Home Did you know ? Ecommerce Fraud Prevention Best Practices – The Ways to Protect Your Online Business From Scammers

Ecommerce Fraud Prevention Best Practices – The Ways to Protect Your Online Business From Scammers

by Mic Johnson

eCommerce fraud is on the rise during a pandemic. A lot of companies are trying to escape and survive in the online space, and what’s more, a lot of them are trying the eCommerce approach for the first time. Of course, online trading is full of benefits, but there are also pitfalls that a business that has previously worked offline has not yet encountered. Yes, we’re talking about e-commerce fraud and scams. One of the first things you need to do is protect your business and clients from intruders. In this article, we have collected eCommerce fraud prevention best practices to help your company stay safe. 

What Are the Risks and Frauds Which Happen Online?

According to the research, “Merchants continue to deal with a variety of threats from high techs, like Bots and Phishing attacks, to medium-tech such as upgraded card skimmers, to pervasive legacy threats like counterfeiting and check scams.”

So, there are the following eCommerce fraud types. 

  • Classic fraud. 

This type of scam refers to credit card fraud the numbers of which are purchased on the dark web. Typically, attackers also use phishing and password guessing techniques to increase the chances of a successful attempt. To gain more insights into these tactics and learn about the potential consequences, readers can refer to this informative page.

  • Triangulation fraud.

This is a tricky scheme in which a fraudster creates an online store on a well-known marketplace, offers in-demand products at low prices, collects a large number of orders, and steals personal and payment data in order to make a purchase in a legitimate store. Thus, the deceived customer pays twice – for the goods allegedly bought in a fake store, and for the real goods, but he does not receive any of them. 

  • Interception fraud. 

In this scheme, fraudsters intercept an order already placed. They track orders made in a real store, contact buyers, and ask them to change the delivery address in order to take possession of the goods before the buyer.

  • Card testing fraud.

Here, the purpose of the scammers is to test the card data that customers use in online stores. They target faulty transactions when, for example, a customer accidentally entered the wrong card expiration date. In this case, with the help of bots, they guess the correct date and can use the complete financial data for their own purposes.

  • Account takeover fraud.

In this case, fraudsters gain access to the buyer’s account, where his financial and personal data are stored. Further, this data is used for purchases until the card limit is reached.

  • Fraud via identity theft.

At the moment, this is one of the most common types of scams in the online environment, as it has become extremely easy to collect all the necessary information about the user from free sources. Plus, if the user doesn’t care about the security of their data and doesn’t follow the rules of behavior on the Internet, then stealing his identity becomes an even easier task. Having this information, attackers can easily answer secret questions, enter the number, expiration date, and СVV щof the credit/debit cards, and even intercept SMS messages.

  • Chargeback fraud 

This type of fraud is also called a friendly fraud since a customer is always one of the participants in this scheme. As you know, the opportunity for a chargeback is a customer protection mechanism, and very often it is overused. In most cases, the customer receives his money back but the good is not always returned to the retailer. What’s more, chargeback fraud sometimes happens unintentionally – that is, the customer doesn’t have a real goal to deceive the retailer. Sometimes, there are real issues (for example, if the good was lost during delivery), however, the financial losses of merchants are real as well. 

How Can Ecommerce Fraud Be Prevented?

Taking into account the impressive number of fraudulent schemes, eCommerce fraud prevention, and payment fraud detection become crucial. Here is what you may do to protect your store and customers. 

  • Use eCommerce fraud prevention tools

There are a lot of eCommerce fraud prevention tools that are based on old-school and innovative approaches. Credit card fraud detection using Machine Learning is one of the later examples. 

  • Combine artificial and human intelligence

Machine learning for fraud detection is quite promising, however, it makes the most sense when used under the supervision of your company staff. 

  • Use verification technologies

Also, there are technologies that allow for verifying the customer credit card data, his IP and physical address, phone number, and email to make sure that the purchase is made by the legal customer. 

  • Use email authentication services

These services help to make sure that an email is not forged and the letter is sent by the legitimate company or person. Thus, this is the way to prevent fishing. 

  • Improve your service to reduce chargebacks.

Sometimes, chargebacks are the result of unclear return and refund policy. Try to make it clearer for your customers to reduce the chargeback issues because of this factor. 

What Are Ecommerce Fraud Prevention Best Practices?

Here are the eCommerce fraud prevention best practices you should begin to follow right now. 

  • Address Verification System

This system allows making sure that the billing address and the real address of the customer coincided. However, sometimes the change of address may be quite legitimate, and in this case, it makes sense to utilize eCommerce fraud prevention tools for additional protection. 

  • Preventing Phishing Attacks

As we have stated, you may do it with the help of email authentication services. Also, your employees should be aware of this risk and never open suspicious emails. 

  • Check the CVV

CVV is the most important and vulnerable piece of customer financial data. To protect it, you may come up with the system that will block the transaction if the CVV is entered wrong two times. 

  • Ensure PCI Compliance

Payment Card Industry Security Standards obliges your online store to use a firewall, as well as encryption, access identification, and virus protection tools on your website. 

  • Chargeback Reasons Analysis

The reasons for chargebacks are not always fraudulent. You should analyze the specifics of your chargebacks issues and find the solution to reduce them. For example, a sophisticated machine learning for fraud detection system may analyze user behavior patterns and conclude on the chargeback intentions right on the order placement stage. 

  • Business-specific risk modeling with AI and ML

Also, you may come up with a business-specific AI and ML tool that will help you to leverage the risks which your store is exposed to the most. What is more, the opportunities for ML and IA usage for business are almost unlimited, and credit card fraud detection using machine learning is not the only way to secure your transactions and your store as a whole. 

How Is eCommerce Fraud Detected with AI and ML?

How to Protect Yourself From Internet Fraud?

Unfortunately, businesses and individuals are equally susceptible to online fraud as it would be impossible to get hold of user data if the user did not share it with the online business. The following infographic contains the basic rules you must follow for your online safety.


The more transactions are made online, the more opportunities are given to fraudsters to intercept personal and financial data. This problem becomes especially urgent during the pandemic when many businesses have moved online with the intention of staying here. Security technologies are evolving in response to new fraudulent schemes, and today your task as an online business owner is to protect your company and customers from the schemes that we already know.

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