To run a successful e-commerce business today, you need outstanding levels of security and awareness of potential fraud. Most importantly, you need to take the right steps in preventing these criminal activities while understanding that fraud is constantly evolving. Here are five common types of e-commerce fraud and how to prevent them.
1. Credit card fraud
Credit card fraud is growing by the day as fraudsters increasingly find ways to purchase or steal online shoppers’ credit card details from the dark web. This fraud takes many forms, and the most popular are:
- Card-not-present (CNP) fraud: This happens when a stolen credit card is used to make purchases from your store. It not only defrauds the cardholder as you might eventually have to refund the full purchase once the customer seeks reimbursements as they did not initiate the transaction. A way to reduce CNP is to always ask for extra authentication, profile your customer behavior, and invest in device fingerprinting tools.
- Credit card testing: This is whereby fraudsters make small purchases to test if a stolen credit card works. These initial purchases might be small, but consequential purchases will be more expensive once the first transaction is successful. Credit card testing is prevented using similar techniques to CNP fraud.
2. Chargeback fraud
Fraudsters have found ways to take advantage of e-commerce stores by first making purchases and then telling their credit card company to reverse the payment by saying the card was stolen. Chargeback fraud tends to do tremendous damage, as most banks impose chargeback fees that get higher the more cases you have. The best way to prevent this fraud is by actively verifying all transactions before shipping a product and having an active dispute management protocol backed with chargeback management software.
3. Account takeover fraud
Account takeovers happen when an unauthorized third party takes over a user’s account and uses their identity to commit fraud. The most effective way to avoid identity theft and related fraud is to offer your clients tips on making online payments safe and implementing stricter identity verification processes.
4. Interception fraud
Interception fraud might not be as common as credit card fraud, but it has equally severe impacts, especially on your business reputation. It occurs when fraudsters find a way to place an order on your site and wait until the goods are ready for shipping before requesting a charge of shipping address. You require strict shipping policies and laid down agreements with your shipper to avoid this fraud.
5. Refund fraud
Refund fraud occurs when a stolen credit card is used to purchase from your store, and then the fraudster contacts your business with a claim of overpayment. The request will be for the refund to be made via a different method, allowing them to steal money from your business. This is proactively prevented by having strict regulations and standards for dispute resolution while maintaining PCI compliance.
As e-commerce fraud continues to be the biggest hurdle for your business, you need to be invested in protecting your business. These tips offer insights on the best practices for combating online crime and keeping your store and clients safe.