eCommerce is an industry that’s been snowballing in the past few years. Since the beginning of Covid-19, many retail companies have decided to go online. As of 2022, there are more than 12 million online stores, and because it's hard to classify them, there might be twice as many.
eCommerce platforms such as Shopify allows people to create their online store with ease, and although creating a store on their platform isn’t free, it’s very affordable. The features of such platforms allow physical stores to transition to click-and-mortar or help individual artisans to sell their crafts.
Unfortunately, eCommerce stores aren’t defined only by their positives. eCommerce fraud is becoming more sophisticated, and they are growing in numbers. Fraud can negatively impact your brand's reputation, leading to financial losses.
To protect yourself and your customers from potential fraud, you can protect your online business by implementing advanced fraud-prevention software or using some manual techniques. Keeping that in mind, we are presenting you with some vital strategies in this article to prevent eCommerce fraud.
- 1. Multi-Factor authentication protocols
- 2. Use fraud prevention software
- 3. Implementing third-party payment processor
- 4. Review risky orders manually
- 5. Be more alert during shopping seasons
- 6. Use verification software
- 7. Limit order quantities
- Having a strategy to prevent eCommerce fraud is highly important
1. Multi-Factor authentication protocols
One of the most common types of fraud is account takeover fraud which implies that a person or a bot has stolen the credentials of a customer's account and is using them for malicious intents. ATO fraud can create losses for both your customer and your business, and it can permanently damage your reputation.
The exploitation of stolen accounts is a common thing on the internet, and it should be prevented. Almost 29% of people didn’t do anything to protect themselves on the internet, which implies that there is a considerable number of people that are at risk of having their accounts stolen.
You can’t make people more aware of their internet security, but you can protect them by implementing a multi-factor authentication protocol. Requiring your users to create stronger passwords can reduce the chances of fraudulent activities, but it’s not guaranteed.
MFA protocols, and its most common form, the 2-factor authentication protocol, will require your users to confirm their identity through multiple devices with multiple security codes. With this authentication protocol, a customer needs to confirm their identity via SMS code or Google Authenticator before being able to access their digital assets and make purchases.
2. Use fraud prevention software
Just as there are significant efforts by internet fraudsters to access accounts from other people, there are a lot of companies that are working on improving fraud prevention software. For example, SEON’s list of apps shows some of the platforms in the field of eCommerce fraud prevention.
Since eCommerce platforms such as Shopify allow its user to integrate third-party fraud prevention applications, you can make significant improvements for the safety of your online store by implementing one that suits you the most.
Usually, for a monthly fee, fraud prevention software will help you minimize the chances of having fraudulent orders and losing money to chargebacks. These apps have their pros and cons, and you need to carefully choose the one that suits you as there are apps that only operate in a specific region.
Artificial intelligence advancements, which some of these apps use, helped fraud prevention software maximize its effectiveness. It is also critical to keep your fraud prevention plans and plugins up-to-date, as older versions might be flawed.
3. Implementing third-party payment processor
Online stores can benefit from partnering with third-party payment processors. The most convenient and secure way of handling payments is through a certified and reliable payment processor.
A payment processor will help you manage chargebacks, payments, and storage of personal and credit card information and increase the security of the payment process. Losing the data of your customers will cause a significant drop in your brand's reputation and sales.
A third-party payment processor will protect your customers' valuable data and prevent any payment fraud that can lead to revenue losses or even a trial.
4. Review risky orders manually
Even though an order goes through multiple filters before reaching you, there is a chance that the order is still fraudulent. Whether the order comes from a suspicious IP, or a costly order that isn’t common in the history of a user, you should evaluate its legitimacy manually.
Reviewing every order manually will make you lose precious time, but it is wise to do that for highly risky orders. If the order isn’t costly, you can just consider whether it is worth your time to go the extra mile. However, an expensive purchase might give you significant profit, and you should consider reaching out to your customer before approving such orders.
There is a variety of ways that you can do your investigation. Legitimate customers will leave a variety of personal info to you, and you can start by contacting them. If they live in the same country as you, the most convenient way is to call them and check their order over the phone.
Other useful ways might be reaching out to them using their email address, or you can contact them through an internal chatbot if your online store possesses such a thing. If you don’t get an answer in a few days, you can be sure that the order was fraudulent.
Whether the user responds positively or negatively, checking the legitimacy of their order and warning them about the potential theft of digital or financial assets is a significant show of respect to your customer. This will indeed affect your brand reputation positively.
5. Be more alert during shopping seasons
No matter where you are based, you should consider having discounts for certain international holidays. Black Friday, Valentine’s day, Christmas, New Year, and other important dates will surely affect your sales positively.
Since both online and physical stores will deal with an increase in orders, people with malicious intent can consider this a perfect time to make fraudulent orders. Automatical fraud analysis, such as Shopify’s built-in fraud analysis or fraud prevention software, will be your best friend during such seasons.
Depending on their number, it can be unmanageable to manually review all the received orders.
6. Use verification software
Verification via multiple devices when logging in is a great way to minimize the chances of people having their accounts stolen. But, a step further in protecting the data of your customer is by verifying each purchase.
First, every purchase should require your customer's card verification number input. This verification requires both the front and back sides of a credit card, increasing the security of credit card purchases.
Another important verification method is using an address verification system or AVS. This software verifies whether the address that the customer leaves is a legitimate one and if other cards have made orders to it.
Fraudsters might not straightforwardly use non-existent addresses, but they might use non-existent housings or input a wrong ZIP code. In such cases, AVS will help you to detect such attempts automatically.
You may sort out all the fraudulent activities carried out under specified names, IP addresses, and shipping addresses using an internal blacklist or a list imported through fraud prevention software. You should allow people to send requests to have their personal information or credit cards unblocked if they have made an open submission because some people may have been victims of hacking and may later be able to access their accounts.
If a person laid their hands on an account with auto-filled credit card info, he could be discouraged from making fraudulent orders by implementing an email verification.
7. Limit order quantities
You might wonder why would someone purposefully limits the number of products they can sell. The reason behind this lies in the fact that just like large amounts of profit can be gained through multiple sales, you can also lose a lot of money if those orders happen to be fraudulent.
When you get many orders from the same address that has a high likelihood of being fraudulent, it’s best to limit the number of products that a person can purchase.
Having a strategy to prevent eCommerce fraud is highly important
It doesn’t matter whether your store is click-and-mortar or completely online. You should do what's in your power to protect your business and your customers from fraud. You can either implement zero-cost strategies, such as manually reviewing each order, or invest in some form of software.
You can start utilizing certain methods even today, but subscribing to fraud prevention software will significantly help prevent fraudulent activity. Even though such software might seem expensive at first, it can prevent losses much higher than its cost.