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Are You Doing Enough to Fight Ecommerce Fraud?

Ecommerce fraud is on the rise. Learn how to protect your business and customers from evolving fraud trends and new vulnerabilities.

Updated:  

October 13, 2022

Consumer and fraudster sitting across from each other to indicate ecommerce fraud threats

Merchants are optimizing business practices and strategies to take advantage of a burgeoning ecommerce market. While many merchants are monitoring data trends and consumer behavior to generate more revenue, they should also consider the impacts of fraud and methods to protect their business and customers. Combating fraud may help online ecommerce businesses stay agile amid the growing rates of theft.

It takes an intentional strategy and innovative tools to stay ahead of ecommerce fraud trends. Some merchants believe they are using the latest fraud prevention solutions, but uncertainties like the pandemic and a possible recession have created new liabilities. Other merchants might hesitate to implement fraud mitigation solutions because they fear it will negatively impact revenue margins. Whichever reason most resonates, you might not be doing enough to protect your business from fraud attacks. Learn how to safeguard your business, while minimizing friction for your customers.  

Ecommerce Fraud Trends: Theft Is On the Rise

Ecommerce has seen rapid growth in recent years. U.S. retail ecommerce sales are projected to hit $5.4 trillion by 2026, according to Morgan Stanley. Unfortunately, as ecommerce sales flourish, more opportunities for ecommerce fraud can occur. For example, criminals with stolen credit card information will sometimes make smaller purchases to test account information without setting off any alarms. This card-testing tactic has been on the rise for years, along with account takeover schemes and loyalty promotion fraud. Our September 2022 study found that more than 30% of subscription consumers admit to creating fake emails to receive referral benefits.

Juniper Research found that merchants' losses to online payment fraud will exceed $206 billion cumulatively between 2021 and 2025.

After the pandemic, fraudsters were successful in creating an environment to intensify cyber-attacks as more people moved toward online shopping. With so many brands turning to ecommerce to generate a foundation for revenue expansion, fraud may be hindering strategies for building long-term customer relationships. Moreover, a cyber-security attack is catastrophic for a brand’s reputation, resulting in loss of profits even years after an unforeseen incident. Ecommerce fraud protection can offer a safer way to help both customers and merchants succeed online.

How Merchants Can Fight Ecommerce Fraud

Fighting ecommerce fraud is not a losing battle, but adapting to evolving methods and different types of ecommerce fraud is critical. Merchants serious about ecommerce fraud prevention should consider the following tactics to better protect their customers, MID relationships and bottom line.

Be Proactive: Ecommerce Fraud Management

Ecommerce merchants cannot afford to be reactive when it comes to fraud. With fraudsters constantly creating new attacks and exploiting fresh vulnerabilities, adopting a proactive prevention plan is critical.

Ensure you are protecting customers who use traditional payment methods such as credit card and debit cards, as well as other payment methods such as mobile wallets, cryptocurrency and gift cards. If you feel ill-equipped to tackle the changing fraud landscape, partner with experts or software providers to develop a robust strategy. Modern ecommerce platforms aid in identifying suspicious customer behavior by gathering data that follows specific buying patterns and transactions.

Revisiting an existing ecommerce fraud management strategy can help ensure that protection is considered for long-term ecommerce growth.

Reduce Opportunities for Account Takeovers

Account takeovers occur when fraudsters gain access to a consumer’s account and make unauthorized transactions. Think of a fraudster hacking into a legitimate customer account connected to your business, ordering your products then reselling those stolen products.

Merchants can reduce the chance of account takeovers by monitoring failed login attempts, risky IP addresses and requiring customers to create strong passwords. Merchants should also quickly identify scenarios that could signal fraud, such as several orders of the same product at the same time, multiple orders to the same address using different cards or shipping addresses that do not match billing addresses.

Leverage Machine Learning

In the past, fraud detection was heavily based on rigid rulesets. For example, a rule within an older anti-fraud solution could restrict any transaction made from a certain country. Previous detection methods were also slow and lacked automation.

Today, denying legitimate transactions and rigid rule sets are less concerning because of machine learning. Algorithms take customer behavior and transaction data, learn from that data, then apply those learnings to identify ecommerce fraud. Ecommerce merchants should leverage machine learning to identify fraud quickly and automatically, without denying legitimate transactions.

Mitigate Friendly Fraud

Friendly fraud most often occurs when a customer disputes a legitimate credit card charge, then the bank issues a chargeback to the customer. Sometimes the situation is an honest misunderstanding, while other times the customer is being deceitful.

Regardless of the intent, friendly fraud can account for 40% to 80% of all fraud losses, according to our fraud solutions partner Kount, an Equifax company. Merchants can reduce friendly fraud by receiving chargeback alerts as soon as a customer disputes a charge. This enables more time to fight those disputes and hold on to more money.

Detecting Online Fraud

The most obvious effect of ecommerce fraud is the loss in existing revenue. Further, online fraud can also impact customer loyalty for a particular brand or store. Unfortunately, shoppers are less likely to return to a website that is risky or unprotected. Some indications of red flags or fraudulent activity on an ecommerce site include:

  • Higher order values — Online scammers who seek to use stolen credit cards will often purchase high-ticket items.
  • Testing credit cards — Fraudsters are known to test stolen credit cards by first purchasing lower ticketed items.
  • Different credit cards — A clear warning sign is one customer making purchases with different payment methods.
  • Unusual IP locations — Fortunately, detecting fraud from unusual purchases from different locations is easier with the right tools.
  • Different billing and shipping addresses — Shipping to different addresses may be an indication that fraud is occurring.

Experiencing fraud is disheartening whether you’re an online shopper or a merchant trying to stay ahead of rising trends in online theft. It’s important to have a system in place to focus on online fraud prevention.  

Protect Your Online Business Against Fraud

As criminals develop new methods to trick customers and steal money, merchants should remain committed to a robust ecommerce fraud management strategy. sticky.io works to empower ecommerce merchants with the latest fraud prevention solutions. Fraud prevention allows merchants to take proactive measures in detecting and solving online fraud to help protect businesses. Block fraudulent transactions before they happen, fight account takeovers and reduce chargebacks — all while delivering a frictionless customer experience.

Discover how to fight the most common types of ecommerce fraud and hear from top fraud experts. Sign up for this on-demand webinar today.

4 types of ecommerce fraud