E-commerce Tips & Tricks 5 min read
29 Jan 2021

Ecommerce Fraud Prevention: 15 Ways To Protect Your Online Store Against Fraud

Ecommerce Fraud Prevention: 15 Ways To Protect Your Online Store Against Fraud

We cannot underestimate the value of security in a world where everything depends on digitization. Whether you’re looking to order brand-new furniture for your living room or want to buy designer wear for an upcoming event, you can get your favorite products delivered to your doorstep with a single click.

Interesting, Isn’t It?

But, It’s Not All Good News.

According to the Association of Certified Fraud Examiners, roughly 50% of online businesses fall victim to fraudulent activity at some stage of their business cycle.

Ecommerce businesses currently confront more than 206,000 attacks on their business each month. If you are an ecommerce business owner, you must protect your online store against hackers and privacy invaders who steal your data, harm your business reputation, and damage your goodwill.

What Is Ecommerce Fraud? 

Ecommerce fraud occurs when a fraudster checks in an online store and makes an unauthorized transaction using stolen data. 

There is a difference between ecommerce fraud and real-life payment fraud as there’s no physical credit card involved in the virtual process. 

In all honesty, online fraud has never been a new thing. As the number of cashless transactions increases, the risk of fraud also increases. We’ve witnessed the rising trend of ecommerce fraud during the Coronavirus crisis when people staying at home only opted for online purchases instead of in-store buying. 

Types Of Ecommerce Frauds

Before we highlight ways to protect your online store against fraud, it’s critical to understand common tactics that scammers use. 

Identity Theft

No online business can survive without foolproof data security and privacy policies. Sadly, data invaders still manage to get into your databases and steal valuable customer information, including user names, passcodes, credit card details, etc. 

Account Takeovers

Scammers hack into customers’ accounts to steal their personal information and financial data. For this, they tend to use several phishing tactics to trick customers so that they reveal their passwords, usernames, and other essential details. 

Emails that you receive in your spam folder is an account takeover example. These emails ask recipients to enter their bank details and credit card information. Fraudsters then use this information to sign in to user’s accounts, change passwords, and use credit card info to make unauthorized purchases.

How To Prevent Ecommerce Fraud?

Here are 15 practices that will arm your online store with all the necessary tools that you need to prevent potential fraud

1. Choose The Right Platform

There are many ecommerce platforms available these days that you can use to build your online store from scratch. Also, you can switch to one of them to upgrade the functionality of your already-running store.

Choosing the right platform is a crucial step in ensuring that you have a safe and secure website. That is why you mustn’t limit your research to cost and design elements only. Look more deeply into the security features.

Surprisingly, many platforms that offer the best transaction rates do not come with reliable security features. So make sure you do proper research before you settle for any specific ecommerce platform for your needs.

2. Conduct Regular Website Security Audits

Conducting regular website security audits enables you to detect flaws in your security before scammers and hackers discover them. Here are a few things you should consider when conducting a security audit for your website:

  • Make sure you have an updated SSL certificate 
  • Make sure your shopping cart software is upgraded
  • Make sure your website is PCI-DSS Compliant
  • Make sure you use strong passwords for admin accounts 
  • Make sure you have reliable anti-virus software installed for your website
  • Make sure you remove inactive plugins 
  • Make sure you encrypt communication between your online store and other parties (suppliers/customers)

3. Maintain PCI Compliance

If the nature of your business requires you to accept credit card payments, then you have to achieve and maintain PCI compliance.

What Is PCI Compliance?

"The Payment Card Industry Data Security Standard is an information security standard for organizations that handle branded credit cards from the major card schemes. The PCI Standard is mandated by the card brands but administered by the Payment Card Industry Security Standards Council".

PCI compliance is designed to protect user data. This standard applies to all online businesses regardless of size or frequency of transactions.

PCI Compliance includes basic security measures, including establishing a firewall and updating default passwords on systems that store sensitive customer information. 

4. Use System Alerts To Identify Suspicious Activity

Unlike physical stores that hire fraud prevention officers, online stores have to take additional measures to protect their store against fraud.

One of those steps is investing in system alerts. These tools notify owners about any suspicious activity they find on the website. For instance, you should take immediate action if multiple orders are placed by the same IP using different credit card numbers. 

Carefully examine your website for billing and shipping inconsistencies. There are different tools available that you can use to track the IP addresses of your customers. Also, some ecommerce platforms come with built-in fraud monitoring steps. Just ensure you choose a platform that offers multiple security features, including system alerts to identify suspicious activities. 

5. Ask For CVV Numbers

The 3-digit and 4-digit codes printed on the rear side of credit and debit cards are some of the many ways you can ensure that the customer has the physical card in their possession.

Since these numbers are not available on the receipts, asking your customers for them will be useful in keeping their sensitive information safe from fraud.

6. Do Not Store Sensitive User Data

Generally, PCI compliance forbids businesses from storing valuable customer information. You can not store credit card numbers and CVV2 codes if you’re PCI compliant.&

However, if for some reason, you have to store that information, just ensure you discard it from your database at your earliest. Businesses that keep the least amount of customer data are at lower risk of data theft and payment frauds.

Remember, nobody can steal anything if it’s not there in the first place. So, try to collect as minimum data as possible.

7. Use Tracking Numbers For All Purchases

To prevent chargeback fraud, you must track numbers for all orders.

If you haven’t heard of this term earlier, chargeback fraud occurs when a buyer purchases anything from their credit card but claims a refund from the credit card company.

The company then pushes that claim through the issuing bank. These frauds are also known as friendly frauds. 

If you’re using tracking numbers, you’d be able to maintain a record and have the confirmation that you have already dispatched the right product to the customer. Requiring a signature upon delivery is also an effective way to protect your store from this specific type of fraud.

8. Make Sure Your Customers Create Strong Passwords

Make sure you allow your customers to create strong passwords when they open an account with your online business.

The passwords they set should be strong enough to trick hackers so that they don’t get access to them. Ask them to create a password that includes, numbers, characters, symbols, and capital letters. You can also ask them to use a password manager like LastPass or Dashlane.

9. Train Your Staff On Security Protocols

Protecting an online business should be a combined effort. There are several ways your online agents and workers can comply with security measures to secure your business transactions.

Your employees should also create passwords based on the same rule as customers. You might even want to invest in a VPN like Surfshark or a well-known NordVPN for added protection. Also, train them to carefully monitor each transaction to prevent any potential fraudulent attack.

In addition to that, every employee on board must also be familiar with your risk management practices.

10. Maintain A Record Of Past Fraudulent Attempts

Keep track of the details of past fraudulent attempts on your business so that you can better prepare for the future.

This record will help you compare your present situation with past events, making it easier for you to plan your future.

This file will also help you identify particular countries or locations where fraudulent charges come from. Also, you can pinpoint those shipping addresses that don’t match the shipping address.

11. Avoid Non-Physical Shipping Address

One of the ways scammers hide their crime is by protecting their physical shipping address. They generally use a PO box or any other anonymous address that police can’t track.

Sadly, many online sellers become victims of fraud because they don’t pay attention to this simple yet often overlooked strategy.

Never deliver products to PO boxes or unknown locations.

12. Use Online Tools To Prevent Fraud

There are plenty of resources and tools available online that you can use to detect and prevent ecommerce frauds.

Make sure you choose the solution that best fits your budget and business needs. Besides, you must also choose software that is easy to install and maintain. Some owners prefer to invest in software that they can handle on their own, while others hire an expert to do this job for them.

The three basic types of anti-fraud tools include Rudimentary tools, Mid-level tools, and top-level tools.

Rudimentary tools are designed to perform a single function only. These tools are usually integrated into cart functionality. 

Multi-level tools are designed to perform a wide range of functions. These functions include chargeback guarantees, high-risk order declination, protection against account takeover, etc.

Top-level tools, on the other hand, are designed to offer advanced case management and security features. 

13. Make Sure The Credit Card Address And IP Address Are The Same

If you’ve been running an online store for some time, you must be familiar with the fact that every order on your ecommerce store comes from a unique IP address.

The IP address is basically a string of numbers that are separated by periods that distinguish each system using the IP address to communicate over the web.

The IP address associated with each computer is generally used to detect the specific location of the world where the buyer is located.

If this location doesn’t match the details of the credit card being used, then it’s a clear indication of fraud. 

14. Set Limits On Purchases

While it may be tempting to receive a lot of orders per day, make sure you set limits on purchases to prevent your online store from potential fraud.

Set limits for the number of purchases and total money you’ll accept from a single account per day.

15. Use HTTPS Instead Of HTTP

HTTPS Instead of HTTP

Make sure you use HTTPS instead of HTTP to transmit data between a web browser and your website. HTTPS is a secure variant of HTTP and it encrypts data to secure confidential user information, including user names, passwords, credit card details, etc.

Using HTTPS over HTTP protects your ecommerce store from potential data invasion, hacking attacks, and other fraudulent online fraud practices.

Identifying Fraud Online

There are many ways you can identify ecommerce fraud online. Here is it critical to understand that the intensity and success of an online fraud depend on the ingenuity and expertise of a scammer.

As sellers increase protection, these fraudsters also come up with more evil ways to defraud their targets.

Make sure you pay attention to these factors to quickly spot an ecommerce fraud:

  • Unmatched zip code and city combinations
  • Unmatched IP address and email combinations
  • An order having multiple units of the same SKU 
  • Multiple shipping addresses 
  • Different orders from multiple credit cards 
  • Multiple orders from a new location (For instance, if you have never received a single order from Malaysia, but suddenly received 15 orders from the same country in the space of 4-5 days)

Wrapping Up

Yes, hackers and fraudsters are getting smarter in how they invade ecommerce store’s databases and privacy. It’s also a fact that the number of attacks ecommerce stores are facing is increasing day by day.

But remember, you now have better resources and tools than ever to fight against these attacks.

Ricky Hayes

Ricky Hayes

Ricky Hayes is the CEO at Debutify. He is a passionate entrepreneur running multiple businesses, marketing agencies, and mentoring programs.

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