Account Takeover / Fraud Prevention

eCommerce Fraud Prevention Best Practices

May 4, 20236 min Read

eCommerce Fraud Prevention

Online commerce has revolutionized the way we shop. However, it has also increased the risk of ecommerce fraud. Fraudulent activities can cause monetary loss to businesses and damage their hard-earned reputation. It is crucial for ecommerce businesses to take necessary precautions to prevent such incidents from happening. Strong cybercrime prevention for ecommerce sites can also be a key differentiator as customers want to ensure a secure, hassle-free shopping experience.

For more information on the fraud landscape, including choosing the right solution, read our ebook, Buyer’s Guide to Fraud & Account Security.

Buyer’s Guide to Fraud & Account Security
Buyer’s Guide to Fraud & Account Security

Common types of ecommerce fraud

eCommerce fraud can take many forms. Regardless of type, however, each method can be financially devastating to both the ecommerce platform and any impacted customer. Here are some common ecommerce fraud types:

Card testing fraud

Card testing occurs when a fraudster uses stolen credit card information to make small purchases in order to test if the card is still active. This type of fraud can be difficult to detect as the purchases may appear legitimate at first glance. Card testing can lead to other fraud types, like shipping fraud. In this instance, fraudulent buyers place orders with stolen credit cards and have products shipped to an address other than their own.

Online payment fraud

Online payment fraud is when a fraudulent transaction is made using stolen credit card or bank account information. Fraudsters may use fake identities or stolen personal information to make these transactions undetected. Similar to online payment fraud is card not present fraud. In this instance, a cybercriminal uses stolen or leaked credit card information, including the card security code, to make a purchase at an online store.

Account takeover fraud

Account takeover fraud is a common type of ecommerce fraud that occurs when a fraudster gains access to a customer's account and makes purchases without their knowledge or consent. Cybercriminals may use phishing scams or malware to steal login credentials and take over accounts.

Promo, affiliate, or loyalty abuse

Loyalty, affiliate, or promo abuse fraud occurs when cybercriminals take advantage of discounts, promotions, or loyalty programs to make fraudulent purchases. They may use fake accounts, stolen credit cards, or manipulate referral links to exploit the system.

Triangulation fraud

Triangulation fraud involves a third party posing as a legitimate seller - sometimes through a fraudulent website - to trick buyers into making purchases. The cybercriminal then uses stolen credit card details to purchase the item from a real seller and has it shipped directly to the buyer.

How to Identify ecommerce fraud online

As a form of ecommerce fraud protection, ecommerce merchants and their security teams should keep an eye out for large orders from unverified or new customers, orders with different shipping and billing addresses, or those that include a high volume of similar items. Unusual payment methods or requests for overnight shipping should also raise red flags.

Best practices to reduce cybercrime and fraud

Ecommerce fraud prevention solutions are crucial for the safety and security of both merchants and customers. Here are some best practices aimed at preventing ecommerce fraud:

Conduct site security audits

These audits can help identify potential vulnerabilities in your website and allow you to take corrective action before hackers can exploit them. It's important to also keep your website's software and plugins up to date to prevent cybercriminals from taking advantage of known vulnerabilities.

Ensure PCI compliance to avoid credit card fraud

Payment Card Industry (PCI) compliance involves adhering to a set of security standards that are designed to secure a payment processor and protect credit card numbers, including any corresponding security code, from fraud and theft. PCI standards include implementing secure payment processing systems, regularly monitoring transactions for fraud, and maintaining up-to-date software and hardware.

Monitor your site for suspicious activity

Monitoring your site for suspicious activity can help to identify telltales for cybercrime before it actually happens and so security teams can take action to prevent it. It's also important to regularly review your website traffic, customer behavior, and order history to spot any red flags. For instance, signs of increased or anomalous traffic can foreshadow a bot or botnet attack.

Use an Address Verification Service (AVS)

Using an Address Verification Service (AVS) helps verify that the billing address provided by the customer matches the one on file with their bank, reducing chargebacks and fraudulent transactions. Additionally, AVS can help detect suspicious activity, such as multiple orders being shipped to different addresses but using the same billing information.

Train your staff in fraud detection

Fraud prevention tools and strategies are only as good as the people using them. This is why it is also important to train your staff, who often remain the first line of defense for businesses, to detect potentially fraudulent behavior. This can include recognizing suspicious patterns, such as multiple orders from the same IP address or a shipping address that is different from the billing address.

Arkose Labs secures ecommerce platforms

For online merchants looking for a fraud protection solution that can protect customer data, Arkose Labs is a mighty ally. The Arkose Platform classifies traffic based on the underlying intent of users and deploys appropriate countermeasures to remediate attacks in real-time. Arkose Labs goes beyond stopping individual attacks to deliver a long-term solution that deters cybercriminals long term while enhancing good user experience.

Arkose Labs enables retailers to take a zero-tolerance approach to fraud and abuse on their websites and apps, while enhancing user experience and customer loyalty for legitimate customers.

Suspicious traffic is targeted with tailored Arkose MatchKey challenges that puts the right amount of pressure on cybercriminals’ ROI without blocking or compromising good user experience. Designed to deter large-scale attacks at the gateways of fraud, like new account creation , login, or authentication areas, the Arkose Labs platform enables retailers to eliminate fraud from their ecosystem early, reduce stress on the payment flow, and increase trust from users.

To learn more about how Arkose Labs can secure your business and its customers, book a demo today.