Given the dynamic nature of the internet, it’s not surprising to also see frequent changes in consumer buying behavior, which online retailers try to predict and cater to on various digital platforms. Convenience and revenue growth of eCommerce businesses, however, come with a price in the form of fraud.
Sales transactions from online merchants are on an uptrend, but attacks on eCommerce businesses have alarmingly increased as well. Based on the first-quarter report by ThreatMetrix, 210 million cyber attacks were prevented in real time from January to March 2018 – up by 62 percent from prior year. Some of these attacks have cost the eCommerce industry a whopping $58 billion in losses in 2017, according to the Global Fraud Report done by PYMNTS and Signifyd.
With the upcoming holiday season, incidents of digital fraud are expected to further rise in the eCommerce industry. Avoid the pitfalls of fraud by proactively taking steps to detect its forms and prevent them from hurting your bottom line, which can be significant for some eCommerce businesses. Fraudulent purchases can translate to chargebacks from affected online retailers, resulting in financial losses.
Pay particular attention to these three kinds of eCommerce fraud:
Types of eCommerce Fraud
1. Identity Theft
Among the most common type of fraud, identity theft has been a long-running scheme of cybercriminals. Identities, along with credit card information and addresses, are stolen using the latest techniques on data hacking, malware, and theft of mobile devices, which are then used to purchase from online merchants. Aside from stolen identities of actual individuals, fraudsters can also fabricate fictitious or manipulated personalities and use these instead during transactions.
2. Friendly Fraud
Sometimes called “chargeback fraud,” friendly fraud happens when customers call their credit card issuer and dispute the charge. While some fraud incidents are due to misunderstanding, others are done with malicious intent. Dishonest consumers will claim that they never received the item, heavily damaged, or not as described, requesting refunds from the online retailer after getting the package.
3. Phishing
This type of fraud is rampant and requires technical capability, as fraudsters pretend to be a company or eCommerce platform to trick customers into typing in personal information on a rigged form. Phishing emails often contain a warning to customers that their accounts have been compromised and need to input details like user ID, password, and personal information as proof of their identity. Armed with an individual’s stolen details, fraudsters can use these to make online purchases or transfer money to another account.
How Online Merchants Can Protect Against Fraud
To minimize the increasing risk for eCommerce fraud, there are a few things that you, as a business owner, can do. A proactive approach, rather than a reactive one, is more effective in preventing fraud from happening and taking a cut of your profits, especially during the holiday rush.
1. Have a good fraud protection system in place.
Before the buying frenzy of the holidays begins, ensure that your business has fraud prevention and chargeback protection systems set up. There are numerous tools available on the market, so choose one that fits your business needs. It’s a cost-effective solution that’s well worth the investment in the long run.
2. Use a prevention system that combines human and artificial intelligence.
While machine learning can effectively analyze patterns of fraud based on millions of transactional data, it still takes human intelligence to know something is off with a transaction.
3. Take advantage of the verification process as well.
To mitigate eCommerce fraud, make use of a good address verification system. This will confirm whether the bill-to and ship-to addresses are similar, along with email address and location as part of a customer’s identity verification when the transaction happened. An extra layer of protection helps by employing the card verification value to ensure that the customer holds or has access to the actual credit card.
4. Use email authentication.
Even though email fraud is a far-too-common occurrence, you still need a good authentication system for your business. Authentication systems with Domain-Based Message Authentication, Reporting, and Conformance will give you a heads up if an email contains dubious links or potential threats. Aside from protecting your eCommerce business against fraud, email authentication assures your customers that what you send is trustworthy.
5. Determine transaction origins.
Each electronic device has a particular fraud profile and depending on what was used for the transaction, you can gauge and screen for potential eCommerce fraud. Device assessment assists online merchants in identifying transactions made by bots, flagging anomalous purchases through account takeovers, and highlighting malicious intents.
When consumer spending picks up during the holiday season, it is expected that eCommerce fraud will gain momentum as well. Ensure that your business is not losing money from fraudulent transactions by beefing up your prevention and authentication systems and keeping them updated with the latest patches.