In the modern day, e-commerce has completely shifted how we shop, making it much easier than it has ever been. However, at the same time, the amount of e-commerce fraud has also increased, posing an exclusive threat to businesses and customers.
As fraudsters continue to find new ways to exploit vulnerabilities, you must stay ahead of the game by implementing the necessary security measures and protecting your customers’ sensitive information, especially when it comes to digital marketing.
In this article, we’ll dive deeper into learning more about the different types of e-commerce fraud, how to prevent them and make sure that you are prioritizing your customer’s safety.
Table of Contents
The Types of E-Commerce Fraud You Should Worry About
Before we go any deeper into learning more about e-commerce fraud, we need to learn more about the types of e-commerce fraud that your online business can encounter:
- Payment fraud: In the last year, the rate of e-commerce fraud has gone up by 16%. One of the main reasons for this has been due to new payment methods.
- Unauthorized use of payment methods, such as stolen credit or debit cards, and even account takeovers.
- Account takeovers: Online attackers will gain unauthorized access to a user’s e-commerce account by taking over their login information.
- ID theft: Includes stealing sensitive information, such as a user’s name, address, social security number, or impersonating them for making fraudulent purchases.
- Return fraud: This occurs when customers exploit return policies by returning non-purchased or used items for a refund. This is mostly how fraudsters will manipulate you to get an item for free.
- Friendly fraud: This is also called “friendly fraud”, which occurs when someone makes a purchase, but will later make a charge with the payment provider, which is a massive financial loss for businesses in the long-term.
- Affiliate fraud: This includes fake leads, click-through rates, or any other type of manipulative tactics for earning illegal commissions. In other words, you can also call it click fraud, since it’s cheating users by making them click on links that steal their sensitive information.
- Phishing: Fraudulent emails or sites that trick users by stealing sensitive information or making fraudulent payments.
- Account creation fraud: This includes creating multiple accounts that are fake to get more discounts, limited-time offers, exploit promotions, and more to negatively affect the business’s financial situation.
While there are new manipulative tactics created from time to time by fraudsters, it’s always important to take the right measures to prevent them and be ready at any time.
The Importance of Consent Management Platforms
Consent management is becoming more important than ever. Have you ever asked yourself if you’re collecting consent in a way that is complying with local regulations? You can always use a consent management platform (CMP) to help you do so. CMPs are a tool that helps companies legally manage customer’s consent choices regarding their personal data.
CMPs inform customers how their data is processed, how it’s going to be used, and for what purposes it’s going to be used. Additionally, customers are given the option to opt out of their data, modify it, or even delete it partially. As an e-commerce store, it’s always important that you inform customers their information is safe in your hands.
Each CMP is effective, but of course, you need to see which one best fits your business requirements. For instance, the CMP software from Osano has an excellent cookie consent that is offered as a single solution.
It automatically displays compliant banners in more than 50 countries and 42 languages. It’s always important to make sure your compliant banners are offered in many languages since not everyone speaks English.
Importance of Managing Multiple Stores Worldwide
Retail store management has never become so simple, and when you are starting to reach a global audience, things might get more complicated than you think. Not knowing how to effectively manage multiple stores can lead to unknown fraud, and this isn’t something you want to happen.
That’s why in order to survive and thrive as a multi-location retailer, we are going to show you how to manage multiple stores around the world without having to worry about fraud:
- Standardize your operations: Standardizing operations in each of your stores means regulating customer complaint handling, staff rosters and schedules, the way you communicate with customers, the customer experience, and discounting and promotions.
- Hire experienced people: Managing multiple stores means you need to rely on reliable staff members. You need to always hire people you can trust and represent you when you’re not there. Conduct periodic training to improve employee skills and don’t forget to pay close attention to their welfare.
- Communicate: If you want to run multiple stores, you need to communicate well. Retailers need to always communicate across multiple channels consistently.
- Pay close attention to your store’s security: Security should be your top priority and there are plenty of ways on how you can effectively protect your store from any threats. Include smart security cameras for surveillance purposes. Fraud can’t only happen online, but offline as well. Encourage remote delivery tracking that allows you to use smart cameras to track deliveries and make sure that they arrive on time and safely.
- Conduct quality control audits: Regular audits are important for making sure that you are ensuring quality control across multiple retail locations. Conducting regular audits isn’t only about finding any faults, but making sure that your operations are running smoothly.
You can always be proud of adding more locations to your retail business, but making sure you are able to manage all of them is important in preventing fraud.
The Power of Multi-Layer Authentication in E-Commerce
A multi-layered security approach is crucial if you want your security practices to be at the top of their game. Multi-layer authentication has a significant advantage over single-layer authentication.
Did you know that 61% of all breaches involved stealing users’ credentials? Multi-layered authentication makes this difficult to happen since it asks users for multiple levels of authentication.
The main components of a multi-layer approach include:
- Includes Secure Sockets Layer (SSL) by encrypting data for protecting user’s sensitive data that is transmitted between their browsers and your site.
- Implementation of secure payment gateways for an optimized checkout process.
- Conducting regular website scanning for malware and other vulnerabilities.
- Two-factor authentication for users in order to prevent any unauthorized access to personal accounts.
Implementing a single level of authentication is never a secure approach. This is due to the reason that fraudsters are always looking for new ways to get a hold of you and your customers’ sensitive information.
Fraud Detection Tools Role in Preventing E-Commerce Fraud
If you’re not already using a fraud detection tool, it’s now time to do so. Fraud detection tools are great for analyzing customer behavior and detecting e-commerce fraud activity. In fact, on average, most e-commerce companies will use at least five fraud detection tools to prevent fraud.
These tools use ML Algorithms and many other advanced methods for identifying fraudulent behaviors and patterns.
The most popular fraud detection techniques include:
- ML to analyze customers’ data and real-time fraudulent transactions.
- AI for analyzing customer behavior and detecting any transactions with suspicious activity.
- Fraud detection automation allows businesses to automate their fraud prevention process and reduce manual reviews.
- Uses risk scoring to assess the level of risk each transaction has based on transaction history, device information, and the IP address. This helps in identifying fraudulent transactions and using additional verification measures based on the given fraud scores.
- More advanced fraud detection tools will use device fingerprinting for collecting and analyzing device information to identify unique characteristics and patterns, which helps in detecting potential fraud and blocking access to them.
Fraud detection tools can see fraudsters coming before you can, and the best part is that they can inform you in real-time so you can take action instantly before any damage has been done. You can always set up real-time alerts that will inform you right away in case of any suspicious activities.
FAQs
Let’s answer some common questions regarding e-commerce fraud:
Q1. What Are Some Common Signs of E-Commerce Fraud?
Signs of e-commerce fraud can include unusual or large orders, multiple orders placed from the same IP address, mismatched billing and shipping addresses, expedited shipping requests, and an unusually high number of failed transactions.
Q2. How Can Businesses Prevent E-Commerce Fraud Effectively?
Businesses can prevent e-commerce fraud by implementing robust security measures such as multi-factor authentication, using secure payment gateways, regularly updating security protocols, educating employees and customers about fraud risks, and employing fraud detection tools.
Conclusion
E-commerce fraud is becoming quite common, and while more people use the internet, the amount of online attacks won’t be slowing down.
You never know about the new methods that fraudsters come up with and what they are willing to do. That’s why it’s important to always stay updated and fraud detection tools are great in helping you do this.
Fraud not only costs your business financially in the long-term, but will also negatively affect your company’s reputation. Your reputation strongly relies on customer loyalty and their trust. Once fraud occurs, it’s highly difficult to get your reputation back to where it was. That’s why most modern-day fraud detection tools and other important practices stop it from happening initially.