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How To Prevent eCommerce Fraud

Payment fraud continues to be a pressing concern for eCommerce merchants. Though fraud extracts a toll on the whole economy, retail merchants often feel fraud’s impact most directly. The mounting costs are measured in excessive chargeback fees, fraud prevention efforts, and lost merchandise.

Fraud demands the urgent attention of every business that accepts payments online. Protecting your eCommerce business requires a strategic commitment to fighting back, an awareness of best practices, and flexible tools to manage fraud’s evolving threat.

The good news is that eCommerce retailers have tools at their disposal to fight back. First we’ll examine the state of eCommerce fraud in 2020 to see the costs on our businesses. We’ll look at some of the most effective fraud prevention strategies available to retailers. Finally, we’ll consider the delicate balancing act of fighting fraud while simultaneously providing frictionless consumer experiences at the point of sale.

Warning signs of eCommerce fraud

Fraud is increasingly organized and committed by skilled hackers using bleeding-edge technologies. But they’re far from perfect and often leave clear red flags to their crimes.

How can you spot fraudsters and prevent them from taking a bite out of your profits? Here are some examples of suspicious behaviors indicating potential fraud:

  • The shipping address and billing address differ
  • Multiple orders of the same item
  • Unusually large orders
  • Multiple orders to the same address with different cards
  • Unexpected international orders

These are all potential warning signs of fraud. They also highlight the inherent difficulties in fighting fraud: none of the warning signs are guarantees. Perfectly legitimate transactions by rightful cardholders can feature any number of these warning signs. Denying legitimate transactions can cost as much or more to your bottom line as accepting a fraudulent transaction. Investing resources to investigate the red flags therefore becomes critical.

The right security balance

Generally when we think about security we think in absolutes. We expect our locks to protect us, every time. We expect our alarms to warn us of intruders, no exceptions. It’s tempting to consider security measures that combat fraud in a similar way: we want to protect our businesses so no fraud takes place.

Yet absolutist approaches aren’t effective for eCommerce. You want to keep out fraudulent transactions, certainly. But just as important you want to let in all the good transactions. Legitimate transactions that produce a “false positive” can be even more costly than fraud. When a legitimate order is inadvertently rejected, that customer isn’t going to be happy. She may have become a lifelong customer, but instead she’ll never return.

Complicating matters is that merchants want to make checkout as easy as possible. One of the leading causes of shopping cart abandonment is too much friction at checkout. Adding security measures helps reduce fraud, but it also introduces friction. Striking a balance that allows your business to earn more revenue and keep more of it is essential to success.

The right security partner

First Data is a variety of business types and industries, including eCommerce operations of every size. Their experts will work with you to assemble the best balance of people, data and technologies to protect what you’ve worked so hard to earn.

Infographic created by Fiserv, an ACH payment processing company.


You may also like to read:
  • Top 10 Must Have E-Commerce Website Features in 2021
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