Ecommerce fraud is a broad name for any illegal activity involving online transactions. There are many types of such online fraud, including the use of stolen credit cards, chargeback fraud, affiliate fraud, and triangulation fraud.
If you run an online store, how can you protect yourself from fraud in online trade and accept only safe credit card payments?
Credit card fraud
Stolen credit card information is one of the most common types of e-commerce fraud. This occurs when a customer's information is stolen and used to make unauthorized online purchases, and it's a major concern for both online merchants and their legitimate customers.
Ecommerce fraud prevention
To prevent fraudulent credit card transactions, both e-commerce merchants and legitimate customers must take a number of precautions.
E-commerce fraud protection for online stores:
- Implement an e-commerce fraud prevention system (they help identify fraudulent transactions)
- Regularly monitor your systems for suspicious credit card transactions and potential account fraud
- As a part of the fraud prevention system, ensure you verify all new customers
Fraud prevention practices for customers:
- Be cautious about sharing personal information, and don't share unnecessary sensitive customer data (this prevents account takeover)
- Regularly monitor your statements for any suspicious transactions
Identity fraud risk
According to National Council On Identity Theft Protection, identity fraud is one of the fastest-growing crimes in America.
This occurs when someone uses your personal information, such as your name, Social Security Number, or bank account, without your knowledge or permission. Identity thieves use stolen customer data to online payment fraud in an online store, transfer money from one account to another, or take out loans in someone else's name.
Practicing good security habits is the best way to protect yourself from becoming a victim of identity fraud. Ensure you appropriately protect all your personal information, such as passwords, logins, and credit card details. Be mindful of phishing scams, too – if something looks suspicious, don't click on it until you can verify its authenticity with a trusted source.
Other types of ecommerce fraud – detection and prevention
Businesses must be aware of several other types of e-commerce fraud and take steps to prevent it:
- Friendly fraud - it happens when a customer disputes a legitimate charge in an attempt to receive a refund or chargeback.
- Interception fraud - a fraudster intercepts legitimate e-commerce transactions by hacking the customer’s device or using malware software.
- Gift card fraud - a fraudster uses stolen or counterfeit gift cards to purchase goods and services.
- Loyalty fraud - cybercriminals access customer accounts and drain them of collected loyalty points.
Thankfully, decent ecommerce fraud prevention software will protect your business from the majority of these threats.