Top 7 Strategies to Prevent eCommerce Fraud: Protect Your Website Better
Muntasir Rifat
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Modern businesses must implement eCommerce fraud prevention techniques to protect their revenue. Experts recommend multiple layers of security for better eCommerce fraud protection.
eCommerce is an industry that’s been snowballing in the past few years. Since the beginning of Covid-19, many retail companies have decided to go online.
As of 2024, there are more than 12 million online stores, and because it’s hard to classify them, there might be twice as many.
eCommerce platforms such as Shopify allow people to easily create their online store. Although creating a store on their platform isn’t free, it’s very affordable. The features of such platforms allow physical stores to transition to click-and-mortar or help individual artisans sell their crafts.
Unfortunately, eCommerce stores aren’t defined only by their positives. eCommerce fraud is becoming more sophisticated, and they are growing in numbers. Fraud can negatively impact your brand’s reputation, leading to financial losses.
To protect your online business and your customers from potential fraud, implement advanced fraud-prevention software. You can also use some manual techniques to enhance security. Keeping that in mind, we are presenting you with some vital strategies in this article to prevent eCommerce fraud.
- 1. Multi-factor Authentication Protocols
- 2. Use Fraud Prevention Software
- 3. Implementing Third-party Payment Processor
- 4. Review Risky Orders Manually
- 5. Be More Alert During Shopping Seasons
- 6. Use Verification Software
- 7. Limit Order Quantities
- Having a Strategy to Prevent eCommerce Fraud is Highly Important
- Frequently Asked Questions:
- Final Words
Key Takeaways
- Learn how limiting order quantities can reduce the risk of fraudulent purchases.
- Learn how multi-factor authentication (MFA) prevents account takeover fraud.
- Discover how fraud prevention software can secure your online store.
- Understand the role of third-party payment processors in protecting customer data.
- Find out how manually reviewing risky orders helps prevent fraud.
- Get tips on staying alert during peak shopping seasons to avoid fraud.
1. Multi-factor Authentication Protocols
One of the most common types of fraud is account takeover fraud. It occurs when a person or a bot steals a customer’s account credentials. They then use them for malicious intents.
Implementing strong eCommerce fraud protection strategies starts with robust identity verification systems. Account Takeover Fraud(ATO) fraud can create losses for both your customer and your business, and it can permanently damage your reputation.
The exploitation of stolen accounts is a common thing on the internet, and it should be prevented. Consider offering account activity notifications to further reduce eCommerce fraud risks.
Almost 29% of people didn’t do anything to protect themselves on the internet, which implies that there is a considerable number of people that are at risk of having their accounts stolen.
You can’t make people more aware of their internet security, but you can protect them by implementing a multi-factor authentication protocol. Requiring your users to create stronger passwords can reduce the chances of fraudulent activities, but it’s not guaranteed.
MFA protocols, including the common 2-factor authentication (2FA), require users to confirm their identity through multiple devices. This process involves using multiple security codes.
With 2FA, a customer must confirm their identity via SMS code or Google Authenticator. Once verified, they can access their digital assets and make purchases. Even small businesses can implement free eCommerce fraud protection techniques through 2FA.
2. Use Fraud Prevention Software
Internet fraudsters make significant efforts to access other people’s accounts. At the same time, many companies are working on improving fraud prevention software.
For example, SEON’s list of apps shows some of the platforms in the field of eCommerce fraud prevention. Budget-friendly options exist for businesses just starting their eCommerce fraud prevention journey.
Since eCommerce platforms such as Shopify allow its user to integrate third-party fraud prevention applications. You can make significant improvements for the safety of your online store by implementing one that suits you the most.
Usually, for a monthly fee, fraud prevention software will help you minimize the chances of having fraudulent orders and losing money to chargebacks.
These apps have their pros and cons. You need to carefully choose the one that suits you. Some apps only operate in specific regions.
Artificial intelligence advancements, which some of these apps use, helped fraud prevention software maximize its effectiveness. It is also critical to keep your fraud prevention plans and plugins up-to-date, as older versions might be flawed.
3. Implementing Third-party Payment Processor
Online stores can benefit from partnering with third-party payment processors. The most convenient and secure way of handling payments is through a certified and reliable payment processor.
A payment processor will help you manage chargebacks, payments, and storage of personal and credit card information and increase the security of the payment process.
Losing the data of your customers will cause a significant drop in your brand’s reputation and sales.
A third-party payment processor will protect your customers’ valuable data and prevent any payment fraud that can lead to revenue losses or even a trial.
4. Review Risky Orders Manually
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Even though an order goes through multiple filters before reaching you, there is a chance that the order is still fraudulent. Whether the order comes from a suspicious IP, or a costly order that isn’t common in the history of a user, you should evaluate its legitimacy manually.
Different product categories may require specific fraud prevention strategies and eCommerce approaches. Reviewing every order manually will make you lose precious time, but it is wise to do that for highly risky orders.
If the order isn’t costly, you can just consider whether it is worth your time to go the extra mile. However, an expensive purchase might give you significant profit, and you should consider reaching out to your customer before approving such orders.
There is a variety of ways that you can do your investigation. Legitimate customers will leave a variety of personal info to you, and you can start by contacting them. If they live in the same country as you, the most convenient way is to call them and check their order over the phone.
Other useful ways might be reaching out to them using their email address, or you can contact them through an internal chatbot if your online store possesses such a thing. If you don’t get an answer in a few days, you can be sure that the order was fraudulent.
Whether the user responds positively or negatively, it’s important to check the legitimacy of their order. Warning them about the potential theft of digital or financial assets shows respect for your customers. This will indeed affect your brand reputation positively.
5. Be More Alert During Shopping Seasons
No matter where you are based, you should consider having discounts for certain international holidays. Black Friday, Valentine’s day, Christmas, New Year, and other important dates will surely affect your sales positively.
Since both online and physical stores will deal with an increase in orders, people with malicious intent can consider this a perfect time to make fraudulent orders.
Automatical fraud analysis, such as Shopify’s built-in fraud analysis or fraud prevention software, will be your best friend during such seasons.
Depending on their number, it can be unmanageable to manually review all the received orders.
6. Use Verification Software
Verification via multiple devices when logging in is a great way to minimize the chances of people having their accounts stolen. But a step further in protecting the data of your customer is by verifying each purchase. Many of the best eCommerce fraud protection software options include device fingerprinting technology
First, every purchase should require your customer’s card verification number input. This verification requires both the front and back sides of a credit card, increasing the security of credit card purchases.
Another important verification method is using an address verification system or AVS. This software verifies whether the address that the customer leaves is a legitimate one and if other cards have made orders to it.
Fraudsters might not straightforwardly use non-existent addresses, but they might use non-existent housings or input a wrong ZIP code. In such cases, AVS will help you to detect such attempts automatically.
To prevent fraud on your website, you can use an internal blacklist or integrate fraud prevention software to track suspicious activity based on names, IP addresses, and shipping addresses.
It’s also important to allow users to request the unblocking of their personal information or credit cards, especially if they’ve been victims of hacking. This approach ensures better security while maintaining trust and allowing legitimate users to regain access to their accounts.
If a person laid their hands on an account with auto-filled credit card info, he could be discouraged from making fraudulent orders by implementing an email verification.
7. Limit Order Quantities
You might wonder why would someone purposefully limits the number of products they can sell. The reason behind this lies in the fact that just like large amounts of profit can be gained through multiple sales.
However, fraud can lead to significant losses. If many orders come from a suspicious address, limit the number of products a person can buy.
When you get many orders from the same address that has a high likelihood of being fraudulent, it’s best to limit the number of products that a person can purchase.
Having a Strategy to Prevent eCommerce Fraud is Highly Important
It doesn’t matter whether your store is click-and-mortar or completely online. You should do what’s in your power to protect your business and your customers from fraud.
You can implement zero-cost strategies. For example, manually review each order. Alternatively, invest in fraud prevention software.
Frequently Asked Questions:
What are some hidden dangers of eCommerce fraud?
E-commerce fraud can damage your business far beyond financial losses. A single fraudulent transaction can hurt customer trust, leading to abandoned carts and reduced sales. Scammers might also target your payment processing systems, causing further security breaches.
How does multi-factor authentication (MFA) work in real life?
MFA works by requiring users to verify their identity in multiple ways before gaining access. For example, after entering their password, customers will need to confirm their identity through a second layer, such as an SMS code or Google Authenticator. This makes it much harder for hackers to break into accounts.
What’s the best fraud prevention tool for my online store?
There isn’t a one-size-fits-all solution, but tools like SEON, Shopify’s built-in fraud analysis, and Kount are highly recommended for eCommerce stores. These tools analyze transaction data in real-time, flagging suspicious activity and reducing the risk of fraud.
Choose a tool that integrates easily with your platform and offers customizable options to meet your specific needs.
Are third-party payment processors worth it?
Yes! Third-party payment processors like Stripe or PayPal offer advanced fraud detection, secure payment gateways, and compliance with industry standards like PCI-DSS. They take on the responsibility of securing sensitive customer data, allowing you to focus on your business.
Why should you care about manually reviewing orders?
Manually reviewing high-risk orders can save your store from significant financial loss. Even though fraud prevention software can help, it’s still essential to double-check orders from suspicious IP addresses or large transactions from new customers
Can limiting orders prevent fraud?
Limiting the quantity of products that can be purchased from a suspicious address or account is an effective fraud prevention tactic. Fraudsters often attempt to make large-scale purchases, and by restricting the number of items in a transaction, you minimize the potential damage. It’s a simple, yet highly effective way to prevent loss without disrupting legitimate sales.
Final Words
In the ever-evolving world of eCommerce, safeguarding your business against fraud is paramount to ensure sustainable growth and customer trust. Implementing the right eCommerce fraud protection solution provides peace of mind.
Learning how to prevent eCommerce fraud requires ongoing education about emerging threats. Your business deserves robust eCommerce fraud protection measures that scale with growth.
In this comprehensive guide, we explored the top seven strategies to prevent eCommerce fraud effectively. By implementing these measures, you can fortify your online store’s defenses and protect your valuable assets from malicious actors. Security measures should adapt to changing customer behaviors and shopping trends.
