Unmasking E-commerce Villains: Shielding Your Online Store from Fraudsters and Foiling Their Evil Plans!

With e-commerce growth, so grows the fraud. Fraudulent activities can result in financial losses, damage to reputation, and loss of customer trust. Fortunately, there are effective tactics available to prevent e-commerce fraud. Below are some key strategies and examples of common types of fraud that businesses face primarily focused on payments.

1. Address Verification System (AVS): One common tactic to combat fraud is implementing an Address Verification System (AVS). AVS compares the billing address provided by the customer with the address on file with the card issuer. If there is a mismatch, it raises a red flag for further investigation. For instance, if a customer attempts to make a purchase with a stolen credit card and provides a different billing address, the AVS will detect the inconsistency and help prevent the fraudulent transaction.
2. Card Verification Value (CVV) Check: Requiring customers to enter the CVV, you know, the unique three or four-digit code on the back of the card, during the checkout process is another effective fraud prevention measure. By doing so, businesses verify that the customer has the physical card in their possession, reducing the risk of fraud. Fraudsters who obtain credit card details without the physical card will likely fail this verification step.
3. Fraud Detection Software: Sophisticated fraud detection software can analyze multiple data points to identify potentially fraudulent transactions. It considers factors such as the customer’s location, IP address, purchase history, and device used for the transaction. For instance, if a customer suddenly places a large order from a different country using a device that has no prior history of activity, the software may flag the transaction for manual review, allowing the business to investigate further.
4. 3D Secure Authentication: 3D Secure adds an extra layer of security by requiring customers to enter a password or a one-time code sent to their mobile phone during checkout. This authentication step ensures that the customer is the legitimate cardholder, minimizing the risk of unauthorized transactions. Fraudsters attempting to use stolen credit card details would likely be unable to pass this authentication process.

Examples of Common Fraudulent Activities:

a) Card-not-present (CNP) fraud: This occurs when fraudsters use stolen credit card information to make online purchases without physically presenting the card. Implementing CVV checks and fraud detection software can help prevent CNP fraud attempts.

b) Account takeover: Fraudsters may gain unauthorized access to a customer’s e-commerce account to make fraudulent purchases. Strong password requirements, multi-factor authentication, and continuous monitoring of suspicious activities can mitigate the risk of account takeover.

c) Chargeback fraud: Fraudsters make legitimate purchases but later dispute the charges and request chargebacks, essentially receiving the goods or services for free. Robust documentation, clear refund policies, and dispute resolution processes can help businesses handle chargeback fraud effectively.

Conclusion: Protecting your e-commerce business from fraud is crucial for maintaining customer trust and ensuring long-term success. By implementing tactics such as AVS, CVV checks, fraud detection software, and 3D Secure authentication, businesses can significantly reduce the risk of fraudulent activities.

The catch — with each of these is that they do have the potential to hurt purchase conversion rate. Each of these tactics has its flaws. They won’t be perfect every time and legitimate customers could get blocked, or frustrated and abandon their cart.

At Best Buy, we make sure to do an A/B test when we roll out a new feature within our commerce area with the hopes that we can identify, or adjust if conversion rate is impacted.