As your online business expands its customer base, takes on more user traffic, processes more transactions, and adopts new technologies and devices, the threat of eCommerce fraud becomes greater and greater. In 2021, experts predict that eCommerce businesses will lose more than $20 billion to credit card fraud, phishing attacks, triangulation fraud, and other cybercriminal activities.
Without a reliable fraud management strategy, your company’s online store becomes a prime target for fraudsters looking to take advantage of vulnerable systems. And if they’re successful, your business can lose brand credibility, customer loyalty, and of course, revenue. You can even wind up facing legal consequences from not adequately protecting your customers’ data.
So what can your eCommerce business do to protect itself and its customers against online fraud? It all starts with understanding the various types of fraud, then adopting the right prevention solutions for your eCommerce site.
TYPES OF ECOMMERCE FRAUD
Online fraud comes in many different forms. As an eCommerce business, these are the most common fraudulent activities to be aware of:
CREDIT CARD FRAUD
Also known as payment fraud and card-not-present fraud, this scheme involves using stolen credit or debit card information to purchase products or services from an online merchant. The stolen payment credentials are typically purchased by and from criminals via dark web services. After noticing the phony charge, the defrauded cardholder will contact their bank to have the charge reversed, at which point the merchant will have a legal obligation to issue a refund, and may also have to pay a chargeback fee.
Friendly fraud has become an increasingly common tactic, as it requires very little effort from the fraudster. All they do is purchase a product online, then contact their bank to dispute the charge once the item has been delivered—usually with a false claim that they never received the item, or that they don’t remember ever making the purchase. So the criminal gets to keep both the product and their refunded money, while the merchant gets stuck dealing with a loss of inventory and a chargeback fee.
The goal of a phishing attack is to hack into a customer’s eCommerce store account in order to steal their credit card information and other sensitive data. In most cases, criminals send phony emails to the customer—claiming to be from the merchant—to trick them into revealing their login information. The message may say something like “Your account has been restricted. To continue using this service, please update your login information here.” When the customer clicks on the link, they are redirected to a fake page that prompts them to enter their login credentials.
When cybercriminals get their hands on stolen eCommerce store account information, they often engage in interception fraud. This involves ordering a product on the site, then calling customer service to change the shipping address so that the item gets sent to the fraudster, not the cardholder. Since the true customer never actually receives the item, it can take several days or weeks before they realize the fraud ever occurred.
Triangulation fraud starts with a criminal creating a fake online storefront—usually one that offers extremely low prices for popular products, such as video games, clothing, and jewelry. Once a consumer makes a purchase on the phony site, the fraudster will buy that exact same item from a legitimate online retailer, then ship it to the customer. The fraudster can then use that person’s credit card information to make purchases for themselves or sell it to the highest bidder via the dark web.
TOP ECOMMERCE FRAUD PREVENTION TOOLS
Now that we’re familiar with the common types of eCommerce fraud, let’s take a look at some of the most powerful fraud prevention applications currently available to online merchants. It should be noted that all of these tools were designed for enterprise-level businesses.
Clear Sale uses machine learning (ML) algorithms and automated workflows to monitor online shopping behavior in real time. With an understanding of browsing patterns usually associated with fraudulent activity, the software can automatically flag suspicious orders, which are then sent to a team of humans for further review.
Clear Sale also comes with a free trial and a chargeback guarantee, which means that the service will cover any chargeback fees that result from undiscovered fraudulent transactions. This software can be integrated with BigCommerce, Magento, PrestaShop, and WooCommerce.
With a long list of validation rules to choose from, Fraudlabs Pro gives eCommerce merchants the ability to customize their fraud validation system so that it aligns with their business’s specific needs and priorities. After all, not all online stores are susceptible to the same types of fraud. In addition to the customized validation rules, this software connects to a database of blacklisted IP addresses, user IDs, domains, and email addresses—so that registered fraudsters cannot initiate transactions on the site.
Unlike Clear Sale, Fraudlabs does not come with a free trial nor a chargeback guarantee. The software can be plugged into many different eCommerce platforms, including Shopify, BigCommerce, Magento, WooCommerce, OpenCart, and ZenCart.
Powered by artificial intelligence, CyberSource pulls from various databases and risk models to identify fraudulent transactions before they go through. It also has a testing feature, which enables merchants to see how well their rule-based fraud prevention system works against various scenarios.
The service does not offer a free trial or a chargeback guarantee and can be integrated into BigCommerce and Magento.
Riskified streamlines the fraud prevention process by providing real-time insights and decisions, powered by ML algorithms. Rather than flagging or assigning risk scores to orders, the software makes fast and simple decisions to either approve or deny transactions.
Riskified does not offer a free trial, but it does have a chargeback guarantee. And the software is supported by Shopify, Magento, and CommerceCloud.
Signifyd offers two distinct plans. The first plan, On-Demand Assurance, allows online merchants to utilize the software while managing all fraud prevention processes in-house. When expert advice is needed, a representative will connect them with a fraud specialist who can assist in evaluating suspicious transactions.
The second plan, Complete Assurance, is a more hands-off approach, where Signifyd acts as a fully outsourced solution, handling all fraud prevention processes and determinations. The Complete Assurance plan is unsurprisingly more expensive, as it allows merchants to avoid putting any time and effort into manually reviewing orders.
Both plans come with a 14-day free trial, along with a chargeback guarantee. And the software can be synced with Shopify, BigCommerce, Magento, and CommerceCloud.
INTEGRATING FRAUD PREVENTION SOFTWARE TO YOUR ECOMMERCE SITE
Protecting your business and its customers from eCommerce fraud starts with implementing the right tools and practices. But how do you know which software is right for your online store? How do you go about implementing it? How do you test it? And how do you ensure that the system can scale alongside your growing business?
As experts in the field of eCommerce fraud prevention, Codal can provide your business with the tools it needs to prevent all forms of online fraud. Since every online store has a unique set of risks and vulnerabilities, we’ll take the time to learn everything we need to know about your company, then integrate the most personalized and effective solution available—as well as make any necessary updates to the current technological infrastructure.
Here are just a few of the things that Codal can do to help protect your eCommerce store.
- Evaluate, test, and implement anti-fraud software.
- Establish PCI compliance for your site.
- Conduct regular site security audits to ensure there are no weak spots or vulnerabilities.
With cutting-edge fraud prevention software, you can sleep easier at night knowing that your business is protected against eCommerce fraudsters. Interested in learning more? Get in touch with Codal today!