Ecommerce is a growing industry that is changing the way businesses buy and sell their products.
Learning the Basics of Ecommerce Fraud & Preventative Tips
The online world is easily accessible, making it a more appropriate option to buy from, rather than having to travel anywhere.
But whilst it may be an easy option for both the customers who shop online and the businesses that sell them, there are vulnerabilities on the internet.
Ecommerce fraud is something that can happen to any organization and knowing the basics of how it happens and the types out there to avoid are worthwhile.
In this article, you’ll learn the basics of eCommerce fraud and the preventative measures you can take to prevent falling victim to it.
What Is Ecommerce Fraud and Why Does It Happen?
Ecommerce fraud is defined as criminal deception that’s caused during a transaction over the internet. The goal is to achieve financial or personal gain as the fraudster whilst impacting the merchant negatively. This type of fraud is also known commonly as payment fraud too.
With 71% of merchants most concerned about identity theft, it’s a concern that’s warranted in this day and age. With more people shopping online, fraudsters are doing their best to take advantage of merchants that may not have as much experience with online security as others do.
This type of fraud occurs because the payment methods you can use online are a lot more diverse than what you’d pay walking into a shop. You also have a lot of companies that simply don’t have the right security protocols in place to protect themselves from online fraud.
What Types of Ecommerce Fraud Exist?
Unfortunately, there are a few types of eCommerce fraud that occur and it’s worthwhile knowing what these are in order to prevent them from happening to your business. This ecommerce fraud guide is a useful resource for the types of fraud that are common and how to detect them in 2021.
This is one of the most common types of fraud that happen online and offline, known as identity theft. It’s a method that’s used by a lot of cybercriminals when trying to steal information or data pertaining to an individual or in this case, an organization.
It doesn’t always involve stolen card details and instead might focus on IP addresses, names, and addresses of customers, email accounts, etc.
Fraudulent purchases can also lead to the creation of fake accounts, as well as the manipulation of the traffic coming onto the site.
These often involve fraudulent transactions that on the surface, seem to be legitimate. This is one that might be used more so online because often enough, the systems used don’t recognize it as being a problem.
However, the transaction usually involves stolen credit card information that is trying to pretend to be a person they’re not.
Whilst it might not be as common, it’s one type of fraud that is growing rapidly. It’s one that’s likely able to slip under the radar for longer, especially if the eCommerce system in place doesn’t pick up on stolen financial information.
Friendly fraud is often one that occurs by mistake or upon the design of the eCommerce platform. The customer whether it is a legitimate transaction or not will pay for the service or product but then claim it never arrived or is damaged.
This means the merchant will then issue the refund or re-deliver the item or be met with a chargeback. This can be something that you want to double-check and to make sure that the customer is being truthful.
Having tracked packages in place and photos of evidence can be handy to call upon as chargebacks are often commonplace for retailers.
With the creation of online sites being so easy to do, there are occasions where fake sites will be set up and appear to be the eCommerce company when they’re not.
As a result, the customers are often left out of pocket and no goods are ever delivered to the customer. It also means that credit card information has been acquired, which can put customers in more danger when it comes to their finances.
Affiliate opportunities are something that eCommerce sites site up in order to give their regular customers or those influential, a chance to make some money.
The person gets a special code or link that enables them to make a cut of the profit every time someone clicks on the link or uses the code to make a purchase.
However, scammers have been able to manipulate traffic and sign-ups in order to make it appear like there’s more interest in the site than there actually is.
It’s something that can be easily done too, so it’s important to be aware of this if you’re setting up an affiliate scheme as part of your eCommerce site.
How to Spot Ecommerce Fraud?
Spotting eCommerce fraud is likely to help avoid as much fallout as possible. So how can you spot eCommerce fraud when it’s happened or has happened to your business? Here are a few common occurrences that will likely be a fraudulent activities or should at least raise a red flag.
- Multiple declined payments.
- Odd location of IP address or delivery address.
- A larger order than usual.
- Multiple orders in a short space of time via credit card.
- Order data that are inconsistent.
- Orders from a different country that’s new for your business.
- Multiple shipping addresses
These are just a few examples, even though some might be genuine orders and transactions. Look out for orders where the payment has been declined several times or the size of the order is abnormally large.
Any order data that is inconsistent is likely to be a red flag and something to look into further.
Knowing this information can help you spot the fraud hopefully in the early moments of when it happens. The problem is that the types of fraud used on eCommerce might not come to light until further down the line.
Preventative Tips to Avoid Becoming a Victim
Global payments fraud is something that’s tripled, rising from $9.84 billion in 2011 to $32.39 billion in 2020. It’s projected to reach $40.62 billion by 2027. With that being said, it’s important to do everything you can to avoid becoming a victim of eCommerce fraud.
So what preventative measures can you take to avoid becoming a victim?
Conduct Regular Audits on Your Site’s Security
One of the biggest vulnerabilities to your business is how secure it is. It’s useful to conduct regular site security audits when possible as this can help determine weak points within the infrastructure of your site.
It’s good to conduct audits in order to test your security and to discover any new security measures that might be worth taking for the sake of your business.
Require Card Verification
One of the best ways to help credit card fraud and transactions where multiple credit cards are used is by requesting CVV numbers for all purchases.
This is something that only the cardholder will be able to provide with the card in hand. It’s a good way of helping to verify and prevent any fraudulent activity.
Monitor Your Site for Any Suspicious Activity
It’s important to be aware of who is coming on and off your site. There will be regulars that are expected but you may find the odd one or two that aren’t normal for your site.
A good way to help spot eCommerce fraud and prevent it is to monitor the activity of your users. If someone doesn’t look right, then it’s good to follow up to check for evidence of fraud.
Avoid Collecting Too Much Personal Data
Personal data is something that you want to collect sparingly. The more you collect, the bigger the fallout will be if you become a victim of eCommerce fraud. Try to only collect the data that is necessary for your business to take.
Make sure you’re also making it clear what the data is used for when taking it from the customer.
Avoid Accepting Non-Physical Shipping Addresses
Non-shipping addresses should be something that your order process can prevent from being selected. There’s technology available to help automate the order form so that they need to put in a legitimate residential or work address in order to complete it.
Avoiding non-physical shipping addresses will likely prevent a lot of these fraudulent activities from happening. It’s easy enough to set up and will help ensure all orders are being sent to the right address and one that’s physical.
Be Wary of Ecommerce Fraud for Your Online Business
Whilst it may not seem likely to fall victim to eCommerce fraud, it is happening more than ever before. Being wary of fraudulent activity and doing everything you can to prevent it is important.
With that being said, use these tips to help prevent eCommerce fraud from occurring and brush up on the methods that are used to stay on top of it.
Author Bio: Natalie Redman (LinkedIn)
Email – firstname.lastname@example.org
Freelance writer for many clients across multiple industries. Natalie has two years of copywriting experience. Natalie has a wide range of experience copywriting web pages for businesses across many industries. She’s also an owner of two blog websites and a Youtube content creator.
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