5 Steps to Protect Your E-Commerce Store from Fraud

As e-commerce grows, so does the pattern of fraud. We discussed last week how ecommerce merchants are facing a perfect storm of fraud because 1) ecommerce is increasing in general, 2) it’s increasing because of the pandemic, and 3) it’s increasing because we’re entering the shopping season. As ecommerce grows, so does fraud.

So there are a few ways you can protect your online store from fraud. A recent TechShout.com article discussed a few ways you can protect your business and your store from fraudsters, whether it’s friendly fraud, malicious fraud, or hackers and cybercrooks.

Based on that list, and a few recommendations of our own, here are five ways to protect your e-commerce store from fraud.

1. Review your transactions for malicious activity

A hand holding a credit card looking at an ecommerce store on a laptop. Merchants need to be aware of the growing fraud around the holidays.

If you’ve had an ecommerce store for a while, you probably know most of your regulars. You’ve seen their buying patterns and you know what they typically order. So if you see some unusual activity, such as a changed address, unexpected high dollar purchase, or a request for faster-than-normal shipping, there’s a good chance they’re the victim of an account takeover. It might be worth a phone call to your customer to confirm that shipment.

Similarly, look for an account that’s using multiple credit cards to make multiple purchases. Flag the shipping addresses and notify your issuing bank or merchant service provider. Ask them to verify that these cards and the addresses are legitimate. There’s always a chance that they’re legitimate orders, but you and I both know that’s not very likely.

2. Set purchase limits for new accounts

Friendly fraud is not only some of the most common fraud, you can’t tell which purchases are going to be friendly fraud and which are legitimate, not like spotting malicious activity above. The best way to avoid getting hit with massive chargebacks is to set purchase limits on new customers. Those big purchases can be especially painful if a customer says it was lost or damaged.

(Also, don’t forget to ask customers to send back damaged and incorrect items before you issue refunds. Be sure to confirm that the item was inside the returned package, as many are just sending back junk, thinking the returns department will only mark the box as returned and issue the refund without checking the contents.

3. Participate in Order Insights from Visa

Order Insights is a program from Verifi (a Visa company) that helps you reduce disputes, chargebacks, and loss of chargeback fees

The way Order Insight works is that you automatically provide all transaction data to your customers and the issuing banks by being plugged into the OI system. If a customer calls their issuing bank to issue a chargeback, the bank will act as your customer service representative and try to solve the problem on your behalf.

Oftentimes, disputed charges are usually a result of a customer not recognizing a charge on their account, whether they don’t remember it or someone else in their family made the charge (also called “family fraud”). And they can even help spot suspicious charges.

4. Make sure you have cyber insurance

While cyber insurance doesn’t protect you from fraud, it will certainly save your business if you’re ever the victim of a data breach. In most data breach cases, you’re required to notify all your customers and offer them one year of fraud monitoring on at least one credit bureau. That alone can be expensive, but it can all be handled by your cyber insurance provider. They will even bring in a third-party to handle all the notifications and management on your behalf, paid for by the insurance company.

Cybersecurity experts always like to say, “It’s not a question of if you get hacked, but when.” Even if you’re taking every measure you can — using strong passwords, using SSL protection on your site, using a cloud hosting company that uses the highest security protection — there’s still a good chance a data breach can happen to you. So don’t skip this step just to save a few dollars, because one slip up could put you out of business.

5. Work with a merchant services provider with anti-fraud measurements

There are plenty of AI-driven fraud prevention tools, but they can be rather costly and cumbersome for a single merchant to pay for. Instead, work with a merchant services provider who has access to these tools for all of their clients.

This way, your costs are a lot lower, but the tools are much more powerful, because they’re not only gathering data from all of the merchants, but they’re enterprise-level applications designed to process thousands of transactions per day. That means the data the applications have gathered and learned from means they’re more adept at combatting cyberattacks, and they’re constantly improving and learning how to fight off newer, more sophisticated attacks. As the attacks come in, the more they learn. As the attacks improve, the better the software gets.

If you want to protect your ecommerce store from fraud, no matter its size, CB-Alert can help you with AI-driven security and fraud measurement, help you register for Order Insights, and give you recommendations on how to configure your store to discourage fraud. To learn more, please visit the CB Alert website.

Photo credit: StockSnap (Pixabay, Creative Commons 0)

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