Ultimate Guide: Ecommerce Fraud Protection for Online Merchants

The Ultimate Guide: Ecommerce Fraud Protection For Online Merchants

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Running a business is a balancing act, one where you have to protect yourself and your customers to ensure fraud prevention for your ecommerce business. Customers’ trust is essential for any healthy business, especially when it comes to online shopping. One study has shown that up to 22% of consumers distrust the internet so much that they never shop online. Now, that’s a lot of lost business right there, but luckily, there are plenty of ways to help reassure customers of your legitimacy. Before a customer is willing to give you their personal information, they need to be comfortable with and trust your site. 

By following the steps in our guide to ecommerce fraud prevention, you can help make sure that your customers know you take their personal information and security very seriously. While it might sound like a stressful and tedious process, these cybersecurity management measures are essential if you want to run a business and grow with the help of customers who trust you.

Types of Ecommerce Fraud

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To learn about how you should implement ecommerce fraud protection, you first need to know what type of ecommerce fraud is out there. Ecommerce fraud prevention relies on past experience and technological developments to examine how hackers break and steal data from small businesses, but we can learn from those unfortunate experiences to fight back and protect our data. These types of fraud range wildly, from small (but still vitally important) takeovers of accounts, to major purchases using a trusted customer’s data. Such an experience could result in you losing said customer and them telling their friends and family that your website is not safe. As an online merchant, you also suffer as 8% of all online merchants report fraud prevention efforts that account for 11% or more of profits. That’s why we go into every type, to make sure you are prepared for any type of fraud. 

Card Testing Fraud

When it comes to ecommerce fraud prevention, card testing is one of the more common types of fraud. It involves a fraudster trying to purchase products from your website using another person’s credit card number that they have stolen. Usually, fraudsters start off with a more inexpensive product—hence the whole “testing” of this type of fraud—and if they fly under the radar of fraud detection services, they start to purchase more expensive products before they are caught and the card is canceled. Fraudsters will use bots to test the credit card information to make sure it’s valid before purchasing products. Ecommerce fraud protection businesses can prevent this in a few ways, which we will talk about below. 

Account Takeover Fraud 

Fraudsters can access customer accounts, get free rein over the owner’s private information, and change account details to prevent the actual customer from being able to log in. This means they can also take the account holder’s personal information (address, credit card info), potentially track them using cookies, and purchase products under the customer’s name. A lot of times, a smart fraudster will try to not perform any unusual activity so they aren’t caught in the act.

Interception Fraud 

Interception fraud is when the fraudster purchases goods from your website using a stolen credit card, but this time the personal information they give you, such as the credit card number, billing address, and name on the credit card all match up. After the purchase is made, they “intercept” the package and take the goods for themselves. They usually call after the purchase is made and ask for the shipping address to be changed, or they might wait (if they live near the victim) and simply steal the package from the front door of the victim’s address. 

Chargeback Fraud

Sometimes fraud can be caused by simple and honest mistakes. Chargeback fraud is when a customer purchases a product or service before contacting their credit card company to void the service. This innocent action is called “friendly fraud”, and when it comes to ecommerce fraud protection, this isn’t the type of fraud to be concerned about. 

Refund Fraud 

Refund fraud involves a fraudster purchasing a product or service from your site using a stolen credit card then having it refunded onto their own credit card, allowing them to get money moved to their account. This results in the original credit card not being refunded, and as the business owner, you are responsible for paying the full original amount to the actual credit card owner. 


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There are plenty of ways you can make sure you and your customers are safe and secure. Running a legitimate business requires keeping track of information and being on guard, but don’t worry, it’s not all a complete slog. Below is a comprehensive list of how you can protect you, your site, and your customers:

Get the Information Correct

It might surprise you, but sometimes the best ecommerce fraud protection just requires you to be aware of the information your customers are giving you. You can consider approving sales when both the billing and shipping addresses match. If you end up in a situation where they don’t match, don’t worry. Email the customer and explain the situation before requesting a photocopy of the credit card and the customer’s ID. Most customers will be more than willing to hand them over. Make sure to simply and delicately explain the situation in the email. Remind them that photocopies are a preventative measure against fraud.    Your customers will not only understand, but they will also respect the effort your business went through to prevent fraud on your ecommerce site. 

Make Sure All Packages Have Tracking

Once your products have been shipped out from the warehouse, you also need to make sure they arrive at the right destination. Making sure your packages are tracked usually helps deter fraudsters. Plenty of shipping websites support both private couriers and national postal services, so you are well covered at every turn. Ecommerce fraud protection is about vigilance, and making sure your business creates satisfied customers. 

Watching Out For High Dollar Orders

We all love when a customer comes in and spends a whole lot of money, but sometimes it can be too good of a thing. Stay wary of high-dollar orders, especially if it involves a new customer. There is a higher chance that they are fraudsters trying to get away with spending money from somebody else’s credit card. 

Address Verification Service

Also known as AVS, Address Verification Service helps prevent fraud by checking the customer’s address on the purchase with the address registered with the issuing bank. Up to 69% of merchants used machine learning tools to mitigate fraud. Learning machines are a type of AI that allows the software to be more accurate. Some learning machines are used to detect if somebody—aka a fraudster—stands out, allowing you to prevent potential fraudulent transactions.

Be PCI-Compliant

The Payment Card Industry Security Standards Council (PCI SSC) is a global forum of brands that enumerates the best practices to prevent fraud. They are an excellent source of information and education when it comes to preventing credit card fraud. As a business owner, you are able to get involved and contact others through community events that can create valuable connections down the line. 

Use SSL Encryption

Secure Sockets Layer (or SSL) is an important protocol designed to protect you and your customer’s information from hackers and is practically a requirement for preventing fraud on ecommerce sites. Make sure your site is encrypted with SSL before your customers enter their payment details, and you’ll be one step closer to maximizing fraud protection on your ecommerce site. 

Don’t Keep Credit Card Info After Checkout

If you’re using a shopping cart service or third-party payment gateway provider, make sure it doesn’t keep credit card info in the database. A database can be the perfect place for a hacker to plunder, allowing them to get potentially hundreds of credit card numbers (if not more) all at once.

Use a Secure Shopping Cart Service

Make sure your payment gateway is PCI compliant to ensure the highest level of security. Shopping carts are where all of the important information is being sent, and they need to be top-notch if you want to be preventing fraud on your ecommerce site. 

Use a Firewall

Protect your store using a firewall. Having a proxy firewall can make your site almost invisible to potential hackers. 

Keep All Software Updated

This is a simple one: keep your software updated. Software is being constantly redeveloped and improved on, and you need to have the best software available when it comes to fraud protection.

Prioritizing Security

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Your business needs a site that is secure and safe if you want to be successful. 38% of merchants surveyed in the Worldpay from FIS Global Payment Risk Mitigation Report lost revenue to payment fraud in 2020, and you don’t want to be one of them. Of course, this can seem like an exhausting ordeal. Preventing fraud on your ecommerce site is necessary, but where should you start? Fortunately, there are sites with top-notch developers and designers that can help you build a safe and secure site for you and your customers. 

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