The effects of the COVID-19 pandemic have made online shopping more accessible to a number of people worldwide. However, its growing popularity also meant that a surge in online fraud would soon follow.
And it did. Statista data showed that global e-commerce losses to online payment fraud stood at $41 billion in 2022, and have the potential to reach $48 billion in 2023 if companies don’t start paying attention to the warning signs.
Some of the most common types of online fraud include phishing scams, when criminals try to trick people into giving them personal information which can be used in identity theft. Payment and online shopping fraud are also common, such as the creation of fake websites or products, as well as malware attacks.
Advancements in technology have led to more sophisticated fraud methods, and the lack of security measures as well as a surge in vulnerabilities in systems are some of the main reasons as to why some e-commerce businesses could be more prone to being targeted by fraudsters more than others.
So how can e-commerce platform owners spot a fraud attack in the making?
- Look out for the red flags such as unusual or high-risk behavior like unusually large or small orders or unusual purchase patterns such as customers using multiple credit cards for one order.
- Use advanced fraud detection tools and machine learning algorithms that can spot and prevent fraud attacks.
- Verify customer information and look out for any inconsistencies. Monitoring IP addresses can also serve as a big plus when detecting fraudulent activity.
- Use an address verification system (AVS) and card verification value (CVV) to help prevent credit card fraud. AVS verifies the billing address of the cardholder and the CVV verifies the security code on the back of the card.
- Monitor for any suspicious activity on accounts and payment methods. This can be done through 3D Secure, an additional security layer for online credit card transactions that requires customers enter a password or a one-time code to verify their identity.
Although knowing how to spot a fraud attack will always come in handy, knowing how to prevent a potential threat is an even bigger plus many e-commerce businesses will benefit from in the long run.
Here are some of the ways with which I like to protect my online business:
- Implementing strong authentication measures such as a two-factor verification process can help prevent unauthorized access to customer accounts and reduce the risk of fraud.
- Regularly monitoring transactions and customer behavior to help with the identification of patterns and anomalies that may indicate fraudulent activity. This could also mean blocking repeated card testing.
- Introducing security measures on emails sent to customers with an identification code to prevent phishing.
- Investing in educational tools on how to detect and prevent fraud for both customers and employees.
- Educating customers to only download and complete actions after verifying that the URL of the website that they are on is correct. This can also be easily integrated on the login portion of an e-commerce site.
- Developing a strong fraud response plan to quickly detect and prevent fraud.
- Working with law enforcement agencies to investigate and prosecute fraudulent activities.
- Continuously monitoring and updating security measures to stay ahead of evolving fraud methods. Investing in fraud detection and prevention tools is perhaps the best way to protect your e-commerce business from falling victim to potential malicious activity.
From personal experience, I can say that protecting an e-commerce business from potential fraudulent activities is a multilayer approach that includes using the right tools, implementing strong authentication measures, monitoring transactions and always staying vigilant.
Daniele Servadei is the CEO of Sellix, an e-commerce platform that lets you sell any type of digital product or service with a custom storefront.