The number of e-commerce losses due to online payment fraud has grown rapidly in recent years. Without the proper defenses, your store is vulnerable to activities like triangulation and chargeback fraud. Fortunately, you can implement some useful strategies to prevent fraud on your e-commerce site.
In this post, we’ll look at the most common types of e-commerce fraud. Then, we’ll discuss five key measures to help you prevent fraud on your website. Let’s get started!
Common Types of E-Commerce Fraud
When you enable online orders and payments, you can help increase your sales and attract new clients. However, this also gives hackers an opportunity to intercept data and steal sensitive information.
In 2022, e-commerce losses to online payment fraud were estimated at $41 billion globally. Therefore, your business can take a huge hit if you don’t have the proper prevention measures in place.
There are many different instances of e-commerce fraud. The most common ones include identity theft and credit card fraud. Hackers can take over genuine user accounts on your site to make unauthorized purchases.
There’s also chargeback fraud, which is when customers complete a transaction but claim that they didn’t receive their items. Plus, with the growing popularity of affiliate marketing, some actors generate false traffic, clicks, or sales to receive illegitimate commissions.
How to Prevent Online Payment Fraud on Your E-Commerce Site (5 Strategies)
Now that you know a bit more about e-commerce fraud, let’s take a look at five simple strategies to prevent it.
1. Limit Order Quantities
One of the warning signs of fraud includes very large orders. Additionally, some users may carry out multiple small purchases to check that stolen payment details work correctly.
You can reduce the risks by placing strict limits on order quantities. This means limiting the number of items that can be purchased in a single transaction.
Of course, you don’t want to inconvenience genuine customers. Therefore, it’s a good idea to find out the average number of products that shoppers purchase in one order. Then, you can set your limit slightly higher to ensure that real buyers enjoy a seamless checkout experience.
2. Encrypt Your Website Data
If you run an e-commerce store, there are certain encryption protocols like HTTPS and SSL that you can employ to make your site more secure. These protocols ensure that all website data is encrypted, making it difficult for hackers to intercept and steal sensitive information.
You may already be familiar with HTTP (Hypertext Transfer Protocol). This is a set of rules that browsers use to read and transfer data. However, you want to use HTTPS for your website. This is a more secure version of HTTP which disguises data to make it unreadable.
You can do this by installing a Secure Sockets Layer (SSL) certificate from a trustworthy Certificate Authority (CA) like Let’s Encrypt:
This certificate authenticates your website’s identity and establishes a secure connection between your site and the customer’s browser. Therefore, it’s one of the most effective ways to protect your site against security breaches.
Most quality web hosts like WP Engine provide free SSL certificates with their hosting packages.
3. Become PCI Compliant
If you’re processing payments online, PCI compliance is a huge priority. The Payment Card Industry (PCI) standards ensure that your site is fit to accept user payment details:
To become PCI compliant, you’ll have to meet a list of requirements. For example, you’ll need to encrypt cardholder data, use antivirus software, and regularly monitor and test systems and networks.
Although PCI compliance isn’t required in every U.S. state, most major credit companies will ask for it when your business reaches a certain size. If you’re using a reputable payment gateway or e-commerce platform, your site may already be compliant with these standards.
4. Require CVV Numbers and Address Verification
One of the biggest red flags for e-commerce fraud is when customers’ billing, shipping, or card details don’t match up. Therefore, you’ll want to implement verification software to spot these issues.
Card Verification Numbers (CVN) is the most popular fraud prevention feature used by merchants worldwide. The CVV number is the security code that you’ll find on the back of your card:
If you add the CVV number as a required field within your store’s checkout process, users will need to have access to a physical card in order to complete the purchase. This should help deter scammers from using credit card details that they’ve obtained over the internet.
What’s more, you can add an extra level of security by implementing an Address Verification System (AVS). This will make sure that the customer’s billing address aligns with the address that’s registered for the card.
5. Manually Review Suspicious Orders
Although there are plenty of preventative measures to reduce e-commerce fraud, you can also manually review suspicious orders. Many business owners use special software to authenticate orders, but this is not 100% accurate, and it can wrongly flag authentic purchases.
If you have the time and resources, it can be useful to review orders manually (or double-check orders that your software has flagged). There are certain methods you can use to spot suspicious orders.
For example, low-value orders from unusual locations can indicate e-commerce fraud. Additionally, if you spot back-to-back orders from the same account, this can be a bad sign.
If you’re unsure, your best bet is to review the customer’s purchase history. For instance, if a customer normally submits orders from the U.S. but suddenly makes one order from Europe, this is unlikely to be a threat. However, if the customer is placing very large orders or using a different payment method, this might mean the account has been compromised.
Conclusion
E-commerce fraud is a very dangerous threat that can have lasting consequences on your customers, your revenue, and your reputation. However, you can prevent it by setting order limits, encrypting data, and becoming PCI compliant.
Do you have any questions about how to prevent online payment fraud on your e-commerce site? Let us know in the comments section below!
Photo by Antoni Shkraba