You spend months building your eShop, investing your hard-earned cash into putting it online, only to witness it being hacked the next day.
In this article, we will look at the top threats that can put your business offline and how to prevent them.
So, let’s get started!
Here’s a simplified table outlining ways to protect an e-commerce store from fraud and hacking, with a focus on the benefits of each method:
|How it Can Safeguard Your eShop?
|Use Strong Passwords
|This is no-brainer, but it decreases the chance of unauthorized access through brute force attacks.
|Two-Factor Authentication (2FA)
|Adds an extra security layer requiring a second form of identification beyond just a password.
|eCommerce websites need a Comodo Wildcard SSL certificate, which encrypts data between the server and the user, preventing data interception.
|Regular Software Updates
|Patches vulnerabilities in software that could be exploited by hackers.
|Anti-Fraud Tools and Services
|Detects and prevents fraudulent activities by analyzing patterns and flagging suspicious transactions.
|Blocks unauthorized access to or from a private network.
|Secure Payment Gateways
|Ensures secure transaction processing and protects sensitive financial information.
|Monitor Site Activity
|Helps in early detection of unusual activity that could indicate a breach.
|Makes sensitive data unreadable to unauthorized users.
|PCI DSS Compliance
|Ensures that the store meets the necessary security standards for card payment processing.
|Educates staff on recognizing and responding to security threats.
|Backup Data Regularly
|Provides a recovery option in case of data loss due to a breach.
|Restrict Admin Access
|Limits the number of people who can access sensitive areas of the site, reducing risk.
|Use a VPN detector
|Preventing people from changing passwords through a VPN network.
|Incident Response Plan
|Prepares your business for quick action if a security breach occurs.
What is e-commerce fraud?
E-commerce fraud is a type of criminal behavior that occurs during online shopping and transactions. Malicious individuals exploit vulnerabilities in digital commerce systems or deceive businesses and customers to gain unauthorized access to sensitive personal or financial information.
Ecommerce fraud can be extremely damaging to businesses and their customers, resulting in unauthorized transactions, financial losses, and reputational damage.
It is a major worry for any company that works online, as it has the potential to have a detrimental influence on consumer trust, security, operating costs, and the entire profitability of the business—in addition to damaging the customer experience.
What types of businesses should be concerned about ecommerce fraud?
While every online business can be a target of e-commerce fraud, certain types of businesses may be more vulnerable to it or must be more attentive to it. These are some examples:
Processors of payments
Companies that handle financial transactions between buyers and sellers, such as credit card processing services, must be concerned about fraud because they are in charge of assuring transaction security and accuracy.
Due to the volume of transactions and the collecting of sensitive consumer data, businesses that offer products or services directly to customers via a website or online platform are at significant risk.
Providers of digital content
Businesses that provide digital products, such as streaming services, e-books, and software, are also targets, as fraudulent actors may attempt to acquire unauthorized access to content or illegally distribute it.
Auction portals & marketplaces
Online marketplaces that support transactions between various sellers and buyers must be concerned about fraud such as bogus listings, counterfeit products, or fraudulent transactions.
Services that require a subscription
Businesses that use a subscription model, such as online courses, software-as-a-service (SaaS) providers, or membership sites, should be concerned about fraudulent sign-ups or unauthorized access to their services.
Sites for scheduling travel & events
Businesses that accept reservations for flights, hotels, or events must be wary of fraudulent actors who make bogus reservations or use stolen credit card information.
This is not a full list of businesses that could be affected. Ecommerce fraud will occur more frequently as more businesses across industries begin accepting payments online.
Fraud Types in eCommerce
Ecommerce fraud is not a consistent danger that affects businesses and customers in the same way every time. To commit ecommerce fraud, fraudulent individuals employ complicated, ever-changing strategies.
Here’s a quick rundown of the various types of ecommerce fraud that businesses and customers should be aware of:
Theft of one’s identity
Identity theft happens when a fraudulent actor utilizes the personal information of another individual, such as their name, address, or credit card information, to make unauthorized purchases or open accounts.
Fraud involving credit cards
Credit card fraud is the unauthorized use of a credit or debit card or the information associated with the card to conduct fraudulent transactions. This can occur when credit card information is taken through hacking, phishing, or skimming.
Fraud involving chargebacks
Chargeback fraud, sometimes known as “friendly fraud,” happens when a client makes a purchase and then falsely claims they did not receive the product or service or that it was unauthorized in order to obtain a refund from their bank.
Social engineering and phishing
Phishing and social engineering strategies use misleading emails, texts, or websites to fool people into supplying sensitive information or credentials that can then be used to perpetrate fraud.
Fraud involving refunds
Refund fraud occurs when a fraudulent actor appears as a customer and claims a refund for a product or service they never purchased, frequently by supplying false order details or using stolen account information.
Fraud involving account takeover
Account takeover fraud occurs when an unauthorized person acquires unauthorized access to a user’s account—either by hacking, phishing, or the use of stolen credentials—and then makes unauthorized transactions or changes.
Fraud with affiliates
Affiliate fraud is the exploitation of an affiliate marketing scheme in which fraudulent actors generate fictitious traffic, clicks, or sales in order to obtain illegal commissions.
Products that are counterfeit or false
Counterfeit goods are imitation or unauthorized goods that are falsely marketed as genuine.
Fraud involving drop-shipping
Drop-shipping fraud occurs when a fraudulent actor pretends as a legitimate supplier but never sends the things they’ve sold, leaving the store with unhappy customers and financial losses.
E-commerce fraud is constantly evolving in response to technological advances in e-commerce. Because new types of ecommerce fraud are always emerging, it is critical to implement fraud prevention systems and techniques that can respond to evolving fraud tactics.
10 Tips to Prevent E-commerce Fraud in 2024
So, now that you’ve covered the fundamentals, here are nine recommendations for avoiding ecommerce fraud. This will assist you in identifying ecommerce fraud, dealing with the issue, and avoiding severe financial damages.
1. Set limits on total purchases
High-volume orders are a red flag for cybercriminals who use stolen credit cards to make fraudulent purchases.
You can reduce the likelihood of these orders being fulfilled by restricting the total amount of units a consumer can purchase. You can also examine your historical sales data to determine the average number of units sold per day. Make sure that orders that exceed this volume are automatically blocked. This lowers the likelihood of hackers committing fraud in your online store.
2. Purchase verification software.
Another symptom of ecommerce fraud is when the customer’s billing, shipping, and credit card information do not match. Make sure you have a verification mechanism in place that can automatically identify these orders:
- Card verification number (CVN): To make an online transaction, cybercriminals just need to see the front of a credit card. As a result, make a three or four-digit PIN or CVN a required field in your e-commerce checkout. Adding an extra layer of security is one of the most popular fraud detection features, with more than half of merchants utilizing it.
- Address verification system (AVS): This checks the billing address on the card the consumer is using. Many fraudsters will utilize multiple cards to make purchases at a single location. An ASV will usually catch them.
3. Perform standard KYC tests
Identity theft is a significant risk for many online businesses. In order to prevent these frauds, adopt conventional KYC practices and KYC compliance on a regular basis.
The following are the most typical KYC tests used to avoid identity fraud:
- To validate an email address, send confirmation codes or emails.
- Use two-factor authentication to validate phone numbers. For example, delivering a code via SMS or voice calls on a mobile device.
- Requiring and validating public records such as credit card bills, electricity bills, passports, and so on to confirm a person’s physical address.
- Video consent verification for authentication. A person, for example, can record a live video of themselves holding their identity document or a handwritten verification code that is supplied via the customer’s mobile phone.
- These inspections are required for every form of online business. There are several additional tests you can perform to prevent identity theft.
4. Ensure that PCI standards are followed.
Payment Card Industry (PCI) standards assist in protecting your company and customers against ecommerce fraud.
These rules are rigidly enforced by the Payment Card Industry Security rules Council. For online merchants, these are necessary. PCI compliance is required for the majority of large payment processors. However, before selecting a third-party payment method, businesses and merchants must conduct research.
5. Require card verification value (CVV) numbers
CVV numbers are three or four-digit security codes that may be found on the back of most credit and debit cards. This is sometimes referred to as the Card Verification Value (CVV).
When all purchases require this code for each transaction, it assures that customers have their actual credit card on hand. Using this code requirement as an additional security measure for every purchase will keep your online store and customers safe. It also reduces the possibility of fraud.
6. Use multi-factor authentication.
Users must authenticate their log-in attempts using this technique by entering a one-time password (OTP), answering a security question, or using their fingerprint.
Multi-factor authentication, according to Microsoft, can prevent up to 99% of cyber assaults. As a result, implementing this method is a good way to improve your e-commerce security. Installing a security plug-in or a third-party program like Google Authenticator will enable multi-factor authentication.
7. Keep a close eye on your transactions.
Another strategy to protect your e-commerce store from fraudulent behavior is to monitor your transactions periodically.
Check it on a regular basis for any red flags, such as contradictory shipping and payment information, as well as your customers’ physical location. This is one of the most effective methods for detecting any unusual actions. Detecting these things is a fantastic and useful technique for preventing fraud.
8. Disallow non-physical shipping addresses.
When placing illicit orders, such as those made using stolen credit cards, hackers will choose a non-physical shipping address to limit the possibility of being caught.
One of the most typical methods is to provide the information for a post office box as the shipping address. While this does not always imply that the behavior is illegal, it certainly raises suspicion.
9. Only acquire client data that is absolutely essential.
This one is self-explanatory. Cybercriminals cannot steal data that they do not possess. In the case of e-commerce stores, make sure that the data you collect is limited to what is required to complete the transaction.
If a scam occurs, you can still limit the damage. For example, while names and addresses are vital, you probably don’t need to enter your customers’ birthdays into your system.
10. Provide security training to employees
Your staff must understand that they should neither email nor text-critical material nor should they share confidential information about their customers via chat, as none of these communication methods are secure.
They must be thoroughly educated on the various laws and rules that may affect consumer data, as well as instructed on the steps required to keep it secure.