e-commerce fraud prevention:

  • New email addresses: Scammers often create new email addresses to use for their scams. If a customer uses a new email address, it could be a red flag that they are trying to hide their identity.
  • High-ticket value: Scammers often target high-ticket items like electronics and luxury goods. If a customer places an order for a high-ticket item, it could be a red flag that they are trying to commit fraud.
  • Transaction velocity: Scammers often make multiple transactions in a short period of time. If a customer places multiple orders quickly, it could be a red flag that they are trying to commit fraud.
  • Expedited shipping: Scammers often select expedited shipping options so that they can receive their goods quickly and then disappear before the merchant can realise that they have been defrauded. If a customer selects expedited shipping, it could be a red flag that they are trying to commit fraud.
  • Buying in bulk: Scammers often purchase items in bulk so that they can resell them at a profit. If a customer places an order for a large quantity of items, it could be a red flag that they are trying to commit fraud.
  • Address mismatch: Scammers often use stolen credit cards to make purchases online. If the shipping address on an order does not match the billing address on the credit card, it could be a red flag that the purchase is fraudulent.
  • Repeat IP addresses: Scammers often use the same IP address to make multiple fraudulent transactions. If you notice that multiple orders are coming from the same IP address, it could be a red flag that the orders are fraudulent.

What to do if you encounter a scam?

If you encounter a scam, it is important to act quickly. Here are some steps you can take:

  • Halt communication: Stop communicating with the scammer. Do not respond to any further emails, phone calls, or text messages.
  • Report to authorities: Report the scam to the appropriate authorities. This may include the Malaysian Communications and Multimedia Commission (MCMC), the Malaysian Consumer Protection Commission (KPDNHEP), or the police.
  • Keep a check on suspicious activities: Monitor your accounts for any suspicious activity. If you have provided the scammer with any personal or financial information, be sure to monitor your accounts for any unauthorised activity.
  • Change your passwords: If you have provided the scammer with any passwords, be sure to change them immediately.
  • Remain educated and vigilant: Educate yourself about scams. The more you know about scams, the less likely you are to fall victim to

However, it is best if you do not engage in any communication that may seem out of place or illegitimate to avoid having to go through this hassle. Nevertheless, if you notice that you have fallen victim to such activities, informing the authorities will remain the most crucial thing.


E-commerce fraud is a serious threat to businesses of all sizes, but it is especially prevalent in Malaysia. In recent years, there has been a significant increase in the number of online scams and fraud cases reported in the country. 

The good news is that there are a number of steps that businesses can take to prevent fraud. By implementing best practices for security and fraud prevention, businesses can significantly reduce their risk of becoming a victim of fraud.

We encourage all e-commerce businesses to adopt best practices for security and fraud prevention. By taking the necessary steps to protect themselves, businesses can reduce their risk of fraud and create a safer shopping experience for their customers!

Experience fulfillment by LOCAD

Grow your business through Locad’s simplified and automated fulfillment solution

  • Unlimited and scaleable warehousing
  • Pay only for what you store
  • No hidden fees or lock-in periods
  • Zero inbound costs
  • Wide integration with marketplaces
  • Automated logistics and delivery
Get the latest e-commerce industry news, best practices, and product updates!

Don't miss out on the latest news!

Get the latest industry news, best practices, and product updates!

Exclusive benefits to ace your e-commerce game this 2023 with Locad’s desk calendar!