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ECommerce Fraud Guide: Risk Mitigation Strategies

Ecommerce has been growing steadily through recent years, now even more than ever, but unfortunately that growth has been matched by a growth in ecommerce frauds. If you have an ecommerce store, you need to take proactive steps to protect yourself against cyber criminals who want to steal from you and your customers, access your confidential data, damage your profits and your reputation.

In order to do that you first need to learn what ecommerce fraud is, how it works, and what you can do to protect your ecommerce store from the rising threat of ecommerce fraud.

 

What is Ecommerce Fraud?

Ecommerce fraud happens when a fraudster exploits online stores for their financial or personal gain.

  • Transaction Fraud

When it comes to ecommerce the most common type of transaction fraud is card-not-present fraud and it will most likely result in chargeback. It happens when a cybercriminal uses a stolen credit card number to make a purchase. Once the card owner discovers fraudulent transaction they report it to the bank which will then initiate a chargeback with a merchant resulting in financial and reputational damage for the merchant.

  • Friendly Fraud

This type of fraud will still result in chargeback, but in this case the purchase wasn’t made with stolen data but by the card holder who afterwards decided to dispute the charge. This might be innocent or malicious, like wardrobing, customers not recognizing the payment, having a buyer’s remorse or they actually intend to harm your business.

  • Triangulation Fraud

There are three steps involved in triangulation fraud. In the first step, a fraudster will create a fake online store, where they will wait for a customer to buy a product. During this process they can steal customers’ confidential data which they will then use in the second step to buy that product from a legitimate ecommerce store and ship it to the customer. This way the customer will not suspect anything. In the third step they will use stolen customer data for additional online purchases they will ship to themselves.

 

How to mitigate ecommerce fraud?

Ecommerce fraud will always be present, but by staying proactive and implementing proper tools you can significantly reduce the risk.

  1. Perform regular security audits.
    By regularly performing security audits you will be able to discover any flaws in your security before fraudsters do and fix them.
  2. Require CVV or Card Verification Value number.
    Requesting customers to provide you with a CVV number will enhance the chance that the customers actually have the physical credit card which reduces the risk of transaction fraud.
  3. Keep an eye on red flags.
    By monitoring your store for suspicious activity like inconsistent order data, many transactions in a short time frame or multiple declined transactions you can recognize the fraud attempt and stop it before any damage is done.
  4. Implement Ecommerce fraud prevention tools.
    Using fraud prevention tools like data enrichment, device fingerprinting or social media lookup will stop fraud before it can affect your business. These tools allow you to gather more information about your user and to discover their intent.
  5. Educate your employees.
    By educating yourself and your employees about ecommerce fraud you are empowering them to defend themselves and your business against the threats that might arise.

 

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