The e-commerce industry, at present, is a lucrative market to invest in and do business in. Anyone who’s been involved in this market recently knows very well just how profitable it can be. But you need to know how to protect your e-commerce business from fraud. Keep reading to find out how.
According to Research and Markets, the global e-commerce market is valued at $16.6 trillion as of 2022. Within the next five or six years, this market will surpass the $70 trillion mark.
In the US alone, this market is worth $925.40 billion, according to Statista. With time, the e-commerce consumer base will grow bigger, and with that, so will the market. However, given how profitable and valuable it is, the sector often attracts the wrong type of crowd. Among them, one common type of criminal that is always looking to strike e-commerce businesses is fraudsters.
From identity theft to false order placements, there are many ways these criminals commit fraud on e-commerce businesses. You need to deploy special fraud prevention strategies to protect your customer base. Here’s how you can do just that:
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Implement Strong Authentication Protocols
One of the most effective ways to protect your e-commerce business from fraud is to implement robust authentication protocols. Two-factor authentication (2FA) is a widely used method that adds an extra layer of security to user accounts.
With 2FA, customers and employees must provide two forms of verification before gaining access to sensitive information or performing transactions. This typically includes something they know, like a password, and something they have, like a temporary code sent to their mobile device.
For customers, you can encourage the use of 2FA by making it an option during the account creation process. Furthermore, educate your customers on the importance of strong and unique passwords and regularly prompt them to change their passwords. This will make it more challenging for fraudsters to gain unauthorized access to accounts.
Of course, 2FA isn’t perfect, according to CNET. However, having it is still much better than not having it. Such authentication protocols are very helpful in preventing friendly fraud. According to Ethoca, such fraud takes place when a customer disputes a credit card charge despite making the purchase themselves.
With 2FA, friendly fraud becomes difficult to commit. That’s because it’s only through the customer’s authentication that the card gets charged. Therefore, they can’t claim that they were not the ones to make the purchase.
Monitor Transactions Closely
Proactive monitoring of transactions is a crucial step in identifying and preventing fraudulent activities. Invest in fraud detection and prevention tools that can analyze transaction data in real time to identify any suspicious patterns or unusual behavior. They use machine learning algorithms to assess various factors, including the location of the transaction, the IP address, etc.
Be vigilant about transactions that deviate from the norm. For instance, a sudden spike in high-value orders from new customers or orders with inconsistent shipping and billing addresses should raise red flags.
Establish thresholds for such anomalies, and automatically flag or hold suspicious transactions for manual review. This way, you can promptly investigate and take appropriate action before any potential fraud occurs.
Educate Your Team
Your employees play a significant role in preventing e-commerce fraud. Train your team members, especially those responsible for handling customer transactions, on recognizing potential signs of fraud. Ensure that they are aware of the latest fraud tactics and are trained to verify the legitimacy of orders and customers.
Be sure to establish clear communication channels within your organization for reporting and escalating suspected fraudulent activities. Encourage employees to share their concerns and observations, creating a culture of vigilance and collaboration in the fight against fraud.
Recently, first-party fraud is becoming common, where one doesn’t pay for a product despite agreeing to do so in the future. This is vital for cash on deliveries. Thus, educating your team will help your business limit such purchase options or ask customers to make some sort of advance payment. That way, these frauds can be avoided.
Utilize Address Verification Services
Address verification services (AVS) are essential tools for preventing fraud in e-commerce. AVS verifies the accuracy of the billing address provided by customers during checkout by comparing it with the address listed with the issuing bank. If there is a mismatch, it could be a sign of fraudulent activity.
Integrate AVS into your payment processing system to automatically flag transactions with address discrepancies. You can then choose to investigate further or contact the customer to verify their billing information. This additional layer of security helps reduce the likelihood of fraudulent transactions going unnoticed.
Stay Informed About Emerging Threats
The landscape of e-commerce fraud is constantly evolving, with fraudsters coming up with new tactics and techniques to exploit vulnerabilities. To stay one step ahead, it’s essential to stay informed about emerging threats and fraud trends.
Subscribe to industry publications, blogs, and forums dedicated to e-commerce and cybersecurity. Engage with other business owners and professionals to share insights and experiences related to fraud prevention. Consider joining industry associations or groups focused on e-commerce security, where you can access valuable resources and network with experts in the field.
Conclusion
That’s all you need to know about protecting your e-commerce business from fraudulent activities. However, knowing is half the battle. It all depends on how you act on these suggestions and implement these strategies to protect your business from fraudsters.
