Types of eCommerce Fraud and How to Prevent Themby Tyler P. A Passionate Blogger - Entertainment
An eCommerce site is at risk for fraud regardless of how secure it is. Since shopping online is gaining in popularity, merchants need to be concerned about fraud prevention.
Research shows that eCommerce fraud is increasing at an alarming rate. While large brands are targeted more often, small businesses are also impacted by fraudulent transactions. It is a never-ending battle because when merchants set requirements and guidelines for accepting customer-initiated payments, scammers find ways to work around them.
Online payment fraud impacts business revenue and puts merchants at risk of being forced to recoup losses and challenge chargeback fees as they strive to maintain a good relationship and reputation with card merchants.
In September 2019, the Second Payment Services Directive (PSD2) was revised to include:
· SCA (Strong Customer Authentication) for online payments
· Secure communication by service providers
These new requirements aim to prevent fraud by creating a much more secure platform to encourage genuine customers to continue with their online purchases. Merchants must make appropriate changes to their payment platforms to ensure they comply with psd2 compliance requirements.
Understanding the different types of eCommerce fraud can help them implement processes to proactively managed product so they can identify potentially high-risk transactions.
Types of eCommerce Fraud
Classic Method – This type of fraud occurs when customers’ card data is stolen and used to make payments and order products.
Interception Method - Criminals place an order using a customer’s account and intercept the shipment before it is delivered.
Triangulation Fraud –The fraudster sets up an online store on known marketplaces and offers expensive products at discounted prices. When customers place an order, the fraudster gathers their card details and purchases the products from legitimate sellers.
Chargeback Fraud – This is also knowing as “Friendly Fraud” and is alarmingly common. Customers ask for a chargeback claiming they did not initiate the transaction after the product has been delivered.
Card Testing Fraud - Cybercriminals set up a mock transaction on a website to check the validity of a card and then use it on another website.
By using fraud detection software and integrating it with their business systems, merchants can create comprehensive backend support for employees, understand how various types of eCommerce fraud occur, and take measures to prevent it.
Following are eCommerce fraud prevention best practices that merchants should follow to ensure customers’ identify and minimize fraudulent transactions.
Best Practices for eCommerce Fraud Prevention
· Put a limit on the daily spending amount for each customer
· Monitor everyday transactions and customer accounts
· Verify that the address on the invoice is the same as the customer billing address for the card used.
· Ask for a CVV number (Card Verification Value) for each transaction
· Regularly update the platform and software used to facilitate online transactions
· Require customers to set strong passwords for their user accounts
· Make sure their website is PCI compliant (Payment Card Industry Security Standard Council).
· Use to-rated fraud prevention tools and AI-based software solutions.
Implementing these best practices is the first step. Companies should also deploy fraud prevention software and get help from a company that specializes in eCommerce fraud. The best solution to combat eCommerce fraud is to invest in a fraud prevention solution that uses a machine-learning algorithm to identify customers’ behavioral patterns to distinguish between legitimate and suspicious transactions.
Created on Sep 10th 2020 02:37. Viewed 76 times.