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Ecommerce Fraud: Facts and Tips
POSTED IN SECURITY SOLUTIONS BY DELEGO ON JANUARY 5, 2015

With dozens of benefits to ecommerce and credit card transactions in general, it is

unfortunate that modern society is plagued with cases of fraud and deceit. After
all, where there is money to be made, cybercriminals will follow. This became even
more apparent after the numerous data breaches that occurred in 2014. And if this
year seemed chock-full of threats to corporate security and personal information,
just look at 2013. According to EMC’s security division, RSA, one out of every
seven payment cards used in the United States in 2013 was exposed in a data breach.
With the sheer number of credit and debit cards utilized by citizens, that
statistic is quite staggering.
When October 2015 rolls around, EMV payment cards will become mandatory in the U.S.
In the meantime, ecommerce retailers – and really all retailers in general because
in-person deceit is a whole other issue – need to stay on their toes if they want
to catch fraud before their company experiences a case. The problem is that
fraudulent transactions are hard to detect, and quite frankly, ecommerce business
owners and managers have many other concerns to worry about. Internet Retailing
magazine reported on a study that discovered 50 percent of online retailers said it
is difficult to keep up with fraud methods and trends, while 77 percent of these
merchants stated that their multichannel approaches to retail only contribute more
to trouble when it comes to prevention. The result is that many are unaware of
techniques to discover and therefore prevent cases of fraudulent payment card
usage.
“Fifty percent of online retailers said it is difficult to keep up with fraud
methods and trends.”
“What is clear is that in this ever-changing ecommerce landscape, fraud is becoming
more difficult for online merchants to manage,” said Kevin Dallas, chief product
and marketing officer at Worldpay, according to the source. “As merchants continue
to expand their cross-border operations, sell through more channels and offer more
payment methods to meet local customer needs, keeping abreast of new fraud threats
is becoming increasingly challenging.”
The facts
The lack of preventative knowledge in regard to ecommerce fraud contributed to the
$2.9 billion in losses so far in 2014 alone, according to RSA. Then, by 2018, the
source estimated that fraud-related losses will double to around $6.4 billion. The
most popular ecommerce transactions associated with fraud occur in the airline
industry, which account for 39 percent of cases, while the rest can be attributed
to general retail, electronics, ticketing, telecom, money transfers, toys, clothing
and a few more sectors. That can help put fraud into perspective, but it still does
not help ecommerce retailers know when they are being duped.
dIn fact, one telltale sign is the value of the transaction. Fraudulent spending is
often significantly higher to the average legitimate purchase, according to the
RSA’s findings. When a criminal commits an act of fraud online, they are investing
more than twice as much as the typical consumer. For example, a customer buying
jewelry online will spend around $300, but in cases of fraud, an individual will
pay close to $1,300, while the same goes for clothing, as an innocent person will
typically invest $495 per transaction and someone using a stolen credit card number
makes a $1,040 purchase. Those statistics are helpful, but around the holiday
season in particular, spending can reach large values, so it is still difficult for
online store owners and managers to pick out cases of fraud.
Ecommerce retailers need to be wary of irregularly large transactions.
Prevention tips
The best scenario for any ecommerce retailer would be to prevent fraud from
occurring in the first place. Erica Tevis, founder and owner of Little Things
Favors, a retail supplier of wedding and party favors and supplies, detailed her
nine fraud prevention checks in an article on Practical Ecommerce:
Policies: Tevis created a list of policies on her online store to weed out
cybercriminals early, such as only accepting payments from authorized accounts.
Monitoring: Check over every order before shipping, even if the company is large,
this is possible with a single extra employee during busy seasons.
AVS and CVV: These verification systems exist for a reason, and while sometimes
typos occurs, double-check information.
Order signs: If an order is rushed or overnighted, or if it has a different
shipping address than the billing address associated with the credit card, wait to
ship until talking to the customer. If it is a hassle for the customer, offer a
discount.
IP and email addresses: Again, if addresses do not match or look weird – or if IP
addresses are from out of the country, do not ship.
International orders: Tevis explained that Asia and Africa have higher credit card
fraud instances. Be careful when shipping overseas.
Signatures: Always require a signature upon delivery.
Contact customer: Just to make sure that they actually order the product.
Protection services: There are tools and services that can help ecommerce retailers
avoid fraud.
To piggyback off of that last tip, frictionless account authentication and global
intelligence are helpful for online store owners. There are many steps to take, but
the best defense against fraud is knowledge.
Does your business need help with ecommerce fraud?
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