E-commerce fraud: prevention strategies for retailers
E-commerce has been part of the business community for a while now, but it has been growing faster than ever in recent years.
Growth has even been more expedited by the sudden appearance of the Covid 19 pandemic.
While trying to keep people safe, many companies had to close the doors of their physical stores and either accept digital transformation by moving their business online or shutting up shop permanently.
This has allowed them to expand their customer network and introduce their product to new markets. Unfortunately, this expedited growth also had some negative consequences.
Fraudsters have decided to use the opportunity and find ways in which they can exploit businesses through e-commerce fraud.
What is e-commerce fraud?
This is a broad term that covers all occasions in which fraudsters try to exploit e-commerce stores and their customers for financial gain. There are three most common types of e-commerce fraud:
Transaction fraud: This happens mainly as a result of card-not-present fraud. Fraudsters use stolen card details to purchase a product or service, resulting in a chargeback request as soon as the legitimate card owner sees an unauthorised transaction on their bank statement.
Friendly fraud: This usually happens when the card owner decides to dispute the transaction after they have made a purchase.
Triangulation fraud: This type of fraud takes the most effort from a fraudster as they need to set up a fake store where customers will buy a product during which fraudsters get their card details.
They will use these details to buy that product from a proper store with the customer's address, so they don't suspect anything. Fraudsters will then continue to use their card details for additional purchases.
How to protect your business from e-commerce fraud?
There are two reasons e-commerce businesses are one of the favourite targets for fraudsters.
Not only do they directly deal with customers' confidential details but also because fraudsters can usually conduct their fraudulent actions without getting caught while merchants end up dealing with all the consequences.
This is why it is imperative to stop them before they can do any damage. By staying vigilant and taking the following steps, you will be able to reduce the risk of e-commerce fraud and prevent your business from becoming a victim.
1. Perform risk assessment and security audits
This is an essential step not only because of cybersecurity but all areas of business.
Risk assessments and security audits not only show you if there are any flaws or vulnerabilities in your security protocols but give you a clear idea about which threats you might be facing.
It also gives you a chance to amend and fix all the flaws and vulnerabilities before they can be exploited and to create an action plan for dealing with those threats if any of them ever happen.
2. Always ask for a CVV or Card Verification Value number
It doesn't matter if you are dealing with a new or returning customer; you need to ask them for a CVV number.
You can never know if your customer has fallen victim to account takeover or identity theft, but them providing CVV numbers significantly increases the chances they are a legitimate customer with a physical credit card in front of them, which reduces the risk of transaction fraud.
3. Be aware of red flags
By being aware of standard patterns and keeping an eye on any suspicious activity that differentiates from usual, like multiple declined transactions or inconsistent order data, you can recognise fraudulent behaviour and stop it before it can do any damage.
4. Use cybersecurity
Implementing cybersecurity protocols, especially fraud prevention tools such as device fingerprinting or data enrichment, is essential in any business that wants to protect itself from fraud.
5. Educate and train
It is essential not only to know what you are fighting against but also how to fight.
By organising regular education and training with your employees, you will create an empowered business force that can defend your business and themselves from any threat.
