Imagine this: you own an e-commerce platform where sales are growing, transactions flow in daily, and customers trust your service. But one day, you realize fraudsters have begun exploiting your platform, creating fake accounts and making fraudulent purchases. The result is unexpected financial losses that you’re forced to cover.

This has been the reality for many e-commerce businesses in recent years. Globally, e-commerce businesses are predicted to lose  $48 billion annually to online fraud. In Africa, the impact is even sharper, with fraud cases rising by more than 600% in some regions within just a few years.

With advanced fraud tactics emerging, e-commerce fraud detection has never been more critical. That is why in this guide, I will walk you through the common types of fraud, the challenges you may face, and the key features to look for when choosing a solution.

The purpose is simple: to help you protect your e-commerce business from costly risks and build the kind of trust that fuels growth.

Ready? Let’s get into it. 

TL;DR:

• What is E-commerce Fraud Detection?
• Common Types of E-commerce Fraud
• How Fraud Detection Software Works
• Key Features of E-commerce Fraud Detection Software
• Challenges in E-commerce Fraud Detection
• Benefits of Fraud Detection for E-commerce Startups
• How to Choose the Right E-commerce Fraud Detection Solution
• Prevent Fraud and Stay Ahead with Dojah
• FAQs on E-commerce Fraud Detection

What is E-commerce Fraud Detection?

E-commerce fraud detection is the process of spotting and stopping fraudulent activities across your store, SaaS platform, or online marketplace. Think of it as the shield that protects your revenue, reputation, and customers from scammers hiding behind fake identities, stolen cards, or shady transactions.

For SaaS platforms, online marketplaces, and merchants, this usually happens in the background. Every order, payment, or signup is scanned in real-time to confirm whether it appears genuine or suspicious. 

Imagine running a marketplace, and a buyer tries to use a stolen credit card. With fraud detection, the system can flag it instantly before any money or goods change hands.

Common Types of E-commerce Fraud

Fraud in e-commerce wears different disguises. Here are the most common types businesses face every day:

• Chargeback Fraud – A customer buys something, receives it, then disputes the charge with their bank to get a refund. You lose both the money and the product.
• Fake Accounts – Fraudsters create multiple bogus accounts to exploit promotions, discounts, or referral bonuses.
• Payment Fraud – Stolen credit cards or hacked payment details are used to make purchases, leaving merchants with heavy losses.
• Promo Abuse – Abusing coupons, first-time user discounts, or referral codes to get repeated benefits that were meant for genuine customers.

Related: Find out how Fraud Detection works for SaaS 

Key Features of E-Commerce Fraud Detection Software

Now that you understand the basics, let’s look at the features that make a good fraud detection software for your e-commerce platform. 

1. Real-Time Transaction Monitoring

This feature scans every transaction as it happens, spotting suspicious activity immediately. It helps prevent losses from fraudulent orders before they are processed. For fast-moving ecommerce platforms, catching issues in real time is essential to avoid costly chargebacks.

2.   Identity Verification & KYC for Buyers/Seller

KYC checks ensure that every account is tied to a real person. By verifying IDs, emails, and phone numbers, the system prevents fake accounts and stolen identities from slipping through. This builds trust between your platform and genuine users while keeping fraudsters out.

3.  Device & IP Fingerprinting

Fingerprinting tracks the devices and IP addresses used for transactions or logins. It helps detect multiple accounts from the same source or unusual device patterns. This feature adds an extra layer of security without slowing down legitimate customers.

4. Behavioral Analytics (Spot Unusual Order Patterns)

The system analyzes user behavior to flag anomalies like sudden high-value orders or unusual login times. It spots patterns that may indicate fraud, even if the payment method seems valid. Behavioral analytics gives your team actionable insights to prevent losses proactively.

5.  Chargeback Prevention Systems

These systems help identify risky transactions before they result in chargebacks. By flagging suspicious purchases and providing alerts, they reduce revenue loss. They also help your business maintain good relationships with payment processors.

6.  Risk Scoring & Automated Alerts

Every transaction and account gets a risk score based on likelihood of fraud. High-risk actions trigger automated alerts for immediate review or blocking. This ensures your team can act quickly while keeping genuine transactions flowing smoothly.

Also see: How Transaction Monitoring really works

Challenges in E-commerce Fraud Detection

Implementing fraud detection for your e-commerce platform comes with its own set of challenges. Here are a few you may encounter:

1. High False Positives Affecting Genuine Customers

A false positive happens when a legitimate transaction is mistakenly flagged as fraud. Without a reliable system, you risk blocking real customers and losing revenue. This happened to Revolut in 2019, when the platform lost nearly $50 million on Black Friday after genuine buyers were barred from completing purchases.

2.   Sophisticated Fraud Tactics (Account Takeover, Synthetic Identities)

Fraud is evolving, and the threats today are far bigger than those of yesterday. Tactics like account takeovers and synthetic identities are harder to detect and slip past simple checks. If your system isn’t adaptive and regularly updated, it leaves your platform exposed to serious losses.

3. Balancing Seamless Checkout with Fraud Controls

You need to balance blocking fraud with keeping checkout smooth for real customers. Too many checks can frustrate buyers, leading to abandoned carts and lost sales. The challenge is adding protection that secures your platform without making transactions feel like a burden.

4. Integration with Payment Providers and KYC Tools

Another challenge is integrating fraud detection with multiple payment providers and KYC tools. Many founders on Reddit have complained about how complex and slow this process can be, sometimes dragging on for months. During this delay, your platform remains exposed to fraud.

5. Limited Resources for Startups vs. Enterprise Players

Also many early or growth-stage founders complain about how limited budgets and fewer technical resources affect them. Unlike enterprises, you may not always be able to afford robust systems.  Without a tool with a suitable pricing model,  you could face challenges in tracking suspicious activity.  

Benefits of Fraud Detection for E-commerce Startups

Despite the highlighted challenges in e-commerce fraud detection, it also brings key benefits to your business. These include:

1. Reduced Revenue Loss from Fraud and Chargebacks

With reliable fraud detection, you avoid costly losses from fraudulent purchases and chargebacks. As seen in the Revolut case mentioned earlier, inaccurate systems can cause massive losses when genuine transactions are blocked. The right system minimizes both fraud-related losses and false positives, protecting your revenue.

2. Faster and Safer Onboarding of Merchants and Buyers

A strong fraud detection tool speeds up onboarding while keeping it secure. Instead of manually reviewing every merchant or customer, the system verifies identities and flags risks automatically. This means you can scale faster without exposing your platform to fake accounts or bad actors.

3. Compliance with Regulations

E-commerce platforms must meet compliance standards like PCI DSS, AML, and local KYC laws. Fraud detection tools help you meet these requirements by monitoring transactions, verifying identities, and generating reports. This helps you build credibility with regulators and partners.

4. Improved Trust and Customer Retention

Customers are more likely to stay loyal if they know their payments and accounts are secure. Fraud detection reassures them that your platform is a safe place to shop or sell. This builds trust and gives you an edge over competitors with weaker protections.

Related: Choosing the right transaction monitoring tool for your fintech

How to Choose the Right Ecommerce Fraud Detection Solution

Now that you know the benefits and you’re ready to choose a fraud detection tool, it’s important to focus on the factors that matter most:

1. Startup-Friendly Pricing

For early and growth-stage businesses, balancing strong protection with limited budgets is crucial. A good fraud detection tool should offer flexible pricing that matches your size and needs, so you’re not overpaying for features you won’t fully use yet. 

2. API Integration Ease

Long, complex integrations can drag on for months and delay the protection you need immediately. The right tool should provide clear documentation, developer-friendly APIs, and support for multiple payment providers, making it simple to connect to your platform. 

3. Scalability

Your business today may handle 5,000 transactions, but tomorrow it could be 500,000. A fraud solution should scale seamlessly with rising transaction volumes and evolving fraud tactics, without a complete system overhaul.  

4. Fraud Type Coverage

Fraud comes in many forms, and your defenses should reflect that. Look for solutions that protect against chargebacks, fake accounts, and account takeovers, among other risks. Broad coverage gives you the confidence that both everyday threats and emerging fraud tactics are being addressed.

5. Local Regulatory Compatibility

Regulatory compliance is just as important as fraud prevention itself. From PCI DSS standards to AML rules and country-specific laws, your fraud detection software must align with the regions you operate in. 

6. Support

When technical issues come up, reliable support is crucial. The right provider should have responsive teams who understand e-commerce and can step in fast. Dojah’s EasyDetect offers dedicated support via Slack, email, and other channels you can rely on.

👉 See how Dojah helped Mima prevent fraudulent sign-ups and improve risk detection across its platform.

Prevent Fraud and Stay Ahead with Dojah.

As an e-commerce founder, product manager, or compliance lead, fraud prevention may seem complex at times. However, with the right tools you can catch fraud early, protect revenue, and maintain a seamless experience for real customers at the same time.

Dojah’s EasyDetect, an all-in-one fraud prevention solution, helps you achieve this by simplifying  e-commerce fraud detection while keeping your business secure and efficient. 

With it, you can:

• Monitor transactions in real time to stop fake orders, chargebacks, and account takeovers.
• Reduce fraud risks with AI-powered analytics, risk scoring, and automated alerts.
• Verify customers instantly and stay compliant with flexible, developer-friendly APIs.
• Integrate seamlessly into your e-commerce stack and get reliable support whenever you need it.

Fast to implement and trusted by 500+ businesses across Africa, EasyDetect is built to protect your growth.

👉 Safeguard your e-commerce platform with Dojah today.

FAQs on E-commerce Fraud Detection

Why do I need e-commerce fraud detection for my platform?
Fraud detection helps you spot fake accounts, chargebacks, and suspicious orders before they harm your business. Without it, you risk financial losses, reputational damage, and customer churn.

How does fraud detection protect my platform?
It gives you real-time visibility into transactions and customer activity, so you can block fraud attempts early and keep genuine shoppers safe.

What challenges do ecommerce businesses face with fraud detection?
Key challenges include rising fraud tactics (like account takeovers and promo abuse), handling high transaction volumes, and balancing strict checks with smooth customer experience.

How do I choose the right fraud detection tool?
Look for features like real-time monitoring, AI-powered risk scoring, flexible APIs, automated alerts, and responsive support. These ensure protection without slowing down growth.

How does Dojah’s EasyDetect help with ecommerce fraud detection?
EasyDetect offers AI-driven analytics, instant customer verification, real-time alerts, and seamless integration. It reduces manual checks, flags fraud quickly, and protects your revenue as you scale.

How fast can EasyDetect flag fraud attempts?
Suspicious activity is detected instantly as transactions happen, giving your team enough time to act before fraud results in chargebacks or revenue loss.