Ecommerce fraud is a growing problem for businesses of all sizes. In 2023, ecommerce fraud losses reached an estimated $28.8 billion, and this number is expected to continue to rise.
What is ecommerce fraud?
Ecommerce fraud is any type of fraudulent activity that occurs during an online transaction. This can include fraudulent credit card use, account takeover, refund fraud, and more.
What are the costs of ecommerce fraud?
Ecommerce fraud can have a significant impact on businesses. In addition to the direct loss of revenue, businesses that experience fraud may also face:
- Increased costs of chargebacks: Chargebacks occur when a customer disputes a transaction. When chargebacks are fraudulent, businesses are responsible for the cost of the transaction, as well as any additional fees.
- Loss of customer trust: When customers experience fraud, they may lose trust in the business and be less likely to shop there in the future.
- Damage to the business’s reputation: Fraud can damage a business’s reputation and make it difficult to attract new customers.
What are the best practices & strategies to prevent ecommerce fraud?
There are a number of things businesses can do to prevent ecommerce fraud. Here are a few best practices:
- Use a secure payment gateway: A secure payment gateway is a third-party service that encrypts credit card information and processes payments. This can help to protect your business from fraud.
- Verify billing and shipping information: Verify that the billing and shipping information provided by the customer matches their credit card information. This can help to identify fraudulent transactions.
- Monitor customer activity: Monitor customer activity for suspicious behavior, such as multiple orders from the same IP address or unusual spending patterns.
- Implement fraud prevention tools: There are a number of fraud prevention tools available that can help to identify and block fraudulent transactions.
- Educate your customers: Educate your customers about ecommerce fraud and how they can protect themselves. This can help to reduce the risk of fraud.
In addition to these best practices, there are a number of other things businesses can do to prevent ecommerce fraud. These include:
- Using two-factor authentication: Two-factor authentication requires customers to enter a code in addition to their password when logging into their account. This can help to prevent unauthorized access.
- Limiting order amounts: Setting limits on the amount of money a customer can spend per order can help to prevent large fraudulent transactions.
- Requiring card verification value (CVV): The CVV is a three- or four-digit code that is printed on the back of credit cards. Requiring the CVV can help to verify that the customer is in possession of the card.
- Using clear policies: Having clear policies about refunds, cancellations, and returns can help to reduce friendly fraud, which is fraud committed by legitimate customers.
Conclusion
Ecommerce fraud is a serious problem, but it can be prevented. By following the best practices and strategies outlined in this blog, businesses can protect themselves from fraud and keep their customers safe.
Additional tips:
- Keep your website and payment gateway up to date with the latest security patches.
- Train your employees to identify and report suspicious activity.
- Be vigilant about monitoring your website for signs of fraud.
- Work with a fraud prevention company to help you develop a comprehensive fraud prevention strategy.
