The eCommerce industry has witnessed exponential growth in the last few years. However, the most extensive boom happened due to the pandemic forcing the mass adoption of digital shopping among consumers. But here’s the thing about eCommerce.
Where there lies excellent opportunity, the threats are greater.
With the rise of eCommerce, the increase of scammers and frauds has also seen steep growth. This means if you have to sustain and be a part of this growing eCommerce economy, taking your online security seriously is critical.
The best part?
You can do so by following a few disciplined prevention measures. What are they?
This post reveals all the top five measures that you need to take in 2021.
Five eCommerce frauds every eCommerce owner should be aware of
eCommerce frauds are smart and stealthy. They happen at the time when you are least expecting any theft. More than often, it leverages consumer misconceptions, unawareness, or low education levels of fraudulent behaviors. No wonder why frequent data breaches, compromised servers are something that the eCommerce community is always talking about.
But fret not. You still can triumph in safeguarding your business from these malpractices. All you need is strategic planning.
At the core of fraud lies one element, a stealthy collection of sensitive data accessed and manipulated by hackers for malicious use. To gain these data, they have specific fundamental patterns. Analyzing them and targeting to block these data collection channels can ensure your business is safe.
Following are the five essential methods of how hackers steal sensitive information and how you can ensure safety against these areas.
1. Identity theft
Identity theft is one of the most common eCommerce fraud examples that you will ever witness.
Most eCommerce sites require you to enter a card number and a verification code, sometimes in the form of an OTP as a security measure. If someone obtains your card number and verification code, they can enter it into their account on the website under a consumer’s name.
However, they won’t just create an account with their name since the account would duplicate the original account. This means they’d have a real credit card with actual account activity, which could be turned into even bigger credit problems.
It’s vital that you educate your costumes to keep their card number and verification code private and never share them with anyone.
2. Fake orders
Most eCommerce stores verify the shipping details of their customers in some form or the other. However, order manipulation happens at this stage too.
Hackers can modify the account information to redirect the order to themselves while processing the order under your registered customer’s name and transaction details. This leads to bad PR (public relations) for your brand and costs your significant business resources: money and customer trust.
Here, the hackers have access to all the sensitive information like credit card number, name, CVV number, mobile number, etc. This lets them create as many redundant orders as they wish. However, you can ensure to curb this down by tracking suspicious activities in the cart or account in real-time.
3. Transaction frauds
Of all the types of frauds you are exposed to, transaction fraud is perhaps the most frequent one you would ever be subjected to. No doubt, robust payment gateways like Paypal, Payoneer, and Stripe have made online transactions easy exponentially, but the complexity towards achieving a safe transaction environment is still significant.
Ideally, a transaction fraud originates at the point of sale when a fraudster uses a stolen credit card information to initiate a transaction. This is followed by your business processing the order. But the real problem arises once the order payment is processed.
Once the original cardholder notices the transaction, they contact their bank to initiate a chargeback to get their money. This ultimately falls on your business. Yes, you heard that right.
When the customer initiates the chargeback, you need to refund the payment. But that is not all. On top of losing a sale, you have to pay a significant admin fee to the card network. To make things worse, the card network always keeps track of your chargeback history. This means if high-frequency chargebacks are coming your way, chances are you would be marked in the high fraud target category where the processing fee is considerably higher than usual.
So the question is how to deal with this? There are multiple ways you can protect your business.
Embracing detailed billing descriptions can successfully reduce your chargeback rates. This description must have 20-25 characters of registered trade name, purchase details, purchase channel and mode of transaction. Adding finer details like the customer name, email id, and phone number can also benefit.
Integrate automatic-representment. This will save valuable time and resources spent on handling a dispute. To do this, you can generate an instant notification alert to validate if the dispute was created by the customer or not. This will often give you more productive time.
4. Triangulation frauds
Triangulation frauds are by far the most advanced frauds that you can ever witness in your marketplace, a situation where you fall prey to fake sellers.
Here is what happens.
A genuine customer purchases a product from a marketplace seller who happens to be a fraudster. This fraudster then reaches your legit business to buy the same item via a stolen debit or credit card, giving the shipping address of the original customer. After you ship the item successfully, this fraud seller initiates a chargeback. What follows is you fall prey to a triangulation scam. But understanding the loopholes and fixing them can ensure you do not have to undergo such painful incidents. Here is what you can do.
Keep track of new customer profiles with unnatural behaviors like regular orders of the same item. Although they are your loyal customer look-alikes, chances are they malicious, fraudulent sellers.
Again look for conflicting addresses where the shipping address and billing address don’t match. Often fraudulent transactions are of low cart value to ensure to keep off the radar.
All of the above measures combined with the in-built fraud detection tools of eCommerce platforms like Shopify and payment gateways like Stripe can create a safer business environment for you and your actual customers.
5. Return frauds
Customers are the lifeblood of your business.
While the former sentence is accurate, not all customers are the same with the eCommerce boom, yet another abuse of flexible return policy of items and goods.
There are multiple ways fraudsters do this. There have been numerous cases where scammers used stolen, manipulated, or false online receipts to exchange merchandise for profit. Again, returning look-alike merchandise bought at lower price points is often traded with the more expensive one. But that is not all.
There are switch frauds. In such a case, a defective good is returned in exchange for a functional item already owned with some other transaction. Then there is bricking where a fully available item is sabotaged to rip it off its valuable components and returned for profit. But the most malicious of them all is the inventory depletion often common amongst small-scale businesses. In this fraud, an entire shop’s inventory is bought to sell it at a higher price via their store.
This means creating an authentication process for whom you are dealing with is critical for ensuring business security.
You can use multiple methods to do so. A comprehensive, single-point data source where you create your customer profiles for references is a great way to do this. Further, you can integrate reverse social media lookup to ensure validation of the profiles. But only validating profiles will not keep you secured. It would be best if you went deeper.
Let your return policies work for you. For example, ensure you ask for ID and contact information while accepting return orders. Again, it is always a good measure to eliminate cash refunds and offer store credits instead. Also, creating timestamps on damaged or returned goods can be a great way to ensure no one can misuse the benefits.
The eCommerce marketplace has limitless possibilities. But to ensure it stays so, you need to ensure that scams do not handicap your maximum growth.
The above tips are sure to give a foundational prevention program for your business. But to ensure maximum security, you need to look closely into your unique business. First, look at the channels and processes that you are invested in. Then, trace out the potential threats in each channel and create a customized fraud prevention program.
Keep in touch with your customers. Ask for their help. They can open doors to creative ways of securing your business environment and operations. A pro tip here would be to design a dedicated team for your business environment’s safety and protection.
So now, when you know how to safeguard your business against the online world of scammers, when are you initiating your anti-fraud squad?