Megan Wright February 3rd, 2021

Best Practices to Prevent eCommerce Fraud

The opportunity of cybercriminals to attack online businesses is increasing as online shopping becomes popular. If you possess an online business, you have to protect it from fraudsters who may ruin your reputation, steal from you, and harm your brand.

What is eCommerce Fraud? 

eCommerce is a commercial electronic transaction via an online store. The transactions are made from phones, laptops, desktop computers, and tablets.

eCommerce fraud is a criminal act carried out during a commercial transaction via the internet with the intention of personal or financial gain of fraudsters. eCommerce fraud is intended for online merchants, and the act is intended to be undetected.

Reasons why eCommerce fraud occurs

Ease. Fraudsters can now access a site on the dark web and purchase stolen credit cards. Before the internet era, they would steal credit cards physically from people and use them. 

Obscurity. eCommerce fraud is common because it is carried out anonymously. Fraudsters do not need to steal from anyone and be captured on cameras. They only require a computer and the internet and steal at any time, any place without being seen. 

They create fake email addresses that cannot reveal their true identity. 

Escape. Fraudsters know that eCommerce fraud is not followed up by law like other criminal acts. The money they steal every time they carry out the crime is small compared to other crimes. 

However, eCommerce fraud mostly occurs across international borders, making it difficult for police to identify their location and arrest them in other countries. 

Types of eCommerce Fraud

eCommerce fraud is not only about stolen credit cards, as many people think. Here are the most common types of fraud.

1. Credit Card Fraud

Also referred to as payment fraud, the fraudster uses information from a stolen card to buy goods and services from an online merchant. The transaction defrauds the seller, who is forced to refund the purchase.

2. Affiliate Fraud

The goal of affiliate fraud is to initiate affiliate commissions. Affiliate commissions are paid to affiliates in affiliate marketing for sales they refer. 

eCommerce fraudsters defraud online sellers using fake activities to initiate or inflate commissions. 

3. Phishing

Also known as account takeover, fraudsters hack into accounts using phishing schemes. Online merchants offer these accounts to customers for storing their financial information, personal data, and purchase history. 

An email is sent to customers to defraud them into providing their personal information such as their usernames and passwords. The fraudsters then log into the accounts and make unauthorized purchases. 

4. Interception Fraud

Here, fraudsters buy products online using stolen credit cards and ship them to the cardholder’s address. After the transaction is successful, they contact the merchants before the product is shipped, and they change the shipping address to their desired address. 

5. Chargeback fraud

It is also known as friendly fraud. After the buyer has purchased products online, the fraudster waits for several weeks or months then notifies their bank, claiming the transaction as unauthorized. 

How to Recognize eCommerce Fraud

As an online seller, you can identify eCommerce fraud in different ways. Keep in mind that for an eCommerce fraud to be successful, it depends on the criminal’s skills. As merchants become protective of their online businesses, eCommerce fraudsters also improve their skills. Some of the common ways to identify fraud are;

Conflicting data. Check if the zip code and the city of the buyer match. Also, their IP address and their email should match.

Large orders. Fraudsters want to receive large orders before they are caught. Mostly, they will purchase an order larger than what your customer spends.

Suspicious location. If your customer buys from an IP address in America and suddenly buys from another location, it should raise a red flag.

Numerous shipping addresses. Mostly, fraudsters will buy many products and ship them to different addresses.

Practices to Prevent eCommerce fraud

1. Carry out frequent site security audits

  • Make sure your shopping cart program and plugins are updated. 
  • Backup your online store regularly. 
  • Strong passwords are highly recommended for admin accounts, database, CMS, and FTP access. 
  • Scan your site for malware. 
  • Encrypt communication between your business, suppliers, and your customers.
  • Remove all inactive plugins.

2. Track your website frequently for suspicious activities

Follow up transactions and accounts for activities like shipping information, inconsistent billing, and the physical address of your buyers. You can look for anti fraud tools that monitor IP addresses and inform you of suspicious addresses. 

3. Use Fraud Protection Services

Look for service providers who will help keep your systems updated. They will inspect all your transactions and validate legal orders. 

4. Verification Technology

Card Verification Technology is highly recommended to confirm that the card belongs to the rightful owner. 

5. Email Authentication

The most difficult thing is detecting if a message comes from a fake email address or not. However, with email authentication, you can avoid this.

6. Pinpoint the origin of the transaction

Tracking the device being used to make an order can assist you


Photo by Jefferson Santos on Unsplash

Megan Wright

Megan Wright is the Chief Editor for ChamberofCommerce.com. Chamber specializes in helping small businesses grow their business on the web while facilitating the connectivity between local businesses and more than 7,000 Chambers of Commerce worldwide.

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