eCommerce businesses regularly fall victim to online fraud. In fact, in 2012, eCommerce fraud accounted for $3.5 billion in losses. Around 0.8 percent of online orders proved fraudulent, and mobile commerce suffered a 1.4 percent revenue loss. With such significant financial damages, the need for fraud protection and fraud prevention has never been greater.
Types of eCommerce Fraud Attacks
Any eCommerce business owner needs to notice the possibility of fraud attacks and take the necessary steps to protect their online stores. One of the best ways to develop a first-rate defense line is to familiarize yourself with the different types of fraud attacks. Knowledge is power, so understanding how thieves steal from online stores is a valuable tool to bolster your website security.
Cybercriminals use various methods to launch identity fraud, such as targeting an eCommerce site using stolen credit cards. Credit card fraud can cause significant financial losses. Rene Delgado, the founder of The Bounce House Store, recently stated in an interview with American Express, “We see a fair amount of identity fraud. Thieves steal credit cards and try to make purchases with them. We see an uptick of this type of fraud beginning in November, and it goes all the way through the holiday season. Fraud schemes are forever evolving.
eCommerce fraud risks consist of both stolen identities of real people and a mixture of fictitious or manipulated identities. An eCommerce criminal uses various methods to commit identity theft involving a real customer’s credit card information to attack or target other security weaknesses.
Account fraud often referred to as account takeover fraud occurs when a criminal gains access to a customer’s eCommerce store account. They use various methods to implement the takeover, such as buying stolen passwords, using personal information obtained on the dark web, and using security codes to start a phishing scheme focused on a particular customer for account takeover.
After gaining access to the user’s eCommerce account, they will often change the account’s details, make purchases, withdraw funds, or gain additional access to other accounts to commit further identity fraud.
Without a doubt, account takeover fraud is a common form of theft that not only costs victims a sizable amount but also damages your eCommerce site’s reputation. Once customers start to feel vulnerable or that their data is at risk on your website, they are far less likely to check out and could drop off your site.
Subtypes of eCommerce Fraud
There are many eCommerce fraud forms that include friendly fraud, account takeover fraud, card testing fraud, and more. Learning about the different types of scam can prove beneficial in battling cybercriminals.
Card Not Present Fraud
Card, not present fraud occurs when the cardholder is not present to give the card to the merchant. The fraud happens with the Internet, mail order, and telephone transactions. A criminal steals the credit card number via skimming, phishing, or hacking. The stolen card data is used to carry out unauthorized transactions and purchases by the fraudster. ECommerce fraudulent threats are genuine and cause online stores to lose billions every year and prove a headache and financial nightmare for the cardholder. The Nilson Report found that 24.26 billion in losses occurred because of card not present fraud in 2017.
According to Invesp, fraud has cost eCommerce businesses in the United States’ $6.7 billion in one year. Besides, users lose their payment card details, sensitive data, and social security numbers due to hacking. eCommerce sites must focus on security by familiarizing themselves with the PCI DSS (Payment Card Industry Data Security Standard) and how to remain compliant.
PCI compliance can help secure and protect card data. Another way to avert hacking attacks is to avoid collecting and storing sensitive data against PCI standards. Always updating your eCommerce platform with a security patch within days of a new version release is imperative. Demanding strong authentication, a complex password, and setting up an alert system for suspicious behavior are other ways to avoid hacking on your eCommerce website.
It involves three key components the unsuspecting customer, a fraudulent seller, and a legitimate eCommerce site:
- The customer makes an order using their credit card, PayPal tender, or debit.
- The fraudulent seller intercepts the order but then uses a stolen credit card.
- The legitimate eCommerce website then processes the criminals’ order.
According to 99Firms, at least 15 percent of digital media advertising revenue comes from affiliate marketing. Yet, 2 percent of the affiliate transactions are affiliate fraud. Affiliate fraud involves the collection of commissions from affiliate marketing programs. The fake fraudsters conversion, duplicate content from another affiliate or perform click stuffing.
Chargeback fraud occurs when the credit or debit cardholder disputes a transaction with the bank instead of first contacting the merchant to request a refund. It is often referred to as friendly fraud chargeback. It is when the actual consumer decides to abuse the entire chargeback process to gain a refund. Using their bank transfer fraud protection (chase bank fraud protection), the bank issues them a refund and then goes after the eCommerce site.
Specific Platform Vulnerabilities
Mobile systems such as smartphones, smartwatches, tablets, and other wearables all have specific platform vulnerabilities. Without enough robust controls and mobile app protections, hackers can access many resources on mobile devices.
Friendly fraud (chargeback fraud) involves making an online purchase, and then the buyer contacts their credit card company to dispute the charge. The customer might say that they never received the item, the item does not match what they purchased, they claim that they returned the item, never made the purchase, or canceled the order.
Putting tracking numbers and shipping mechanisms in place is one way to fight friendly fraud. The Address verification system (avs) is another option. Having a foolproof return policy that clearly states the item must be returned to get a refund is another choice. An online email and account order history that reflects all transactions also help.
Tips to Help Prevent eCommerce Fraud
The year 2020 and the COVID-19 pandemic have spurred many shoppers to turn to online purchases, which have fueled the global commerce market. With unprecedented new online users, the potential for groundbreaking revenue exists. HTTPS- and security are one way that eCommerce battles fraud but there are more options to protect the network and customer information.
Choose the Right eCommerce Platform
When choosing the right eCommerce platform, you will want to make the correct choice to create a secure store. Without a doubt, a secure eCommerce platform has never been more important.
Ensure Your Store is PCI Compliant
PCI compliance refers to an eCommerce site that follows the Payment Card Industry Security Standards Councils rules set forth to protect customer data. The Security Standards Council provides current information on how a store can remain present and protect data security.
What is PCI Compliance?
PCI (Payment Card Industry) has a set of requirements referred to as PCI DSS (payment card industry data security standard) that ensure all companies can safely process, store, and transmit credit card information. The goal is to always protect credit card data from breaches by securing sensitive data.
Use Address Verification System (AVS)
The Address Verification Service (AVS) lets a merchant detect any suspicious credit card transactions and halt potential credit card fraud. The AVS is used to verify the customer’s billing address of the cardholder’s credit card account. It adds an extra layer of fraud security.
Check the Card Verification Value (CVV)
The CVV code is a number printed on the back of a credit or debit card. It is not transferred when a card swipes and is only known by the cardholder. With a Visa or Mastercard, it is a three to a four-digit number. The security feature allows the REEF to identify the cardholder. The CVV code should never be confused with the PIN code. It is an added security feature of transactions when it comes to credit card transaction types.
Don’t Store Sensitive Customer or Transaction Data
As mentioned before, when combating eCommerce fraud, a merchant should not store sensitive customer or transaction data like payment methods, addresses, billing addresses, credit card numbers, or other personal information on the eCommerce operating system.
Allow Your Customers Track Their Orders with Tracking Numbers
Allowing your customers to track their orders using tracking numbers is a nice perk for any Ecommerce website. The buyer can easily track their order every step of the way, and it is one way to provide security and let the consumer know that you are not a fake online store.
Require Strong Passwords from Your Customers
Strong passwords matter. They are a way to protect existing accounts and protect data on mobile devices and PC (personal computer) systems. That’s why you can set a reminder for new and existing customers on the account page while they create or edit account information to change their passwords or to use a specific number of symbols for it.
Keep Your Software Up-To-Date
Developers will help close security hole problems by keeping your software up-to-date. Magento ongoing support keeps your software up-to-date. eCommerce store owners can also reduce the potential for fraud by visiting the Magento website to look for patches and security updates.
Useful Tools for Fraud Prevention
The eCommerce market has become a dangerous place rife with fraud. Many are trying to expand their businesses, but that puts them at risk for new threats. However, you can protect your site from criminal fraud by utilizing fraud prevention tools. Deciding on the best useful tools for fraud prevention is never easy but a necessity.
The Card Verification Number (CVN) is a three or four-digit code used for security on a credit card’s back. If a card is not physically presented for a purchase, then requiring the CVN is an extra layer of fraud protection.
Address Verification Service is a fraud prevention system. It helps to limit not only fraud but chargebacks. It works by verifying the address the customer enters to make sure it is associated with the credit card account. The AVS is a service designed by Mastercard to halt CNP fraud.
In the past, customers used their passwords but added security to prevent eCommerce fraud is now needed. Multi-factor authentication requires that a customer use at least two independent authentication methods when shopping online. Sometimes it involves a password in combination with a code sent via SMS to their smartphone to help identify the buyer.
Mobile Apps Protection
Multi-factor authentication is one way to provide mobile app protection. Digital wallets are also relying on tokenization. Other mobile app fraud detection tools use geolocation and velocity checking.
Best Practices for Magento
Magento allows building great eCommerce websites. However, it can become the target of spamming, phishing, and breaching the website’s server/database. You can take steps to protect your Magento storefront, such as using Secure Sockets Layer (SSL) for an encrypted connection, using secure FTP, complex passwords, staying up-to-date with the latest version, and using unique email addresses.
Staying current with Magento security patches is one of the best ways to maintain a secure site. Always take the time to learn the various methods to install the patches.
You can use it for Magento to monitor users’ use to determine if they are human and not a computer bot. This is one more level of security that you can use to combat eCommerce fraud.
Magento Ongoing Support
There is a reason why Magento stands out from the crowd because of its ongoing support. Security is one of the biggest concerns and priorities for any retailer to help combat eCommerce fraud.
Online security is a real challenge for any eCommerce site. Thieves are always discovering new ways to scam and steal. Every business has to stay on top of their store’s security features to prevent an attack and financial losses. Although there is no foolproof way to halt cybercriminals, you can take security measures to protect your business and reduce your vulnerability. If you want to build trustworthy relationships with your clients and remain safe from various fraud attacks, ensure that your store is PCI compliant and has a stable version of the CMS platform, relevant SSL certificate, AVS, CNV for customers’ orders, and strong passwords for your data and accounts’ data. If you have Magento CMS as a base for your store, you can use reCaptcha to prevent bots attacks, security patches for the 1.x versions, and support of reliable developers if you need to fix any issues in your store security.