Ecommerce fraud is disheartening as it is debilitating. Merchants spend time and money building a business, then fraudsters try to profit from their hard work by attacking ecommerce channels and customers.
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 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 has seen rapid growth in recent years. U.S. retail ecommerce sales are projected to hit $710 billion by the end of 2020, according to eMarketer. That growth creates more opportunities for ecommerce fraud. 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. The pandemic is creating an environment for fraudsters to intensify these attacks as more people move online to shop. With so many brands turning to ecommerce to generate revenue during the pandemic and beyond, fraud could be hindering strategies for building long-term customer relationships. Moreover, a cyber security attack could cost a brand its reputation, along with profits, for years after the incident.
Fighting ecommerce fraud is not a losing battle — it is an evolving battle. Merchants serious about fighting ecommerce fraud should consider the following tactics to better protect their customers, MID relationships and bottom line.
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, crypto currency and gift cards. If you feel ill-equipped to tackle the changing fraud landscape, partner with experts to develop a robust strategy. Then revisit that strategy periodically to ensure its relevancy.
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.
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.
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 leading fraud solutions provider Kount. 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.
sticky.io partners with Kount to empower ecommerce merchants with the latest fraud prevention solutions. Block fraudulent transactions before they happen, fight account takeovers and reduce chargebacks — all while delivering a frictionless customer experience.
Request a demo to learn more about integrating industry-leading fraud prevention tools with a robust ecommerce platform.