8 Ways to Protect E-commerce Transactions from Online Fraud


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Ecommerce Fraud. What is it about eCommerce that fraudsters love targeting? 

Is it because it is easy? Or is it because it has untapped potential? 

The unfortunate news is that – there has been an ever-increasing growth in eCommerce fraud. 


Let’s stop to look at the numbers for a second. 


There has been an average of 206,000 attacks on e-commerce stores in over a month in 2021-2022.


In case you operate your own site, your focus ought to be on protecting yourself from fraudsters, a solid buffer against those seeking to wreck your online reputation. 


Like protecting oneself from the brand competition wasn’t enough, fraudsters are now forcing you to be overprotective of what you own.


So here we have the ultimate guide to break down what e-commerce fraud is all about and what you can do to protect your e-commerce firm from the same. 


Let’s dig in! 


What is E-commerce Fraud?


Understanding what eCommerce fraud is all about is essential. Why? Because it lets you protect what you have earned on your own. 


E-commerce of course involves all goods and services that are transacted electronically over the world wide web. Typically any online store that does this, allows transactions to occur with the usage of a phone, laptop, tabs, etc. 


When we talk in particular about eCommerce fraud, it refers to a type of criminal deception that results in personal gain for a third party. 


E-commerce fraud conducted through a fraudster can negatively affect profit numbers and result in huge losses for the firm. 


So two things need to be kept in mind when we talk about eCommerce fraud – deception is intended to be undiscovered and the target is usually a specific online merchant’s site. 


This sort of illegal transaction is undoubtedly the biggest contributor to online theft transactions. 


Any illegal transactions that are performed by a criminal occur due to stolen payment information. This is usually done using false identities, fake cards, false card information etc. 



ecommerce fraud


Why Is E-commerce Fraud Prevalent?


Especially in this post covid era, the use of AI has had both negative and positive consequences. 


Fraudsters are finding newer and better ways to conduct e-commerce fraud. 


In a world where data is everything, the same data is being stolen by fraudsters to conduct their crime. 


The following are some of the major threats that are confined to e-commerce fraud activities. 


Threats to look out for:


1) Identity theft


If an imposter obtains personal data including financial details, this amounts to the unauthorised use of one’s personal details. It not only affects you as the merchant but also customers requesting a refund. 


2) Friendly fraud


A chargeback or friendly fraud is when a customer requests a refund for a purchase never made. 


This can be reduced only when the data tracking mechanism is robust and transparent with all details on the purchase date, refund request date, shipping policy etc. 


3) Stolen credit card fraud


A stolen credit card is used to make a genuine purchase from a real customer online. This type of e-commerce fraud is more problematic since it looks legitimate. 


4) Phishing


Phishing involves stealing the data of a genuine user. This could be credit card information, User ID, Passwords, etc collected over SMS or mail. 


Without the owner’s knowledge, purchases are then made through that data. 


4) Triangulation fraud


Triangulation fraud is genuinely not as complicated as it sounds. 


When an e-commerce fraud involves a fake online shop offering real goods at super cheap prices, then you should be cautious. 


Such credit card data is collected and stored on the site. 


Post an order is placed on a fake website, the fraudster will resort to ordering the same product from a real website using the stolen credit card information. 


In this way, the customer ends up paying twice, while the fraudster gains money once. 


ecommerce fraud


How to Detect E-commerce Fraud


Fraud detection should be one of the primary focal points you need to keep in mind when considering ways to prevent the same. 


  • How eCommerce frauds are committed
  •  Who are the fraudsters
  • How to detect eCommerce fraud


Some hints to let you in on the trail for detecting eCommerce fraud may be as follows:


  • Bulk quantity orders 
  • Unusual location shipping order 
  • Multiple cards used for orders with the same IP address  
  • Bot-generated data breaches with account takeovers


Identifying your threat is the first step in preventing it from happening. 


E-commerce fraud completely depends on the defence your eCommerce shop has and the skill of the fraudster. 


Some red flags to look out for:


  • Inconsistent data: 


The city location and postal zip code may not match. Or the IP address of the shopper and their email address don’t match.


  • Higher than normal purchase volume: 


The order in volume and value are larger than what the customer normally spends. Other hints include multiple units of the same item, expedited shipping etc. 


  • Unusual location: 


In case an IP address suddenly changes to a random location in a country across the continents, you need to realise something’s up. 


  • Multiple shipping addresses: 


Multiple purchases are made under one billing address but shipping addresses are seen to be in different locations, this is another red flag to look out for. 


  • Multiple transactions in a short timeframe: 


Multiple purchases are made suddenly when it is an off-sale season, this can be considered another red flag as well. 


  • Multiple orders from multiple credit cards: 


In case a fraudster makes multiple purchases using multiple credit cards or corporate credit cards, then it is something to look out for.  


  • Multiple declined transactions 


Multiple failed attempts with 6-8 failed attempts just mean the fraudsters are playing around with numbers to try their luck to scam their way through purchases. Beware of such attempts. 


8 Ways to Protect E-commerce Transactions from Online Fraud


There may be technical or non-technical aspects to look into when it comes to the prevention of e-commerce fraud. 


Some are software-based and some are non-software-based. Following are the 8 best ways to prevent e-commerce fraud:


  1. Conduct regular site security audits. 


Detect all the flaws in your website privacy and security settings. Conduct regular security audits and keep these questions in mind:- 


  • Have you kept the shopping cart software up-to-date?
  • Status of SSL certificate 
  • PCI-DSS compliant (Payment Card Industry Data Security Standard) status 
  • Backup frequency – Is it set well? 
  • Are strong passwords being used for  FTP access, admin accounts, hosting dashboards, CMS etc
  • Scan frequency for malware 


ecommerce fraud


2. Ensure  PCI compliance


PCI basically means Payment Card Industry. These PCI standards are managed by PCI Security Standards Council to keep credit card transactions secure. 


This means your e-commerce store needs to meet these PCI standards to increase cyber security requirements. For instance, your platform will provide this compliance if you own a SaaS-based eCommerce store. 


3. Monitor for suspicious activity.


Offline shops hire professional officers to ensure no shop; lifting occurs. Similarly, you may hire cyber security experts to monitor all the accounts and billing information confined to your database to prevent eCommerce fraud. 


Using cyber security tools to track shipping activities, customer IP addresses etc are added defence tricks you can use to prevent e-commerce fraud. 


4. Opt for Address Verification Service (AVS)


Credit card agencies generally issue address verification services. This is used to detect any suspected fraudulent activity that occurs through the card. 


AVS checks all details issued by cardholders and syncs them with the file on the bank’s database. When addresses do not match or in case of any other mismatch in data, the transaction gets flagged for investigation. 


5. Mandate Card Verification Value (CVV) numbers for each purchase


The 3-digit security code that comes with all credit or debit cards is highly important. Sure the customer’s payment experience needs to be smooth but a customer would value higher cyber security provisions over comfort on any given day. 


6. Use HTTPS (Hypertext Transfer Protocol Secure)


HTTPS is a more protected version of HTTP. This is a primary protocol to send data between two parties. In this case, it is the customer’s browser and your eCommerce website. 


The encryption that HTTPS comes with ensures sensitive data is protected and this prevents hackers from accessing the name, address, and credit details of customers’ cards. 


You may buy an SSL certificate to get HTTPS. 


7. Avoid collecting sensitive client data


Collecting and keeping very little information on customer card details is another way to prevent e-commerce fraud. 


If there is nothing to steal, then hackers can’t do anything without data. 


Collect the data you absolutely need, just enough to complete a payment process and ship the goods. 


Collecting social security numbers, anniversaries, special dates and other unnecessary information may be avoided. 


8. Set limits on purchases. 


Setting limits on the number of purchases or total dollar value for a specific account is important. In that eCommerce fraud if not prevented, can at least be reduced considerably in terms of value and volume. 


Adding an anti-fraud solution may also help. There are a wide variety of tools in the market. Choose the one most suited to your needs. For example, IP address recognizers, auto decline, chargeback guarantee detectors device fingerprinting tools etc. 


Bottom Line – Knowledge Is Power


For sure fraudsters are innovating newer and newer methods to attack merchants online. 


However, the number of attacks is also considerably low in proportion to the attacks, thanks to affordable technology. 


Understand your eCommerce store, its weakness and strengths and then proportionately weigh in on the ways to prevent eCommerce fraud. 


After all, every eCommerce store has a different set-up and a different process.


Recognize yours and prevent what’s avoidable. 



Check out the EcomBalance blog page for more helpful articles


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Ramitha Ramesh

Ramitha Ramesh

Ramitha Ramesh is the editor at Karbon Business, working as an SEO content marketing strategist for Karbon, with clients from the US, UK and India. You can find her blogs anywhere in the fast-driven sphere of finance, business and banking. She is also an expert in vendor management processes that makes business payments hassle-free. Finding nirvana in food, fun and travel, she is on a mission to save the world from infodemic emanating from the digital world, through her blogs.

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