As the e-commerce industry continues to grow rapidly, so does the threat of fraud. According to statistics, e-commerce fraud was estimated at 41 billion U.S. dollars globally in 2022. As an online retailer, taking the necessary steps for e-commerce fraud prevention to safeguard your customers’ sensitive information is critical.
This blog will delve into the nitty gritty of e-commerce fraud prevention, discussing the various types of fraud and the most effective methods for protecting your retail business.
From implementing multi-layered security measures to staying ahead of the latest fraud trends, we’ve got you covered. So, let’s get started on securing your e-commerce empire!
Understanding E-commerce Fraud: Types and Trends
E-commerce fraud refers to the criminal activities committed against online businesses and their customers, intending to steal money, personal information or both.
Here are some of the most common types of e-commerce fraud:
Credit card fraud
Credit card fraud occurs when someone uses another person’s credit card information to make unauthorized purchases or transactions.
Hackers may steal credit card information by hacking into databases and skimming devices. They may then use this information to make unauthorized purchases online.
Credit card fraud is a significant issue in the e-commerce industry, and the prevalence of these types of fraud has increased over time.
In the first half of 2022, U.S. consumers reported nearly 800,000 fraud complaints. Of those, more than 27% indicated a financial loss.
Identity theft occurs when someone uses another person’s personal information, such as their name, address, credit card number, or social security number, without permission to make fraudulent purchases or access their financial accounts.
In e-commerce, identity theft can happen when a hacker gains access to a user’s account information through a phishing attack or by exploiting vulnerabilities in the e-commerce platform’s security measures.
Phishing is an online scam where fraudsters try to obtain sensitive information from individuals by posing as trustworthy entities.
It can take many different forms, but they typically involve fraudulent emails, texts, or other forms of communication designed to look like they come from a legitimate source.
These messages often contain links to fake websites that ask users to enter their personal or financial information, such as credit card numbers, login credentials, or social security numbers. Scammers use it to make fraudulent purchases, steal money from victim’s bank accounts, or commit identity theft.
Friendly fraud occurs when a customer makes a purchase online and then disputes the charge with their credit card issuer, claiming that they did not receive the merchandise.
When the customer did, in fact, receive the merchandise and is intentionally abusing the chargeback process to receive a refund while keeping the product.
It is a major problem for e-commerce merchants as it results in chargebacks, which can be costly due to chargeback fees and lost merchandise.
Additionally, excessive chargebacks can result in high-risk merchant labels, leading to higher fees, loss of processing capabilities, and damage to their reputation.
Implementing E-commerce Fraud Prevention Measures
Implementing E-commerce Fraud Prevention measures involves using various security protocols and tools to verify customer information, detect suspicious behaviour, and prevent fraudulent transactions.
This can include multi-factor authentication, address verification, and device fingerprinting. Let’s take a look at each of them.
Use secure payment and password policies
Here are some ways to prevent e-commerce fraud using secure payment and password policies:
- Use secure payment systems to process customer transactions. This may include services like PayPal, Stripe, or Square, which use encryption and other security measures to protect customer information.
- Implement 3D secure authentication which is an extra layer of security that requires customers to enter a password or code before completing a transaction.
- Require customers to create strong, complex passwords when setting up their accounts. This can include using a mix of letters, numbers, and special characters and requiring a minimum length.
- Require customers to reset their passwords periodically and use multi-factor authentication to verify their identities. This can help prevent fraudsters from gaining access to customer accounts.
Enable two-factor authentication
2FA can significantly increase the security of your e-commerce platform and reduce the risk of fraudulent activities.
Here are some best practices for implementing two-factor authentication in your e-commerce platform:
- Choose the right 2FA method considering the nature of your e-commerce business. Several types of 2FA methods are available, including SMS-based authentication, one-time passwords (OTP), biometric verification, and hardware tokens.
- Make it mandatory for all users, including customers, employees, and administrators. This can prevent any potential weak spots in your system that fraudsters can exploit.
- Monitor the usage of 2FA on your platform and track any attempts to bypass this security measure. This can help you identify potential vulnerabilities and take proactive steps to prevent fraud.
According to a report by Google, 2FA can prevent up to 100% of automated bot attacks, 96% of bulk phishing attacks, and 76% of targeted attacks.
Regularly monitor and review transactions
Retail businesses must take a proactive approach to prevent e-commerce fraud by regularly monitoring and reviewing transactions.
Here are some steps you can take to ensure your business is protected:
- Set up a system for monitoring and reviewing transactions using various tools such as fraud detection software, and regularly review all transactions to detect and investigate any suspicious activity.
- Establish clear guidelines and protocols for handling suspicious transactions: Develop a protocol that outlines the steps to take when you identify suspicious transactions.
- Implement automated fraud prevention measures such as address verification and CVV verification to ensure that the customer’s billing address and card details match.
Enhancing Customer Trust with Transparent Ecommerce Fraud Prevention
To enhance customer trust with transparent e-commerce fraud prevention, e-commerce companies can implement fraud prevention measures that are clearly communicated to customers.
Here are some e-commerce fraud prevention measures that retail businesses should implement.
Invest in SSL certificates
SSL certificates can enhance customer trust by ensuring secure communication between the e-commerce website and the customer’s browser.
This means that any data transmitted, such as personal information or payment details, is encrypted and protected from hackers.
Additionally, SSL certificates display visual cues such as the padlock icon and “https” in the website URL, which signals to customers that the website is legitimate and secure.
Therefore, investing in SSL certificates can go a long way in building customer trust and confidence in an e-commerce website.
Provide clear privacy policies
Partner with DEHA Vietnam for E-Commerce Fraud Prevention
E-commerce fraud is a major threat to retail businesses of all sizes. By implementing the right fraud prevention measures and staying vigilant, retailers can minimize the risk of fraud and keep their businesses safe.
At DEHA Vietnam, we specialize in providing fraud prevention services that cater to the unique needs of e-commerce businesses. With our expertise in the retail industry, we can help you identify and prevent fraudulent activities, secure your payment systems, and reduce chargeback rates.
Don’t wait until your business falls victim to e-commerce fraud. Contact DEHA Vietnam today and let us help you protect your retail business from online fraud.
Schedule a consultation with our team to learn more about our fraud prevention services and how we can help your business thrive in a safe and secure e-commerce environment.