Understanding the types of e-commerce fraud, its never-ending challenges and the 4 important fraud prevention solutions throughout the entire user journey
November 10, 2023
The e-commerce market has been booming, particularly since the pandemic, and will continue to rise. It is projected to grow at an annual growth rate of 10.14% (CAGR 2023 - 2028).
It is expected to reach USD 3.03 trillion in 2023; by 2028, the projected market volume is expected to hit a whopping USD 4.91 trillion.
In this haven of endless opportunities for businesses in the digitalized world, doors for cybercriminals open, too.
With millions of personal credentials readily available on the dark web, cheaper hardware for mass exploitations, and easier access to automation tools, online businesses are now easy targets.
In 2022, Ekata reported that the losses on e-commerce online payment fraud hit USD 41 billion. According to Juniper Research, the total cost of e-commerce fraud to merchants globally will exceed US 48 billion this year.
Before the pandemic, reported online shopping scams were at 24 per cent, but in 2020, e-commerce fraud attacks accounted for 38 per cent of all reported scams worldwide.
But what types of fraud do e-commerce retailers face, and how can you protect yourself while ensuring a seamless customer experience?
E-commerce fraud is a multifaceted challenge that continues to evolve. It’s imperative to delve into the various dimensions of this menace. They take on different forms, each with its characteristics.
This classic form of fraud remains prevalent. It involves the unauthorized use of personal information to make fraudulent purchases.
Identity thieves may obtain your customers’ personal information in many ways, usually with various electronic and low-tech methods.
Some methods include triangulation fraud or fake websites, phishing, smishing, vishing, hacking, purchase on the dark web and more.
Clean fraud refers to transactions that appear legitimate but are, in fact, fraudulent. It’s a sophisticated form of fraud where fraudsters use actual data stolen or acquired via a third party.
This poses a difficulty for both algorithms and humans because genuine, unique data is used.
Clean fraud can take many forms, such as
This fraud can be as simple as duplicating promotional coupons or as extensive as mass scalping free coupons and reselling them for profits.
The financial losses to businesses from promo abuse can be pretty extensive.
The techniques employed by cybercriminals reveal the depth of the challenge faced by online retailers.
They use stolen credit card details but also employ a broader set of deceptive tools, including email accounts, user accounts, names, addresses, IP addresses, and even personal devices. These elements come together to create a convincing facade of legitimate customers.
The impact of e-commerce fraud is far-reaching and can be devastating. It results in fraudulent purchases, the creation of fake accounts, the manipulation of web traffic, and financial losses.
In essence, it erodes trust, hikes up security expenses, and can even threaten the viability of a business.
It's essential to recognize that no online business, regardless of its size, is immune to the threat of e-commerce fraud.
The digital landscape has opened doors for cybercriminals to target a broad spectrum of businesses, emphasizing the need for a proactive approach to security.
In the face of these ever-evolving threats, businesses, particularly those in the digital commerce sector, must remain vigilant and adaptable.
Tech leaders of e-commerce need to invest in cutting-edge security solutions and stay ahead of the curve to protect their customers and their bottom line.
However, there are many considerations when it comes to selecting the security solution fit for their business goals and needs, such as,
However, the challenges they often face include
So the question begs, at what point is protection becoming overprotection, or is security sufficient to protect your business from cybercriminals? And how can e-commerce safeguard their business from the ever-evolving threats of fraud?
Understanding the imperative need to preserve customer experience and business needs, e-commerce fraud prevention becomes rather complex.
And the battle against e-commerce fraud continues. It's a battle that must be fought with determination and innovation.
With the balance of fraud prevention and customer experience at stake, here are 4 must-have solutions to effectively combat e-commerce fraud while preserving the customer experience.
We delve into the typical challenges faced with each fraud prevention method, the characteristics and how we can overcome the challenges to achieve optimum prevention.
A unique identifier is generated by collecting information about a device, such as its hardware configuration, operating system, and software configuration.
Device insights can be used for various purposes, such as fraud detection, user authentication, and digital marketing.
It is typically used to distinguish between genuine users and potential threats. It is crucial in combating e-commerce fraud. However, it comes with its own set of challenges.
To overcome these challenges, you will need highly sophisticated, innovative solutions that can discern a device at the micro-level, allow you to take quick actions to manage fraud, and comprehensively protect your business and customers.
A good device fingerprint technology excels in precise device identification, consistently linking each device to its rich historical data, detecting fraud in real-time, and protecting businesses and customers throughout the customer lifecycle.
TrustDecision’s device fingerprint is renowned for providing precise device identification, real-time fraud detection, and access to an extensive fraud detection database.
If you want to learn more about our device fingerprint solution and the 8 best device fingerprints available in the market, be sure to check out our blog.
Our solution can distinguish the devices even in challenging scenarios like factory resets, tampered device location, group control tools, script-based manipulations, or app reinstallations.
With real-time fraud detection, you can take action whenever anomalies or suspicious activities are detected.
Moreover, you can access a vast fraud detection database, which means robust protection for your business and customers throughout their lifecycle, from onboarding, browsing, transacting and continuous monitoring.
Promotion abuse refers to deceptive tactics and activities that exploit marketing promotions and discounts.
This exploitive behavior can manifest in various forms, posing significant business challenges.
Combating such fraudulent practices effectively, e-commerce needs comprehensive solutions designed to safeguard the brand reputation and preserve the effectiveness of promotions.
You will have continuous vigilance and a rule-based detection mechanism to identify suspicious behaviours and activities promptly.
You will also need sophisticated behavioral analytics with the capacity to analyze user behavior, transaction histories, and device insights for highly-effective anomaly detection.
While promotion abuse might appear to be a short-term success, it can harm the brand reputation and long-term marketing ROI.
In response to the growing threat of promotion abuse, we offer a range of solutions using advanced technology, such as artificial intelligence and machine learning, to help digital retailers protect their brand reputation, business integrity and customer trust.
Our real-time monitoring and rule-based detection allow you to act upon suspicious behaviors swiftly before the matter worsens. You can also have flexibility in fine-tuning the rules and parameters to fit your promotional strategies.
Our machine learning behavioral analytics are trained to produce real-time scoring and recognize anomalies, making them more effective in automation.
Identity verification is a critical aspect of ensuring the legitimacy and security of user identities.
It involves confirming the identity of individuals accessing online platforms or services.
Effective identity verification is essential, yet it poses several challenges.
Possible ways to combat these challenges include blocking fraud even before they onboard your platform, using multi-factor authentication (MFA) and using smarter algorithms to reduce false positives.
Considering all the identity verification challenges, our innovative solutions are tailored to deliver comprehensive protection for your business and customers.
We offer frictionless fraud prevention at the level where, even before, they can get on board your platform. From comprehensive background checks to identifying irregular behavior, linking to social profiles and previous fraudulent activities, we can help prevent spam registrations, bot infiltrations, and the inclusion of non-genuine users.
You can lower the risk of ATO with continuous monitoring. To ensure a seamless customer experience, you should only trigger MFA whenever abnormal behavior is detected. With our intelligent decision engine that learns a new fraud pattern within the ecosystem, you can be sure to protect your platforms from malicious entries.
Using advanced algorithms and machine learning, our solutions can precisely reduce false positives, which otherwise can be detrimental to your revenues and genuine customers. We have an extensive network of global connections to ensure legitimate users are not inconvenienced while maintaining high security.
TrustDecision streamlines user onboarding and validation with access to a vast repository of document types from 270 countries in more than 130 languages, all with real-time biometric checks. This simplifies the onboarding process.
Fraud management is a crucial component in safeguarding businesses against a wide array of fraudulent activities, ensuring that transactions and operations are secure and trustworthy.
Managing fraud poses distinctive challenges, which include:
TrustDecision's solutions for fraud management are designed to address these challenges effectively, providing businesses with comprehensive protection:
In this digital era, e-commerce fraud is a persistent threat affecting any online business. With cybercriminals getting increasingly sophisticated, staying vigilant and adaptive is essential.
TrustDecision's innovative solutions provide a security-first approach, ensuring accurate fraud detection and prevention while preserving the customer experience throughout their journey.