Protection From E-Commerce Fraud

The reality of eCommerce fraud

Millions of people globally have discovered the world of online mobile shopping during the Covid-19 pandemic. Due to lockdown, physical stores had to quickly focus on their online strategies to adapt to the changing retail landscape.

For many consumers it is now hard to believe there was a world without the presence of eCommerce behemoths such as Amazon.

While the volume of eCommerce transactions is growing, so is the prevalence of fraud. It’s the cross-border angle that is proving to be a particular problem area. Studies have shown that international online payment fraud occurs more than two and a half times more than domestic channels.

The same goes for mobile as well. Brazil, Nigeria, Indonesia, South Africa and Venezuela find themselves among the top-ranked countries for mobile fraud. Companies within those countries are increasingly turning to companies like ours to help protect their customers from fraud.

What are the main types of eCommerce fraud?

eCommerce fraud encompasses a wide range of deceptive activities aimed at defrauding online businesses and consumers alike. Some of the most common types include:

1. Credit card fraud: one of the most common types of eCommerce fraud, involving stolen credit card information used to make unauthorised purchases. Fraudsters may obtain card details through phishing, card skimming devices, or data breaches.
2. Identity theft: occurs when an individual steals personal information such as passports or driving licences. These stolen identities can be used to open credit accounts, apply for loans, or make fraudulent transactions on eCommerce websites.
3. Chargeback fraud: also known as friendly fraud, this occurs when a legitimate customer makes a purchase online and then disputes the charge with their credit card issuer, claiming the product was not received or was different from what was described. This results in chargebacks, where the retailer is forced to refund the customer and cover chargeback fees.
4. Account takeover: occurs when a fraudster gains unauthorised access to a customer’s online account on an eCommerce platform. Once inside, they can make purchases, change shipping addresses, and steal personal information.
5. Phishing scams: fraudulent emails, websites, or messages designed to trick recipients into revealing sensitive information such as login credentials or credit card details. These scams often impersonate legitimate eCommerce sites or financial institutions.

The costs of eCommerce fraud

The costs associated with eCommerce fraud are not to be underestimated, affecting both retailers and consumers in profound ways.

Costs for retailers: for eCommerce retailers, the financial repercussions of fraud can be staggering. Retailers are often the primary target of fraudulent activities, which can result in substantial monetary losses:

• Fraudulent orders can lead to retailers shipping products to non-existent addresses or to individuals who never intended to pay.
• Failure to comply with industry-specific regulations and standards, like the Payment Card Industry Data Security Standard (PCI DSS), can result in hefty fines and legal penalties.

Costs for consumers: eCommerce fraud also exacts a toll on consumers. When fraudulent activities occur, it is often consumers who bear the immediate financial burden:

• Consumers may find unfamiliar charges on their credit card statements, forcing them to deal with the inconvenience of reporting and disputing these charges.
• As consumers experience fraud or hear about others falling victim to it, they may become more cautious when making online purchases. This diminished trust can lead to a decrease in online shopping, affecting eCommerce businesses’ revenues.

Reputation damage: another significant consequence of eCommerce fraud, affecting both retailers and the eCommerce industry as a whole. When consumers perceive an online retailer as being vulnerable to fraud or lacking security measures, trust erodes rapidly:

• Consumers are less likely to return to an eCommerce site where they’ve experienced fraud or heard of others being defrauded, leading to a decline in customer retention.
• Unhappy customers are more likely to leave negative reviews and share their negative experiences on social media, further damaging the retailer’s reputation.
• eCommerce businesses that are known for their security measures and proactive fraud prevention are more likely to attract and retain customers.

The fundamental steps to protect retailers against online fraud

eCommerce fraud continues to evolve, and online retailers must adopt proactive security measures to safeguard their businesses from financial losses and reputational damage. Implementing a multi-layered fraud prevention strategy is essential to reducing risks while maintaining a seamless shopping experience for legitimate customers.

1. Implement strong customer authentication (SCA)

Using multi-factor authentication (MFA) and passwordless login methods, such as biometric verification or one-time passcodes (OTPs), can reduce the risk of account takeovers and unauthorised transactions.

2. Use real-time mobile number verification

Verifying customers’ mobile numbers during account creation and checkout helps ensure that accounts are linked to real users. Mobile number intelligence can detect SIM swaps, inactive numbers, or high-risk sign-ups.

3. Monitor transactions with AI-powered fraud detection

Machine learning and artificial intelligence can analyse transaction patterns and detect anomalies such as suspicious purchasing behaviour, device inconsistencies, and high-risk geolocations.

4. Prevent chargeback fraud with digital receipts and tracking

Chargeback fraud, also known as friendly fraud, can be mitigated by providing customers with clear digital receipts, proof of delivery tracking, and secure refund policies.

5. Secure payments with tokenisation and encryption

Replacing sensitive cardholder information with secure tokens and encrypting payment data ensures that customer details remain protected against cyber threats.

6. Detect and prevent bot traffic

Fraudsters use bots for card testing, fake account creation, and loyalty programme abuse. Implementing bot detection solutions can help filter out fraudulent activity before it impacts the business.

7. Conduct regular security audits

Retailers should perform regular security assessments of their platforms, including vulnerability scans, penetration testing, and compliance checks with industry standards like PCI DSS.

By adopting these security measures, online retailers can enhance fraud detection, minimise risks, and build trust with their customers, ensuring a safer and more secure eCommerce environment.

Increase protection from eCommerce fraud

The first step any eCommerce website needs to take is to ensure their customers are who they say they are. This is critical for every transaction — not just at the point a new client signs up or creates an account.

Using real-time mobile network operator data, TMT ID works with leading eCommerce and social networks globally to help verify and authenticate user identity, whilst delivering a low-friction and highly reliable customer onboarding process.

Our Verify API alerts businesses when a SIM swap, call divert, or port-out is identified on a mobile device, raising awareness of possible fraudulent activity. Our onboarding API can allow you to seamlessly validate important customer data such as name, address, and mobile number during your onboarding process.

Time is critical and something customers around the world value, which is why everything we do is aimed at verifying a customer in fractions of a second. All of this is aimed at helping our clients offer a seamless customer experience whilst also protecting them from fraud. The key is not to block legitimate transactions — nothing destroys the customer experience as much as mistakenly preventing buyers from purchasing goods and services they truly want.

Preventing fraud with TMT ID

To combat eCommerce fraud effectively, businesses must prioritise security measures and stay vigilant. Implementing secure payment gateways, robust authentication methods, and proactive fraud detection systems are crucial steps in safeguarding against the main types of eCommerce fraud.

Additionally, educating customers about online security and the dangers of phishing scams can help create a safer online shopping environment for everyone.

Mobile devices can be a hotbed for fraud — but they don’t need to be. Our data helps verify users, detect fraud, and improve the user experience worldwide. Ultimately, we reduce fake accounts and increase conversions.

Speak to us today about how TMT ID can help your business.