Ecommerce Fraud Protection: 7 Effective Tips for Online Sellers


ecommerce fraud protection


There are specific hurdles that come with being an e-commerce seller. For starters, it can be very challenging to confirm that a customer is a legitimate one. Additionally, dealing with unauthorized transactions can lead to many problems, such as chargebacks that may result in further financial loss.


Notification of a fraud chargeback can feel like a blow below the belt. The responsibility for verifying orders is upon online merchants, and the credit card providers want them to check if genuine cardholders place the orders or not. So, online sellers should be knowledgeable about how to identify fraudulent transactions.


Due to online payment fraud, the US estimated eCommerce losses of almost $20 billion in 2021 alone. Asia-Pacific nations are the most susceptible to e-commerce fraud, with lost profits amounting to 4% of a brand’s turnover. The COVID-19 epidemic saw a 68% surge in fraud efforts in North America, but no nation is immune to it; worldwide, fraud is on the rise.


However, that doesn’t imply that you can’t take steps to secure your company as an online seller. There are several effective ways to detect online fraud and activate eCommerce fraud protection.


But first, you need to understand the following:


  • Why do you need e-commerce fraud protection?
  • What are the types of eCommerce fraud?
  • How to identify eCommerce fraud?


Why do you need e-Commerce fraud protection?


ecommerce fraud protection


Con artists might fraudulently intercept a business transaction on an e-commerce site for monetary or personal gain. This illegal practice, also known as payment fraud, involves con artists stealing money from the client, the seller, or both.


With forecasted worldwide e-commerce revenues of $5.55 trillion in 2022, fraudsters will have plenty of opportunities to steal client data. Therefore, as an online merchant operating an e-commerce website, you must comprehend the main justifications for implementing eCommerce fraud protection for your company.


1. It recognizes new and evolving fraud attempts


Fraudsters continuously develop new strategies to exploit flaws or make their attacks more sophisticated to get past security measures. You can detect fresh and unanticipated fraud attacks better if you have eCommerce fraud protection, particularly with machine learning fraud detection.


Machine learning models can effectively detect anomalous behavior and thwart never-before-seen fraud risks by using the past to predict the future and comparing behavior to its current surroundings.

2. It thwarts malicious log-in attempts and high-velocity attacks from bots


Fraudsters perform highly sophisticated mass bot attacks to access private data and stored value. Bot attacks are especially damaging due to their speed and scope. A fraudster can access hundreds or even thousands of accounts or credit card numbers in a few minutes.


These high-velocity attacks can be recognized and stopped using tools with bot protection capabilities. A solution for account takeover can also halt frequent attempts to log in. Fraudsters target customer accounts for stored data like credit card information, personal information, and loyalty points. High-volume log-in attempts can be recognized and stopped by an eCommerce fraud protection solution, protecting consumer accounts.


3. It protects customer data


You are also defending your clients by using eCommerce fraud protection to safeguard your company. It’s also your responsibility to protect the client database since you’re in charge of it.


4. It Enhances credibility


If your clients know how seriously you take the security of their data, your credibility will increase. They will undoubtedly divulge their contact information and payment information. Before consumers purchase from you, they must have faith in your company.


5. It increases revenue and profitable orders


By comparing the risk of fraud to the value of a client on a faster and more scalable basis, eCommerce fraud protection simulates an expert fraud analyst, raising order acceptance rates and revenue.


With a faster and much larger scale, an eCommerce fraud protection solution can accurately determine a customer’s reliability. This entails stopping fraudulent or faulty orders, accepting more orders from loyal consumers, and minimizing false positives to increase the income that would have otherwise been lost to fraud or wrong orders.


6. It prevents losing profit


You will lose money due to hackers exploiting your accounts to engage in fraudulent activity.


For instance, a seller can’t use its social media platforms for advertising business if they are hacked. It will be difficult to win back the clients’ faith if there is a data leak or security breach.

7. It gradually lowers pre- and post-authorization chargebacks


For businesses, fighting chargebacks can be pretty tricky. Since complaints can be filed up to 120 days after a transaction, it might take a while before the underlying issue comes to light. Delayed processing can result in unforeseen chargeback expenses that quickly mount and potentially put businesses in danger of being included in fraud monitoring programs.


Before a company authorizes and conducts the transaction, an eCommerce fraud protection tool, such as a payment fraud prevention solution, guards digital payments against fraud. Therefore, if the company has a preventative measure, it can completely deny the transaction when a fraudster tries to make a purchase using a stolen credit card.


Conversely, a chargeback mitigation system enables companies to respond in real-time to post-authorization dispute queries and chargeback notifications. In this case, a business can intercept a customer disagreement from unintentional and intended friendly fraud and convey transaction information to avoid a chargeback.


These options can significantly lower pre- and post-sale chargebacks and inventory and fraud losses.


What are the types of eCommerce fraud? 


ecommerce fraud protection



Here are 7 eCommerce fraud types online sellers must know:


Account Takeover (ATO) Fraud


It occurs when a hacker accesses a valid user account on an online store and exploits it to make purchases.



Card Testing Fraud


An attack occurs when a scammer has obtained credit card information but is unaware of the validity information and limit.



Friendly/Chargeback Fraud


This fraud occurs when a perpetrator buys something from an online store and asks for a chargeback after the item has been delivered. This scam is also sometimes referred to as “friendly fraud.”



Refund Fraud


In this kind of fraud, the perpetrator will use a credit card that has been stolen to make an online purchase, pay more than necessary, and then get in touch with the online retailer to ask for a refund. They ask for a reimbursement for this overage while urging that another way to send the funds be used instead.



Shipping / Interception Fraud


This fraud occurs when criminals place orders in an online store using the card’s legitimate billing and shipping addresses to complete the transaction. The fraudster will use deceptive methods to intercept the goods and steal them for himself.



Triangulation Fraud


A triangulation fraud involves three parties: the scammer, a buyer, and the e-commerce store, hence the name “triangulation.” A third shopper is needed to initiate the attack in a triangulation scam. The perpetrator of this scam first creates an online store or storefront on an online marketplace. Selling in-demand items at a steep discount to get buyers in quickly is a frequent strategy.


When a legitimate shopper submits their credit card information to purchase items from an eCommerce site, the fraudster will steal that information and use it to make the desired purchases from legal e-commerce websites. In the end, the fraudulent seller vanishes into thin air, leaving the actual merchant responsible for the chargeback fee.


Transaction Fraud 


A scammer using stolen credit card information to make purchases at an online retailer is an example of this fraudulent activity. The genuine cardholder sees the fraudulent transaction after the store processes the payment. 


If they do nothing, the amount will be charged against their credit card bill and increase their debt. Paying off too much credit card debt isn’t affordable for a typical individual, so they are compelled to opt for a debt settlement option or file for bankruptcy.


Customers may act immediately to avoid such a situation and get their money back. So, they start a chargeback with their bank. Ultimately, the seller or eCommerce company will come out on the losing end.


Highly suspicious signs of probable eCommerce fraud 


ecommerce fraud protection



Here are some red flags to look out for:


Unusual user behavior


Scammers will test their luck in one location before moving on to the next, concentrating on new businesses and websites. When they’ve conned one, they’ll move on to the next without leaving a trace. Keep an eye on new customers and what they do in your online store. If the credit card owner is a frequent shopper, you can analyze their purchase history and look for discrepancies.



Unusual location


Check for unexpected activity coming from locations other than typical if the customer has purchased something from you. The billing, IP, and shipping addresses are typically close to one another in the most secure transactions. Transactions with significant gaps between those three should be handled with greater caution. Watch out for orders with multiple shipping addresses or orders from unusually far-off nations.


An example would be if a consumer consistently purchases from an IP address in the US but suddenly does so from an IP address in Kenya. The account owner could be on vacation, but it’s better to be safe than sorry.



Declined transactions


Yes, even reputable shoppers can make mistakes like forgetting their PIN or exceeding their card’s credit limit. However, you should be wary if an account makes more than five attempts without correctly entering the credit card details (number, expiration date, name, and CVV).



Repeated Transactions in a Short Amount of Time


Multiple transactions are an obvious sign of credit card fraud. While making consecutive transactions from the same consumer may delight you, some scammers would use this technique to test cards. Before the account is canceled, the fraudster attempts to use the total amount on the card. Verify any orders placed from the same account repeatedly within a short period.



Multiple Cards From a Single IP address


These kinds of transactions show that the same machine has placed multiple orders. A single IP address for many cards and orders indicates a high possibility of fraudulent transactions. Therefore it’s essential to watch it even if the account names and delivery addresses differ.



Multiple purchases were made using different credit cards


A blatant red flag for fraud, particularly card testing fraud, is when an account (or many accounts with similar signatures, such as the same IP address) makes multiple purchases using multiple credit cards.



Large orders or quantities


Larger than usual orders will result from credit card fraud because a stolen card number does not last very long. Scammers want to spend as much money as possible in a single transaction and quickly max out their credit cards. Check orders for the same goods that seem particularly large to protect yourself from credit card theft.



Multiple shipping addresses


When a customer makes repeated purchases using a single credit card (one billing address) yet mails the item to numerous different addresses, that is another obvious red flag. You should be skeptical whenever customers wish to have their purchases shipped to a location other than the card’s billing address.



Fast Shipping options


Most regular consumers will probably choose a less expensive shipping option, which will take longer. Although money isn’t an issue for scammers, they’ll want to get their hands on the products as soon as feasible. Orders with overnight or urgent shipments should receive particular attention because they carry greater risk.


7 Effective e-Commerce fraud protection tips


ecommerce fraud protection


1. Increase website security


Securing your website is one of the fundamental elements to preventing eCommerce fraud activities. As they say, prevention is preferable to treatment.


Thus, be sure to:

  • To sell on, pick a safe eCommerce site.
  • To add additional security, have an SSL certificate.
  • Avoid integrating shaky plugins into your online store.
  • Cooperate with anti-fraud specialists to safeguard payment options.
  • Avoid downloading malicious software.

By taking these steps, you can avoid scams that might use these methods.


2. Use eCommerce fraud protection tools


The most well-known eCommerce platforms and marketplaces have integrated fraud detection and prevention systems, which are helpful aids.


These tools assist retailers in detecting fraud, identifying IP addresses, and gathering essential data from blocklists, email addresses, geolocation, and other sources. The following are a few of the most prominent eCommerce fraud prevention tools: 


  • Kount
  • Riskified
  • Fraudlabs Pro
  • Subuno
  • SEON
  • Signifyd
  • Sift
  • Cybersource


3. Educate the customer support team


A skilled customer support team for online stores is essential for preventing and detecting fraud. Fraudulent transactions might quickly go overlooked if your support crew rushes to approve orders.


Front-line customer service executives are frequently the victims of scams because they lack the expertise or training to identify and prevent fraud.


To spot all the aforementioned red signs, teach customer support staff. Hire more hands on deck during the holiday or shopping seasons to get more help. Or, to keep your company secure, employ an expert to evaluate your present security procedures and train your customer care staff to be more careful.


4. Ask customers to use strong passwords


Customers should use secure passwords when signing up on an eCommerce website and create accounts to make transactions online.

By doing this, a customer is defending themselves against possible unauthorized use of their accounts or identities. Additionally, this will stop unauthorized credit card transactions using their financial information.

A seller can also set up an OTP pin service or a login link for added security.


5. Use AVS, CVV, or CVC verification method


Many credit card issuers provide Address Verification Services (AVS) to enable retailers to verify the provided address with the one banks have on record. A bank verifies it and gives the merchant the AVS code. These codes may show differences between the actual address and the one the con artist gave.


A security code called the Credit Verification Value (CVV) is written on the back of credit cards. The buyer must have an actual credit card because this code is not saved in any files and cannot be used online. This is useful for preventing card theft-related transactions. To confirm that they are making the purchase, a buyer must require CVV (Card Verification Value) or CVC (Card Verification Code). Visa uses the CVV method, and Mastercard uses CVC.


Merchants can choose to accept, reject, or flag a specific transaction for possible fraud by employing AVS, CVV, or CVC for transaction verification.


6. Stay up-to-date with PCI standards


The Payment Card Industry (PCI) security standards aim to ensure that all businesses that accept, retain, operate, or transmit credit card information do so in a secure and protected manner.


Keep abreast with standards and pick a trustworthy third-party payment processor. The PCI compliance of the payment processors is essential for merchants. These requirements prevent fraud and are necessary for taking credit card payments.

The third-party payment processors generate revenue from an eCommerce site’s sales. Making the transactions as secure as feasible will benefit the business’s reputation and third-party payment processors’ goodwill.


7. Initiate monthly site audits


A seller must initiate monthly security audits to identify security gaps in their website defenses before scammers exploit them. 


Use this checklist and follow safety measures to stop fraudulent transactions and activities:


  • Run routine malware scans
  • Back up your online store data periodically
  • Verify that the SSL certificate is up to date
  • Update cart plugins and applications
  • Delete any plugins that are not active
  • Create secure passwords for all your important admin accounts
  • Encrypt all communications between the business, its clients, and vendors
  • Keep the shop compliant with PCI




In addition to the methods listed above, keep an eye on multiple failed transactions. If you see multiple failed transactions from a specific account using numerous cards, that can be a red flag. Additionally, once a fraudster succeeds, they will attempt again. To ensure that the fraudster is unsuccessful in further attempts, ban their phone number, email, IP address, and shipping address.


Numerous online businesses have devoted fraud prevention teams that can examine all high-risk transactions. Every company that sells products or services online should have some fraud protection policy, regardless of the size of its operation or the selected technique. Always remember, prevention is better than cure.


Check out the EcomBalance Blog to see more helpful articles and what’s new and how we’re working to change bookkeeping for the eCommerce industry. 

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Lyles Esq

Lyles Esq

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