How to Detect and Prevent E-Commerce Fraud?

How to Detect and Prevent E-Commerce Fraud?

Fraud is an unfortunate reality of e-commerce. As the online retail industry continues to grow, so does this problem. The best way to combat fraud is by detecting it early on and implementing prevention measures that minimise its impact on your business. In this blog post, we will go over some of the most common types of fraud you might see in e-commerce, as well as steps you can take to prevent them from happening again.

What Is E-Commerce Fraud?

E-commerce fraud is a type of internet scam in which the perpetrator creates fake websites and uses them to trick unsuspecting customers. These sites can look very similar to legitimate online retailers, fooling people into entering their payment information on what they believe is an authentic e-commerce site.

The criminals behind these sites can then use the stolen data to make fraudulent purchases. They also sell customer information on dark web marketplaces, where it is used for other types of cybercrime, such as identity theft and credit card fraud.

What Is Online Fraud? How Does Fraud Occur?

The term “online fraud” refers to any illegal activity committed through the use of a computer and the internet.

There are three types of online fraud that can occur: identity theft, credit card or debit card fraud, and e-commerce.

  • Identity theft occurs when someone uses your name to make purchases without your consent. The scammer will often create a new email address using the victim’s personal information in order to carry out the fraud.
  • Credit or debit card fraud occurs when a person uses another individual’s credit card information to make purchases without their consent. The scammer will often create a new email address using the victim’s personal information in order to carry out this type of online fraud as well.
  • E-commerce fraud occurs when a person uses another individual’s credit card information to make purchases without their consent. The scammer will often create a new email address using the victim’s personal information in order to carry out this type of online fraud as well.

How to Detect and Prevent E-Commerce Fraud?

How to Detect E-Commerce Fraud?

The following are the signs of e-commerce fraud:

Inconsistent Data by a Customer

If a customer is providing inconsistent information, this should be taken as a sign of fraud. This could mean that the person might have used different identities to open multiple accounts and purchase from them, or it may also indicate that the person has stolen someone else’s identity for fraudulent activities.

First-Time Customers

Customers that have never made a purchase with you before are at higher risk of being fraudulent. It is easier for them to just create an account and make the transaction, so they might do it if they want something from your store but don’t have the money.

Customers Making Different Purchases from Various Credit Cards

One way to spot a fraudulent purchase is if the customer uses different credit cards. If someone purchases $200 worth of product from one card and then goes on later that week and buys another expensive item with a different card, it might be suspicious. The same applies to separate orders made by the same person but using multiple accounts or addresses – this is another sign that something might be wrong.

Unusually Large Orders by Customers

Fraudsters will often place an order that is much larger than usual, particularly if a company does not have a limit set on the number of money customers can spend.

Types of E-Commerce Frauds to Watch Out For

The following are the most common e-commerce frauds that you should be concerned about:

1. Identity Theft:

Identity theft is a form of fraud where someone pretends to be another entity in order to access resources, obtain personal information, or take over accounts. It can be difficult to detect this type of fraud, even if it is carried out through an electronic device.

2. Chargeback Fraud:

Chargeback fraud is a type of e-commerce fraud that occurs when an online customer disputes a transaction with their bank. This results in the loss of funds from both the merchant and consumer’s accounts, as well as an increased risk for merchants to lose future business due to having chargebacks on record.

3. Clean Fraud:

A high-risk transaction with a merchant is called clean fraud. In this case, the customer’s card information is stolen from an online store and used without their knowledge or consent to make purchases on other sites.

4. Friendly Fraud:

Friendly fraud refers to transactions that are not fraudulent, but the customer may try to open a chargeback anyway. This tends to happen when customers change their minds about an order or receive something they didn’t want. These types of returns do cost you money as well as time chasing them down and trying to recoup your losses.

5. Triangulation Fraud:

Fraudsters can use different IP addresses to access their accounts. Use triangulation fraud detection strategies that track every transaction from multiple sources simultaneously when a single source is compromised or suspected of being hacked, for example, when an account has been accessed from several locations in the same time frame.

6. Affiliate Fraud:

Affiliate fraud is defined as when a publisher or affiliate monetises their site by promoting fraudulent products. This usually occurs in the form of an automated bot to sell, buy and/or distribute goods on Amazon’s marketplace platform. However, there are other ways for affiliates to take advantage of Amazon’s revenue-sharing program. Typically, affiliates will just ask for a coupon code to be applied directly. If no manual review takes place by Amazon’s team, the affiliate can claim money back on their commission fees after they have completed the sale with that particular code.

7. Advanced Fees and Wire Transfer Scams:

While the basic fee scam is very common, there are other scams that involve more complex or specific actions. One such example is when a consumer receives an email asking them to pay for something using wire transfer services like Western Union and MoneyGram. The receiver of this payment will be asked to make some sort of repayment by wire and will usually be asked for a wire transfer fee.

How to Detect and Prevent E-Commerce Fraud?

Best Practices for E-Commerce Fraud Detection

The following are some of the best practices for e-commerce fraud detection:

1. Ensure Compliance With PCI DSS

It’s important to ensure compliance with PCI DSS because it helps in protecting cardholder data. It specifies how credit card information needs to be handled and what security measures need to be followed for an e-commerce merchant. If you are not compliant, your customers’ financial details might get compromised, which is something nobody wants, so being compliant should be your top priority.

In addition to this, you should also make sure that no one from the company has access to any sensitive information such as cardholder data or security codes on a regular basis because it might get misused, which can lead up to major problems for both merchants and customers if not detected in time. As an e-commerce merchant, you need to stay updated with the changes in PCI DSS so that you are always up-to-date.

2. Set Up Fraud Prevention Policies

Setting up fraud prevention policies is another important e-commerce fraud detection practice. You need to have a clear set of rules in place which will help you detect suspicious behavior and prevent fraudulent transactions from taking place on your website.

It’s also necessary that these policies are clearly communicated to the employees so that they know what actions they should take when dealing with customers and their transactions.

You should also set up a system where you can monitor all the actions of your employees and handle them accordingly so that fraudulent activities don’t take place on your website. Furthermore, these policies should be tweaked as per changes in business operations to ensure that they remain effective at all times.

3. Continuous Monitoring to Prevent E-Commerce Fraud

To prevent fraud, you need to be proactive about your e-commerce business. Continuous monitoring is the only way to stay ahead of potential threats and ensure your customers’ data remains safe from cybercriminals.

With continuous monitoring, you can take a variety of steps to protect your customers and business. Traditional DDoS attacks are too slow for e-commerce transactions, so other types such as volumetric or application layer may be used instead. This could include large numbers of requests designed to crash the site or specific pages on it, but this type of attack can be thwarted with a DDoS defense solution.

Continuous monitoring also includes the ability to monitor your customer data and transactions for suspicious activity, such as multiple purchases made from the same device or patterns of unusual behavior that could indicate identity theft, which is one of the most common forms of e-commerce fraud.

4. Use HTTPS

Google announced that it was going to flag all non-secure sites starting. This will affect the ranking of your site if you do not have an SSL certificate. It also means that customers are likely to leave a page without security when making purchase decisions because they don’t trust the website. The best way you can prevent this is by using an SSL certificate to secure your site.

One of the most common ways for attackers to get access to sensitive information in e-commerce sites is through phishing attacks when users are tricked into visiting a fake website posing as a legitimate one and giving out their personal or financial details. This can be prevented by taking extra steps to secure your website against phishing attacks.

5. Leverage CVV and AVS

The card verification value (CVV) and address verification service (AVS) are tools that can be used to detect potential e-commerce fraud. The CVV is a three or four-digit number that appears on the back of most credit cards, but not all debit cards. It’s important because it confirms that you have possession of your credit card. When you make an online purchase, the CVV code is verified to ensure that your credit or debit cards are not being used fraudulently.

The address verification service (AVS) is a tool that can be used to detect potential e-commerce fraud and reduce false declines. The AVS compares the billing addresses for both credit cards and debit cards with information in your bank’s databases. If there is no match, this may indicate suspicious activity or fraudulent use of the card.

6. Partner With Trusted Payment Processor

You can work with a trusted payment processor to detect and prevent e-commerce fraud. These processors will give you access to tools that allow you to optimize the accuracy of your risk solutions, make it easier for customers to complete transactions online, and help reduce false declines by validating billing information. A solution like this may cost more upfront but is a long-term investment.

7. Keep The Software Updated

The fraud detection software has to be updated before the fraudsters get their hands on new ways of committing fraud. Fraud is a constantly evolving business, but many providers are slow in keeping up with these changes because they have other priorities or simply lack resources. This means that you should keep an eye out for updates and check whether your provider provides regular updates. If this is not the case or you want to profit from new functions and improvements, then you should consider switching providers.


A lot of e-commerce websites are impacted by online fraud, which is why every site should have a reliable anti-fraud solution in place. The impact can be massive if you do not work towards preventing the problem. It may result in increasing bounce rates and decreasing conversion rates because your website will not appeal to new customers or returning visitors who are afraid of getting scammed.

Shivam B.

Native Writer

It has been 10 years that I am working in the Content Development and Blogger Outreach industry. I can assure timely delivery of top-notch content pieces.