Ecommerce fraud has become a growing concern for online businesses, with losses due to online payment fraud reaching $41 billion in the US in 2022, double the losses of the previous year.
As global ecommerce sales are projected to reach $6.3 trillion in 2024, it is essential for businesses to implement effective fraud prevention strategies to protect themselves and their customers from financial loss and damage to their reputation.
What is Ecommerce Fraud?
Ecommerce fraud refers to any illegal or deceptive activity that occurs during an online transaction. It can involve stolen credit card information, identity theft, fake websites, or any other fraudulent activity that aims to exploit unsuspecting online shoppers and/or businesses for personal gain or financial benefit.
Types of Ecommerce Fraud
- Identity theft: Fraudsters gather personal information about individuals to impersonate them and make illegitimate purchases or unauthorized transactions.
- Account takeover: Fraudsters gain access to legitimate user accounts and exploit them to make fraudulent purchases or access sensitive information.
- Card Not Present (CNP) fraud: This type of fraud occurs when a fraudster uses stolen credit card information to make purchases online without physically presenting the card.
- Friendly fraud: Sometimes referred to as "chargeback fraud," friendly fraud occurs when a customer makes an online purchase and then disputes the charge, falsely claiming they did not receive the product or service.
- Phishing attacks: Fraudsters use deceptive techniques to trick individuals into revealing their sensitive information, such as login credentials or card details.
- Triangulation fraud: Fraudsters create fake online storefronts to trick customers into making purchases, but they never deliver the products. Instead, they use the payment information for illegal activities.
9 Ecommerce Fraud Prevention Strategies for Businesses
To prevent ecommerce fraud, businesses must implement comprehensive fraud prevention strategies. Here are nine steps for successful ecommerce fraud prevention:
- Manually review risky orders: Implement a manual review process to scrutinize orders that display red flags or suspicious patterns.
- Collect proof of delivery: Work with trusted shipping carriers and collect proof of delivery to prevent false claims of non-delivery.
- Be PCI compliant: Ensure your business meets Payment Card Industry Data Security Standards (PCI DSS) for secure processing of online payments.
- Be vigilant around peak shopping seasons: During peak shopping seasons like Black Friday and Cyber Monday, be extra cautious as fraudsters may take advantage of increased transaction volumes.
- Use identity verification software: Invest in fraud prevention software that can detect discrepancies in customer details, such as billing, shipping, or card information.
- Build a blocklist: Maintain a blocklist of known fraudsters to prevent them from making repeated fraudulent purchases.
- Use IP fraud scoring tools: Implement IP fraud scoring tools that can detect unusual IP locations and patterns associated with fraudulent activities.
Webinar: Get Expert Tips on How to Protect Your Ecommerce Platform
From fashion to electronics, Africa's e-commerce sector has witnessed a significant boom in the last few years. However, fraud remains a major challenge for many e-commerce businesses.
Join us on January 12th for a deep dive with key industry experts from Dojah, Selar, and Catlog on combating fraud in the e-commerce space. Come learn real-life strategies and success stories on building a fraud-proof e-commerce business in Africa.
Don't miss out. Register now to save your seat.