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A rise in online shopping over the past couple of years has led also to a rise in ecommerce fraud. It is more critical than ever before for businesses to detect and prevent online fraud. Here’s how the right solutions can help.
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Digital transformation has given rise to various ecommerce trends around the globe. It has revolutionized the way we interact with businesses and obtain their products and services.
Over the past two years, with the outbreak of the COVID-19 pandemic, even the smallest of businesses has had to shift online to interact with their customers. Today, even the most novice customers have become accustomed to ecommerce. For example, before March 2020, 9% of US consumers, 15% of UK consumers, and 8% of Japanese consumers had never purchased anything online. But with the new normal (and online shopping becoming a norm), global ecommerce sales reached $4.9 trillion in 2021.
However, this rise in ecommerce was accompanied by a significant surge in global ecommerce fraud and resultant losses. In 2021, the collective global ecommerce fraud losses were $20 billion—representing growth of 18%—compared with $17.5 billion in 2020. Moreover, fraudsters have been increasingly using sophisticated machine learning (ML) algorithms and synthetic identities to overcome fraud countermeasures.
Now, more than ever, it is crucial for businesses to take proactive measures in detecting and preventing fraud. Moreover, by investing in the right prevention solutions, businesses can protect themselves from costly financial losses and damaging scams.
Here Are Eight Ways to Safeguard Against Ecommerce Fraud
Detection of fraud attempts is the first step in preventing ecommerce fraud and protecting your business. Here are some of the industry best practices to detect and avoid ecommerce fraud:
Implement ML- and AI-Powered Fraud Detection Solutions
ML- and AI-powered ecommerce fraud detection solutions eliminate potential human error in fraud analysis and can detect fraud in real time. They analyze past fraud data, and using predictive analytics, ascertain fraudulent activity. This can protect you from fraudsters and give you more control over business outcomes.
Use Address Verification Service (AVS)
AVS systems compare the address provided by customers with the billing address registered with the bank (in case of a card payment). But if the addresses do not match, the system may require additional verification steps or decline the transaction. This can help identify potentially fraudulent card payments and prevent ecommerce fraud.
Implement Robust Customer Authentication Protocols
Customer account takeover is one of the most common causes of ecommerce fraud. In such instances, the fraudster steals the details of customers and makes purchases from their accounts. Robust customer authentication protocols can help in protecting customers’ identity.
For example, be sure to require strong password requirements, ask security questions, insist upon two-factor authentication, and build in mandatory use of card verification value. In this way, your business can secure customers’ accounts and detect potential fraud if customer authentication fails.
Perform Regular Security Audits to Help Prevent Ecommerce Fraud
Identifying and addressing potential weak spots in website security is crucial. Otherwise, fraudsters exploit them and steal from your business. For example, this should include regular system updates for cart plug-ins and payment gateways, along with frequent anti-malware scans. Also be sure to include regular data encryption and backups as well as the use of strong passwords for admin accounts and databases. These steps allow you to identify, predict, and prevent potential e-commerce fraud.
Use Hypertext Transfer Protocol Secure (HTTPS) to Safeguard Against Ecommerce Fraud
HTTPS encrypts all data exchanged between customers and ecommerce stores. Basically, the use of HTTPS protects customers’ personal data, such as credit card numbers or addresses, from hackers. In other words, it safeguards them from online retail fraud.
Collaborate with a Trusted Third-Party Payment Processor
As all payments go through them, a reliable payment processing partner is critical for ecommerce fraud management. Third-party payment processors add another layer of security for your business and for customers. It detects and prevents ecommerce fraud, thereby keeping customers’ data secure.
Ensure Compliance with Payment Processing Regulations
Stringent regulations and standards have become a norm within the ecommerce environment in light of increasing risks in online payment frauds. These standards and regulations include such measures as PSD2 (Payment Services Directive), SCA (Strong Customer Authentication), 3DS (3-D Secure), and PCI (Payment Card Industry). These are developed by leading online payment processors and safeguard customers and businesses against potential ecommerce fraud.
Invest in Up-to-Date Ecommerce Fraud Management Solutions
If your business is new to the ecommerce ecosystem or lacks expertise in fraud analysis, you can invest in e-commerce fraud management solutions. Of these is the programmatic advertising solutions that will help keep you secure from hackers and fraudsters. Such investments allow you to leverage services and analytics expertise to safeguard your business from online retail fraud.
Ecommerce fraud is bound to evolve. However, with these industry best practices in mind, businesses can proactively identify red flags, protect customer data and revenue, and boost their presence and relevance in the online market space.
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