The evolution of e-commerce has been excellent for online business owners, but at the same time, has made them increase their awareness of fraud. Especially considering the fact that fraud has increased over the years.
Experts claim that the economic downturn of 2023 is going to result in an increase in payment fraud. The pandemic was the big cause of increasing online shopping throughout the years.
Let’s dive deeper into this article to find out more about fraud prevention strategies you can use this year.
The Types Of E-Commerce Fraud
Before we go deeper into learning more about fraud prevention strategies, let’s take some time to learn more about the common types of e-commerce fraud.
- Payment fraud: Payment fraud occurs when a fraudster is using someone else’s credit or debit card for purchasing and reselling goods for their personal profit. Most e-commerce losses occur because of this.
- Account takeover (ATO): This happens when a fraudster is using stolen credentials for accessing consumers’ accounts and getting access to their platform. Online attackers steal credentials and this is considered an “account takeover.”
- Friendly fraud: We’ve mentioned it before and have to say that there’s nothing good about friendly fraud. Some call it “chargeback fraud or abuse” and this is a type of ecommerce fraud that includes the fraudster asking for a refund illegally.
- Affiliate fraud: Fraudsters will use illegal acts to earn commission payments via affiliate marketing programs. Even though there are many terms for preventing this, it can still occur. Some of the most common types of affiliate fraud involve cost-per-click campaigns, cost-per-sale models and more. This type of fraud can occur in any way, from refreshing a webpage, to making you click on a spam link and more.
- Synthetic identity theft fraud: This is a type of fraud that includes stealing real people’s information, including their birth date, government ID, and much more. It’s not pleasant and when it occurs, many other fraud damages can occur.
Even though we mentioned lots of e-commerce frauds, there are plenty of them that occur. Each year, there might even be new forms of fraud that haven’t been discovered yet. We can’t know them, but the best step we can take is to try and prevent them.
8 E-Commerce Strategies You Can Use For Preventing Fraud This Year
1. Automated decisions using artificial intelligence (AI) and machine learning (ML)
Undoubtedly, AI has become a powerful weapon against fraudsters. ML algorithms are a part of AI technologies and are used for analyzing data and detecting irregular behaviors. By automating decision-making processes, it’s easier for you to make better decisions considering that your AI technologies are being used as a fraud analyst.
When you integrate AI-based technology with ID verification, merchants can build their own rules and provide a much better approach to e-commerce fraud prevention solutions. It also reduces the need for manual reviews, increasing acceptance rates and building a better business outcome.
2. Integrate multi-factor authentication (MFA)
MFA is an excellent way for identifying fraud. In fact, it blocks 99.9% of automated cyberattacks. In order for MFA to be effective, it uses more than two authentication forms for completing a transaction. This either might be a password, sending a limited-time code via SMS, email, or using fingerprints and facial recognition.
MFA is excellent for reducing account takeover risk and ID theft. Integrating it into your business’s authentication process is an excellent way to prevent attacks. Overall, numerous online shopping platforms need customers to enter a verification code to confirm purchases.
In order to integrate MFA into your business verification process, you need to know what kind of transactions your business approves and the level of risk associated with them. In this case, a high-value transaction might be more targeted by fraudsters compared to a low-value one.
Before you ask your customers for authentication, you can educate them on why you are doing it. This is for the good of your business and to save them from any unnecessary attacks.
3. Keep your software up to date
- Content management system (CMS)
- Plugins in your site, especially the shopping cart one
- Your site’s themes
This way, you’re playing the game safe and not giving fraudsters any space for potential attacks. After all, if you don’t keep your software updated, you’re also allowing space for bugs to occur. This is a free-way ticket for fraudsters to attack.
4. Ask for credit verification value (CVV)
On the back of your credit card, you have a code that nobody expects you to see. It’s completely safe to conduct transactions this way because fraudsters can’t get a hold of the credit card and see the CVV, unless they physically stole it from you.
CVVs are either three or four-digit security codes that usually act as a second-factor authentication for making online purchases. By requiring online buyers to supply a CVV number, you are granting them an extra layer of security, reducing the risk of e-commerce fraud.
5. Use the know your customer (KYC) procedure
Fraudulent transactions are only working against you because they damage your business reputation. KYC is a set of procedures used for identifying and verifying a client or customer. KYC processes are commonly used by eCommerce merchants for preventing fraud.
Moreover, here are a few ways that eCommerce merchants can use KYC for stopping fraud:
- Verifying the customer’s ID: Asking buyers to provide their IDs and verifying their consumer’s address and contact details, reducing fraud risk and the capability of stolen identities to make purchases.
- Screening for any risky customers: This scans through buyers to see if they have any history regarding fraudulent purchases.
- Pay attention to consumer behavior: Check on what kind of purchases your customer is making. If it’s large from new locations, this might be a red flag you should pay attention to.
- Include multi-factor authentications: As we mentioned before, include an MFA process since it makes it more challenging for the fraudster to complete their transactions.
Always confirming the consumer’s identity is an excellent idea for making unauthorized transactions and lowering fraud risk.
6. Compare the billing and IP address
IP addresses might not always be a perfect identifier, but it does ensure you’re within the same general geographic region. For example, if you have a buyer that shows their billing address is from Europe, but their IP address is in the United States, we might have a problem here.
Even though there are people that make purchases while they are traveling, you’d still want to call or email the customer to confirm the purchase. Recently, the federal government just reported that they got more than 2.8 million fraud reports this year.
7. Only collect the information you need from customers
It’s not always a good idea to keep too much information from your customers. We suggest that you only collect the ones you need because with more data, always comes more responsibility.
The best practice is to avoid collecting too much sensitive data. This way, you’re reducing risk exposure and as a general rule of thumb, you’re collecting the data you need and validating transactions.
Overall, the amount of data you collect should only be for validating your transaction and the need to ship the product.
8. Set limits on all total purchases
You need to assess your store’s average revenue and set a limit on the total number of purchases made, both in items and dollar value on an account within a single day. This way, even if a fraudster does succeed in taking over some accounts, they still won’t be able to do large amounts of financial damage to your business.
Therefore, these limits are excellent for your purchases and can highly benefit you in the long term.
Why E-Commerce Prevention Strategies Are Important For Your Long-Term Success
E-commerce strategies are an important trait when it comes to contributing to your long-term success. Fraud is an uprising issue and whatever you can do to prevent it, it’s always welcoming.
Considering that fraud is becoming an uprising issue, it’s more important than ever to set up the necessary strategies for preventing it. After all, it only takes once for your business reputation to suffer and after you lose it, you won’t be getting it back.