Top 5 Essential Strategies for Ecommerce Fraud Detection

Ecommerce fraud refers to any malicious activity that targets online retailers and often involves the theft of sensitive data and money. It can result in reputation damage and financial loss. In 2022 alone, global losses to online fraud were estimated at $41 billion.

Therefore, online businesses must secure their platforms to prevent ecommerce fraud and protect customer data. For instance, you can implement multi-factor authentication, use a secure web host, and install an SSL certificate. 

In this post, we’ll take a look at the most common types of ecommerce fraud. Then, we’ll discuss five key strategies to detect fraud in your online business. Let’s get started!

Ecommerce Fraud: What It Is and Common Threats

Ecommerce fraud can take many forms, but the most common attacks involve fraudulent transactions using stolen credit cards. This has always been an issue, but the increase in online sales has provided fraudsters with more opportunities.

In 2020, online shopping scams accounted for 38 percent of all reported scams worldwide. While there are many types of ecommerce fraud, here are the ones to be aware of:

• Transaction fraud (or credit card fraud) occurs when malicious actors make online purchases with stolen credit card information.
• Return fraud involves bad agents exploiting the return policies of online retailers. For example, they may use stolen or falsified receipts or return a defective item (after purchasing a working product).
• Account takeover fraud is essentially when user accounts get “hacked”. Often, this is done with the intention of stealing personal or financial information.
• Chargeback fraud (or friendly fraud) occurs when customers purchase an item, claim it never arrived, and ask for their money back. It’s particularly difficult to detect because legitimate customers can raise honest disputes.
• Interception fraud occurs when bad agents place orders using the legitimate billing and shipping address linked to the credit card. But then, the agent re-routes the package, often by contacting the customer service team.
• Triangulation fraud is quite complicated and involves the fraudster setting up an ecommerce store and selling high-demand items at low prices to attract customers. Then, they’ll use the credit card information to purchase goods from legitimate websites.

It’s always a good idea to educate yourself about all the different types of ecommerce fraud. This way, you can take the necessary precautions to prevent these crimes.

Ecommerce Fraud Detection: 5 Strategies You Need to Know About

Now that you know a bit more about fraudulent transactions, let’s take a look at five strategies for ecommerce fraud detection.

1. Perform a Card BIN Lookup

An excellent way to prevent fraud is to perform a card BIN lookup. This enables you to access more information about the payment method provided by the customer, and therefore reduce the risk involved in online transactions.

Every payment card contains a Bank Identification Number (BIN) which lets you retrieve data from the card used to carry out the transaction. For instance, you can find out if the card is valid, where it was registered, the name of the issuing bank, and more.

2. Implement Multi-Factor Authentication

Another way to secure your ecommerce business against fraudulent transactions is to enable multi-factor authentication. This strengthens the login process and verifies customer identities before they get access to your website.

As such, it’s a great way to prevent account takeover fraud and reduce the chance of identity theft. All it means is that, when customers log into their accounts, they’ll be asked to enter a unique key in addition to their passwords.

This key is usually generated in real-time. Often, it takes the form of a code sent to the customer’s email address or mobile device to authenticate the session. You can also use authenticator apps, security questions, and more.

There are many ways to implement two-factor authentication in your ecommerce store. Plugins are an excellent option for WordPress users, particularly WP 2FA as it offers an easy setup procedure and supports several verification methods.

3. Assess Suspicious Activity

Although detecting fraudulent activities can be difficult, there are a few tools that can help. Typically, it’s best to implement some kind of security software to automate this process.

That said, it is possible to perform most of these tasks via a manual review, but this can be very time-consuming.

Here are some signs to look out for if you’re trying to prevent online fraud:

• Low-value transactions that are carried out from the same IP address within a short span of time.
• Multiple failed login attempts, which might be a sign of bad bots hammering the login page to cause website crashes.
• Orders with mismatched billing address and shipping address.
• Very high-value orders, especially from high-risk locations.
• Rapid account creation all from the same IP address.

There are several things that you can do to prevent these issues. For instance, you can set up fraud detection rules and filters to flag orders over a certain threshold.

You can even implement an address verification service (AVS) to check that the billing address provided matches the one on file with the card issuer.

4. Encrypt Data on Your Site

If you want to take a more proactive approach to fraud prevention, you can make sure all data is encrypted on your website. This means that even if fraudsters manage to intercept data (like credit card details), it will be unreadable.

The easiest way to do this is to install a Secure Sockets Layer (SSL) certificate. Some web hosting providers like SirsteveHQ include this certificate with their plans. You can also purchase it from a certificate authority like Let’s Encrypt:

If you already have one, you’ll want to make sure that the certificate hasn’t expired. You’ll also need to switch from the standard HTTP to HTTPS. This ensures that the data transmitted between the customer’s browser and your website is encrypted.

5. Use a Secure Web Host

Your web hosting provider plays a key role in your site’s security. If the server they use is not protected, any website that is hosted on it is at risk.

Therefore, it’s important to choose a quality web hosting provider for your website. SirsteveHQ offers dedicated WordPress hosting plans for ecommerce businesses.

You’ll get free email accounts, a free SSL certificate, and even a free branded domain name to boost credibility. SirsteveHQ is a security-focused provider, so plans also come with daily backups. This way, if anything goes wrong on your site, you’ll be able to restore a recent copy of your content.

What’s more, SirsteveHQ provides automatic updates to ensure that all software is patched and protected against the latest threats. You’ll also get access to a real-time Web Application Firewall (WAF) for monitoring IP addresses.

Finally, SirsteveHQ offers round-the-clock DDoS protection and malware mitigation. Meanwhile, the support team is available 24/7 if you require expert knowledge and solutions.

Conclusion

Ecommerce fraud is a significant concern for any online business owner. If you want to retain customer trust and protect your brand reputation, you’ll need to implement the right strategies to detect fraudulent activities on your website.

To recap, here are five strategies to help you prevent ecommerce fraud:

1. Perform a BIN card lookup.
2. Implement multi-factor authentication.
3. Assess suspicious activity.
4. Encrypt data on your site.
5. Use a secure web host.

At SirsteveHQ, all WordPress plans come with security features like free SSL certificates, DDoS protection, and a web application firewall. Check out our plans today!