5 Tips for Protection Against eCommerce Fraud in Online Shops

5 Tips for Protection Against eCommerce Fraud in Online Shops

With the steady rise in e-commerce, fraudulent cases are becoming increasingly problematic. Experts predict that by 2025, revenues totaling seven trillion US dollars could be lost. To protect themselves and their customers from these emerging threats, it is essential for merchants to strengthen their security measures and implement new prevention strategies.

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Amid the COVID-19 pandemic, the already thriving e-commerce sector experienced an unprecedented boom. Reasons to stay home and shop online varied, ranging from store closures to the persistent on-site infection risk. This led even those who had never ordered from an online store before to suddenly shift their entire weekly shopping to the internet. Estimates suggest that this boom will result in global online retail revenues surpassing the seven trillion US dollar mark by 2025.

However, despite this positive development, there is also a concerning side associated with the enormous success of e-commerce. Where there is a large flow of money, fraudsters are not far behind. Globally, merchants face over 200,000 cyber-attacks each month, leading to fraud-related revenue losses exceeding 20 billion US dollars in 2021. A rise of 18 percent compared to the previous year. Future forecasts are alarming as well, with experts expecting annual losses of 25 billion US dollars due to fraudulent orders in e-commerce by 2024, despite the introduction of Secure Customer Authentication (SCA). To adequately prepare for this growing threat and protect customers from fraud attempts, proactive action by merchants is now required.

1. Tip: Early Detection and Prevention

Preventing fraud in e-commerce requires not only identifying suspicious activities as they occur but also taking preventive measures to minimize the risk of fraud from the outset. Traditional legacy solutions fall short of meeting the current requirements of e-commerce. They are too inaccurate and slow to raise alarms in a timely manner. Therefore, merchants should opt for the implementation of an adaptable end-to-end fraud prevention solution. This elevates the security of the shop to a new level and reinforces the trust of customers, which should remain intact despite increasing threats.

2. Tip: Continuous Updating and Vigilance

Legacy solutions operated internally by e-commerce merchants are not only too slow and inaccurate but also require continuous updating to keep pace with constantly evolving trends and fraud schemes. Neglecting these updates exposes not only customers but also merchants to significant risks. An effective strategy is to rely on external solutions. Providers of these solutions stay up to date daily and can best assess the necessary security measures. Outsourcing this responsibility not only reduces revenue losses for merchants but also saves valuable time.

3. Tip: Integration of Artificial Intelligence (AI)

In online shopping, security is not the only factor that matters. Potential buyers also expect a smooth order and payment process. If this does not work optimally, there is a risk that they will abandon the purchase and switch to competitors. To quickly approve orders, merchants have no choice but to rely on fully automated solutions. Manual checks would simply take too much time, a resource that is scarcely available in today’s fast-paced e-commerce. This is where solutions based on Artificial Intelligence come into play. They can analyze large amounts of data in a short time and almost in real-time decide whether it is a legitimate order or a fraud attempt.

4. Tip: Security Comes at a Price—Investments Pay Off

The implementation of Secure Customer Authentication (SCA) can significantly reduce fraudulent activities and even shift fraud liability from the merchant to the financial institution, theoretically providing merchants with a significant advantage. However, SCA protocols like 3-D Secure do not offer absolute protection against online fraud, even though they make it difficult for fraudsters to infiltrate the accounts of legitimate customers. Moreover, these new solutions create additional friction points, such as when the issuing company of the credit or debit card additionally verifies the identity of customers through a password or a code sent via SMS. This can lead to a less positive shopping experience for customers and compromise their loyalty to the company.

5. Tip: Utilize Large Data Networks for Higher Accuracy

In a time when shops are strengthening their security measures and constantly introducing new protection regulations for customers, online fraudsters are adept at adapting their methods. Therefore, a single perspective is not sufficient to comprehensively monitor and prevent potential fraud attempts. The use of a robust data network is crucial. Only when a shop can link billions of digital interactions worldwide can the finest nuances be recognized, and legitimate orders distinguished from fraudulent ones. A rule of thumb is that the more data e-commerce merchants have at their disposal, the faster and more accurately they can detect and prevent fraud.

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