Reduce Fraud and Chargebacks: Protect Your E-commerce Store

In this era of digitalization and the internet, everyone gains from the simplicity and ease of online shopping. Businesses and consumers alike gain from a multitude of benefits as e-commerce expands, such as a customized shopping experience and a varied selection of products.

Regrettably, e-commerce fraud—the shadowy side of the digital world—is drawn to fast growth. The blog post explores the alarming global statistics on e-commerce fraud that impact consumers and businesses alike. 

What is E-commerce Fraud?

E-commerce fraud is a type of cybercrime in which customers make purchases online. Malicious actors deceive businesses and customers in order to gain unauthorised access to personal and financial information, commit fraud, or profit from the online retail environment. Fraud causes enormous financial losses for corporations and their customers, as well as reputational damage to the companies and industries involved. 

Types of E-commerce Fraud

Businesses are coping with new challenges as a result of e-commerce's rapid growth, such as the changing environment of e-commerce fraud. Protecting your business and clients from dishonest persons is critical, especially if you accept online payments.

The most prevalent types of e-commerce fraud that most organizations encounter are described below. You may limit the danger of fraud in e-commerce by being proactive and aware of it. This will protect your brand, income, and customer trust.  

Identity Theft

Identity theft occurs when a fraudulent actor uses one of your customers' personal information. It includes the name, address, and credit card details to make unauthorized purchases or open accounts on your e-commerce website. Criminals retrieve customers’ personal information through various means. 

These include being involved in database breaches, phishing attacks and social engineering. They further use the information to create new accounts on your e-commerce website, thereby impersonating the actual user and conducting transactions. If your business is operating online and collecting customer data, you are at risk.

Credit Card Fraud

Credit card fraud is described as the unlawful use of credit cards to make online transactions of goods and services.

Phishing, hacking, and skimming are all ways used by criminals to steal your consumers' credit card information. These are the methods used in e-commerce fraud to get money or personal information without consent.

Hacking is the technique of gaining unauthorized access to a networked computer system by utilizing technical abilities and tools. Fraudulent actors accomplish this by exploiting multiple software weaknesses or use brute-force password guessing methods.  

Refund Fraud

Refund fraud occurs when a fraudster claims to be an existing customer wishing to return a product for a refund. Frequently, the fraudster claims to have returned the merchandise and asks for a refund without actually returning it.

In other circumstances, a fraudster purchases a product using stolen credit card information, then contacts customer service to report it as broken and wants a refund after selling it elsewhere. 

How to Prevent E-commerce Fraud?

Since building and maintaining trust is fundamental to strong relationships, preventing fraud is the key to protecting your business and your customers. Here are some excellent ways every e-commerce business must adopt to prevent e-commerce fraud:

Adopt ML and AI

Deploying machine learning (ML) and artificial intelligence (AI) to monitor any suspicious activity helps mitigate risk. If you are aware of your store's normal traffic, a spike in traffic often indicates someone is trying to engage in denial of inventory. 

If you have an online store, you might experience faster transactions and changes in baselines depending on the season. In such a scenario, deploying an e-commerce fraud prevention software is the need of the hour. 

The software uses AI and ML to set baselines, track abnormal activities, and understand seasonal differences in your E-commerce website. Invest in top-notch prevention software that covers your business credit card fraud protection.

Identifying the Risks

Some biases pose an unlimited risk. However, certain IP addresses or geographic locations might be riskier because fraudsters use these locations more often than other locations. Therefore, experts recommend controlling and monitoring to identify and mitigate the risks.

Authenticate Users

As an e-commerce business, since you cannot see your customers, you need to authenticate users using digital means, such as multi-factor authentication (MFA). With MFA, you need to get account recovery risks, as the person needs to answer a challenge question. Your customer will be required to enter a security code before logging in to the account.

Install Updates Regularly

Cybercriminals exploit familial software and application vulnerabilities to steal data. Often, developers develop e-commerce websites using a familiar programming language. In such a scenario, fraudsters can easily search the fields in the content management system (CMS) and steal your customer’s card details. Therefore, regular updates of website themes, shopping-cart plugins and CMS are essential.

Tips to Minimise Chargebacks

Chargeback is a sudden, expensive problem for businesses. With high costs associated with chargebacks, as an e-commerce business, you must build strategies to minimise the negative effect chargebacks have on your business. Enlisted are some measures that you can adopt to prevent chargebacks. Let’s take a closer look at them!

State Accurate Product Descriptions

As an E-commerce business owner, you must ensure that the product descriptions and images accurately represent the items you sell. Avoid the use of stock photographs on misleading descriptions to prevent customer dissatisfaction.

Establish Clear Communication with Your Customers

Try to remain engaged and communicate with your customers at every step of their order process. It will be challenging for your customers to deny your policies and card transactions. Ensure that your return policies are simple, clear to customers. 

Make your customers click a checkbox to confirm that they have agreed to your terms and conditions during the checkout. Often, your customers need help and require a point of contact during their buying process. 

Look for Red Flags and Create a Traceable Record

Often, you might experience people rapidly purchasing various types of items, high-ticket products, and multiples of the same product. These can be fraudsters with the intent of committing chargeback fraud. 

As a retailer, you can build verification methods to build proof that the cardholder authorised the purchase. You can also analyse and understand the purchasing habits of your customers and send order confirmation immediately after they purchase and at other key stages to create an audit trail.

Conclusion

The popularity of e-commerce companies is accompanied by an increase in online store attacks. These days, the majority of online retailers employ e-commerce fraud protection software, which comes with a number of tools for spotting potential threats. You can even choose ones with additional protections and features. A wide range of options, such as shopping cart extensions and complete platform security, are provided by the right tool.