Whenever any industry grows, there are those who take advantage of certain circumstances and commit fraud. A recent example of this is e-commerce, where explosive growth has resulted in a significant increase in fraud, particularly in the past 15 months. In most cases of online fraud, products are purchased using a fake or stolen payment method, which then gets disputed, leaving the store without being paid for the merchandise. According to a recent study by Forbes, fraud has had a big impact on retailers’ bottom line. Merchants report having lost between 5% and 10% of their total e-commerce revenue in 2020 due to fraudulent behavior. The content delivery network, Fastly, reports that retailers suffer 206,000 attacks per month on their websites. Furthermore, a study conducted by Help Net Security estimates fraud will collectively amount to $20 billion by the end of 2021.
With the holiday season rapidly approaching, businesses are becoming increasingly concerned about fraud prevention. A large number of merchants, both large and small, fall victim to fraud every single day. The truth is, it's up to every single business to put forth specific measures to prevent fraud from occurring. Despite the difficulty of catching fraud online, with the growth of e-commerce comes the development of other technologies that will help combat fraud, provide faster shipping, and ease the checkout process. The first step that businesses need to take is to identify instances of online fraud as quickly as possible.
Here are some typical signs that might indicate you’ve been targeted:
- Larger than average order
- Inconsistent order data
- Unusual purchase location
- Multiple shipping addresses
- Many transactions in a short timeframe
- Many orders to the same shipping address purchased from different credit cards
- A history of declined transactions in a short timeframe
- Multiple orders from a new country
While implementing fraud prevention strategies, online retailers should be aware that frequent customers may find some of these measures to be intrusive or annoying. That being said, implementing a security program that protects against emerging fraud risks, in the long run, will result in happier customers, which will translate into better shopping experiences. With the following tips, you can approve more sales and protect your business from fraud.
These nine methods can be used by e-commerce stores to prevent fraud:
Regularly Audit Your Site
Spending some time auditing your platform can result in significant savings. By checking for holes in your code or your checkout process, you can eliminate initial issues that may create entrance points for fraudsters. Ensure that your integrations and apps are compliant with current fraud standards.
Be PCI Compliant
The Payment Card Industry (PCI) requires stores that accept credit cards (so every e-commerce company) to be PCI compliant. The requirements are established and updated by PCI Security Standards Council and are there to ensure that the standards are met and consistent throughout the United States.
Use an Address Verification Service (AVS)
In order to detect suspicious credit card payments, banks and credit card processing companies often use Address Verification Services. The service will verify that the billing address matches the billing address on file with the bank. If the addresses do not match, they will either decline the transaction or flag it for further investigation.
Require Card Verification Value (CVV) numbers for all purchases.
Card Verification Value (CVV) or Card Security Code (CSC) is the three-digit number usually found on the back of a credit or debit card. (For American Express Cards, the number is four digits.) By requiring this code, the business ensures the customer has the physical card in their hand, which provides further assurance of authenticity.
Use Hypertext Transfer Protocol Secure (HTTPS)
HTTPS is a more secure version of HTTP. HTTPS encrypts HTTP data to protect sensitive data like customer names, addresses, and credit card numbers. It prevents hackers, cybercriminals, and fraudsters from seeing the information.
Avoid Collecting (Too Much) Sensitive Customer Data
It is important for consumers to ensure that a company does not ask them for too much information when making an online purchase. It is important to avoid asking for sensitive information. By doing so, you will not only make consumers feel more comfortable about purchasing from you, but it will also prevent the possibility of customer data being stolen in the event of a system hack. Aiding in the fight against identity theft can help reduce fraud in the future.
Set Purchase Limits
When a fraudster has gained access to another person's credit card or finds that they possess a working fake payment, they are likely to try to spend as much as possible within a short period of time. If you set limits for purchases such as saying no more than ten of the same item or no orders over $2000, you may be able to reduce fraud.
Try Anti-fraud Solutions
As mentioned above, with the growth of the e-commerce industry comes new solutions to make shopping online safer. There are many types of anti-fraud solutions available on the market, ranging from very complex to very basic. It is important to determine your company's level of risk before choosing the level of projection that you might require.
Ensure IP and Billing Addresses Match
In many cases, fraudsters are located in locations that do not correspond to the billing address. An individual who obtained a billing address but whose IP address is on another continent is most likely conducting a fraudulent transaction and should be flagged or declined.
The effects of e-commerce fraud can be devastating to any business and the threat is increasing. E-commerce fraud can result in the destruction of data, stolen money, lost productivity, and disruption to normal business operations. Following a fraud attack, costs related to these attacks can also include forensic investigations, data restoration, and deletion of hacked systems. It is important that retailers do what they can to protect business and their customers.