How To Protect Your Brand From Ecommerce Fraud

While ecommerce stores remain safe from shoplifting, they are still unfortunately not safe from cyber theft or fraud. Ecommerce fraud refers to exploiting vulnerabilities within online payment systems, websites, and digital platforms. Within this, it includes various fraudulent practices, such as identity theft, stolen credit card information, account takeovers, phishing scams, and fake merchandise schemes. As the popularity of ecommerce continues to grow, unfortunately, the rate of ecommerce fraud also continues to increase. In 2022, it was estimated that losses to online payment fraud were 41 billion U.S. dollars globally. For brands, combating and preventing ecommerce fraud has become the priority, which is why in this article we’re highlighting how to protect your brand from ecommerce fraud.

Most common types of ecommerce fraud 

With ecommerce fraud showing no signs of slowing down, it’s crucial for brands to take precautions as it poses significant risks to their reputation, finances, and customer trust. However, taking the correct precautions demonstrates a commitment to customers, builds trust, and ultimately helps to foster long-term customer relationships and business growth. 

Firstly, it’s essential to identify the most common types of ecommerce fraud and how to protect your brand and customers from them.

Credit Card Fraud

This involves the unauthorized use of stolen or counterfeit credit card information to make fraudulent purchases online. Fraudsters obtain credit card details through various means, such as phishing, data breaches, or card skimming.

In order to protect customers’ information, brands can use secure payment gateways that encrypt sensitive customer data during transactions. Along with protecting customer information, it’s also important to verify their information. A common red flag for credit card fraud and triangulation fraud is when the shipping and billing addresses are different, meaning the owner of the card is not receiving the goods. To tackle this, brands can implement an address verification system (AVS), which verifies that the billing address provided matches the cardholder's address. For added security for customers, brands can also use card verification value (CVV), which requires customers to enter the three-number code on the back of the card. In many cases, identity thieves only steal the card numbers, not the actual card, adding another vital layer to your security. Finally, fraud detection tools analyze customers’ transaction patterns and behaviors to help identify any suspicious activity and are a key addition to any brand's security toolkit.

Account Takeover (ATO)

In an account takeover, fraudsters gain unauthorized access to a customer's online account by stealing their login credentials. Once in control of the account, they can make purchases, change account information, or conduct other fraudulent activities.

To prevent account takeovers, encourage customers to use strong and unique passwords along with multi-factor authentication (MFA), such as dual authentication via SMS, email, or an authenticator app. Additionally, brands can monitor login activities for unusual IP addresses or login patterns using fraud detection tools.

Identity Theft

Identity theft occurs when fraudsters obtain and misuse personal information, such as social security numbers, addresses, or bank account details, to make fraudulent purchases or open new accounts in the victim's name.

Brands can protect their customers from identity theft by regularly updating software and systems to patch up any potential vulnerabilities. Also, implementing secure data storage and encryption protocols will protect all customer information. On top of that, it’s paramount to educate customers about online security practices such as using strong passwords as we mentioned above, and taking caution with their personal information.

Phishing Scams

Phishing involves fraudulent attempts to trick individuals into revealing sensitive information, such as login credentials, credit card numbers, or personal details. Fraudsters typically pose as the brand through deceptive emails, messages, or websites.

To avoid phishing scams, train all employees to identify and report any suspicious emails or communications that could be phishing attempts. In addition, brands can utilize email filtering systems to flag up and block any suspicious emails. Once again, it’s important to educate and update customers about phishing techniques and how the brand will or will not contact them. For example, banks often communicate to their customers that they will never ask for sensitive customer information via email or SMS.

Chargeback Fraud

Chargeback fraud, also known as friendly fraud, occurs when a customer makes a legitimate purchase but later disputes the charge with their credit card company to obtain a refund while keeping the purchased item. This leads to financial losses for merchants.

To protect against chargeback fraud, ensure refund and return policies are clear and transparent while keeping records of customer transactions and communications. In addition, brands can implement fraud detection systems to analyze transaction history and identify any patterns of potential chargeback fraud. Finally, using a courier that utilizes proof of delivery is a valuable line of defense against chargeback fraud. By ensuring that both brand and customer have access to shipment tracking information, and require a signature for packages is an effective way to deter fraudsters. 

In addition to all of the above, brands can partner with reputable payment processors, stay updated on the latest fraud trends, and collaborate with fraud prevention service providers to enhance protection against ecommerce fraud. Ultimately, a comprehensive approach that combines technology, education, and proactive monitoring can help brands safeguard themselves and their customers from ecommerce fraud.