6 Best Practices To Prevent eCommerce Fraud

6 Best Practices To Prevent eCommerce Fraud

With the outbreak of the coronavirus pandemic, the popularity of online commerce has soared to phenomenal heights. However, this has also triggered a rise in the number of incidents involving e-commerce fraud. Research suggests that, by the year 2024, there is likely to be a loss of 2.4 million USD suffered by e-commerce retailers all over the world. (Source) And alarmingly enough, the rapid evolution of technology has also not been enough in tiding e-commerce fraud; fraudsters always manage to have their way by using sophisticated technologies and tools.

It is now more critical than ever, to adopt proactive steps if necessary collaborate with ecommerce fraud prevention companies, and adopt the right strategies to detect and prevent ecommerce fraud. In conjunction with this, implementing the industry best practices can also go a long way, in ensuring the security of e-commerce customers and merchants.

Let us find out 6 of these best practices that can be effective when implemented either individually or alongside other behavioral signs.

1. Connect Identity Elements with listed Fraud Signals

An individual red flag is not enough to confirm fraudulent activities. To establish the trust of identity, it is vital to spot and link all elements of identity from fraud signals that are already known. A strong data network can be of immense help to fraud analysts in this case. This is because a wider and more robust network that supports hundreds and billions of e-commerce interactions provides more accuracy to analysts in assessing if a specific purchase is suspicious or legitimate.

2. Implement Step-up or Risk-Based Authentication

When it comes to implementing step-up authentication or risk-based authentication, the issuer bank implements scrutinizing steps at various levels for validation. This is purely based on the level of risk that a particular interaction presents. So, if the risk level is considered higher, then the verification process will automatically be more stringent. Interactions that seemingly have a higher possibility of being fraudulent, are challenged by such step-up authentication systems.

Mandating the use of strong passwords that comply with different rules, can also help reduce potential frauds. But this alone is not sufficient to guarantee safety in e-commerce platforms.

3. Invest in AI Fraud Prevention Application

Highly sophisticated fraud prevention systems implement Artificial Intelligence and Machine Learning, to accurately simulate the capabilities of experienced fraud detection analysts. And with the help of ML, AI can also weigh the risks involved in a fraud, sense potential fraud attacks, and base analytical decisions from historical data.

The best thing about AI fraud prevention systems is that they are usually very accurate, timely, and have zero scopes of human errors. AI is highly scalable and faster too when it comes to gauging the value of a customer against the risks of scams. Armed with AI fraud prevention, businesses get to enjoy more authority over their business outcomes, minimize human efforts and accept orders on a much greater scale.

4. Implement Address Verification System

Address Verification Services (AVS) is a brilliant way to establish trust in customers. Through AVS, when a customer submits an address, it is verified against the known address filed by that customer present in their bank database. Based on the match result, the bank returns a specific code to the e-commerce business. For instance, if the house number keyed in by a customer fails to match a specific ZIP code, the AVS system returns the corresponding code indicative of that condition. Based on that, businesses can choose to reject, accept or flag individual transactions, thereby reducing chances of fraud.

5. Adhere to PCI Standards

Standards set by the Payment Card Industry help protect online sellers and their customers against fraud. It is mandatory for e-commerce platforms to adhere to these protocols, and major payment processing organizations comply with them.

6. Enforce Regulations for Card Security Code

One of the very common e-commerce frauds is the card-not-present transactions when customers shop online using mobile apps or over the phone, where they are not required to produce their card for the purchase. In such transactions, there is no way to verify the validity of the cardholder’s identity, which heightens the risk of fraud. Implementing card security codes for validation can reduce the chances of fraudulent transactions.

John Norwood
John Norwood is best known as a technology journalist, currently at Ziddu where he focuses on tech startups, companies, and products.