How to Prevent Ecommerce Fraud & Protect the Online Store

The term ecommerce fraud can describe many different things. The most common type of ecommerce fraud occurs when someone uses a different person’s account or credit card to buy products from your site. Ecommerce fraud happens when the person gets access to the victim’s account on your site so they don’t need to enter credit card information. The second type of e-commerce fraud is a data breach, which occurs when someone hacks into your database to steal the customers’ data.

Here we are discussing the first type of e-commerce fraud that is quite common. In a few cases, the customer notices the fraudulent charge and alerts their credit card company. The credit card company reverses the charge and the ecommerce stores lose the money they paid you. The regular customers often don’t notice fraudulent charges until a few weeks or months later. If you’ve already shipped a product when the chargeback occurs, you’re out the cost of the product.

If the customers aren’t careful, even small ecommerce fraud purchases can add up and cost you a bundle. To protect your ecommerce business, follow the below-mentioned tips.

1. Cling to PCI Standards

Every new ecommerce stores should already be doing this, but it’s so essential that it’s worth stating. The Payment Card Industry, or PCI, has tough security standards for every ecommerce company to follow. These safety standards will also go a long way toward making your transactions more secure. They also have direct repercussions. If ecommerce stores don’t follow PCI security standards, they are vulnerable to lawsuits. Some credit card companies may also decline to work with you, bringing your business to a fast halt.

2. Use the Address Verification System

The Address Verification System, or AVS, is an existing tool to help you secure your business. The AVS verifies that the customer’s billing address matches the one their credit card company has on file. Running a customer’s payment information through the AVS is one more safeguard against ecommerce fraud. The verification system is already in place to give big rewards from the minimal effort it requires.

3. Require CVV Codes for Purchases

Any credit card’s three-digit or four-digit CVV code is a crucial part of ecommerce security. While online databases can store a customer’s credit card number and billing address, they can’t store the CVV code. If you require the CVV code for online purchases, it’s unlikely that the data is stolen. It seems like a small addition to your payment process and it is, but it goes a long way in preventing fraud.

4. Set Tight Password Requirements

The ecommerce stores set up an online account and become frustrated with restrictive password requirements. At the cost of a small inconvenience, though, you’re cutting down on your risk of e-commerce fraud. Tightening your password policy protects your customers as well as your business. Creating a smart password policy can require certain types of characters in your customers’ passwords so the passwords are exceedingly difficult to hack.

5. Look for Red Flags

There are many potential red flags that a purchase might be fraudulent. Keeping an eye out for these red flags can help you detect fraud and block the transaction. The key signals include:

  • Inconsistent billing or shipping information
  • Unusual spending patterns
  • Purchases from unusual IP addresses (like an IP address in a different country than the customer’s typical location)

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