Addressing E-Commerce Fraud Prevention and Detection in 2022

    Addressing E-Commerce Fraud Prevention and Detection in 2022-01

    In this digital age, e-commerce companies are increasingly becoming easy targets for fraudsters looking to steal large amounts of data. Retailers must strike a delicate balance between proactively detecting fraud and providing an outstanding customer experience.

    With the rise in online commerce fueled by COVID-19, e-commerce fraud has significantly increased. According to a 2021 Juniper Research report “Online Payment Fraud” research from 2021, e-commerce companies may lose an estimated US$24 billion to online payment fraud by 2024. While an increase in e-commerce fraud is nothing new, threat actors are becoming more sophisticated in their attempts.

    Taking proactive actions to detect and prevent e-commerce fraud is more crucial than ever. Investing in the right e-commerce fraud prevention tools can make a significant difference in both customer safety and financial outcomes.

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    Almost every online retailer will face fraud in some form or another. It is vital for all business owners, regardless of their industry, to do everything possible to protect their e-commerce business and the shopping security of their customers. Here are some steps for preventing and combating e-commerce fraud.

    Define the strategy

    Fraud prevention requires an understanding of fraud and risk tolerance. For banks, merchants, and card issuers, each channel should have adequate layers of protection, underpinned by policies that balance user experience and fraud prevention and in line with their tolerance. Do they ratchet up fraud prevention in order to avoid losing customers to competitors? Or do they prioritize consumer experience in order to outperform competitors while jeopardizing the profit? The best strategies will have solutions for each channel that prevent fraud while maintaining customer satisfaction.

    Implement machine learning and AI

    The most effective technique to detect and prevent e-commerce fraud is to avoid relying just on human decisioning. Artificial intelligence (AI) fraud prevention mimics the job of expert fraud analysts, but without human error. It compares the risk of fraud against the value of the consumer in a faster and more scalable way than a human.

    With the use of supervised and unsupervised machine learning, AI can assess fraud risks. Unsupervised machine learning accounts for prior decisions, while supervised machine learning detects emerging fraud threats. AI-enabled e-commerce enterprises do more than merely detect and prevent fraud. They accept a higher percentage of good orders, have fewer manual evaluations, and have more control over business outcomes.

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    Regularly update the fraud detection software

    If a company utilizes software to avoid e-commerce fraud, they must ensure it’s up to date. Threat actors are continually devising new techniques to avoid detection, and anti-fraud software companies are constantly adapting to combat them. However, out-of-date software can expose companies to new fraud patterns.

    Anti-fraud software relies on security patches to avoid changing fraud practises and guard against new viruses and malware. Without updates, companies risk threat actors gaining access to data and circumventing fraud-prevention mechanisms.

    Collaborate with a trustworthy third-party payment processor

    One of the simplest and safest ways to prevent e-commerce fraud is to outsource fraud checks to a third-party payment processor. Security compliance, customer chargebacks, and data storage are often handled by third-party payment processors.

    Customer data security should be a major priority, particularly if customers save credit card information in their accounts. A third-party payment processor can help in keeping personal information of customers safe, reducing the amount of e-commerce fraud attempts.

    The cost of failing to invest in fraud prevention

    The consequences of failing to take eCommerce fraud seriously are staggering. According to a recent TransUnion credit bureau report, there was a staggering 24 percent increase in global online fraud attempts across industries in the first four months of 2021 compared to the same period in 2020.

    With such increases, it’s logical that a company would want to cast a wide and extended security net around their eCommerce activity. However, doing so may create too many barriers for potential customers, resulting in an unacceptably high number of false positives on flagged transactions, resulting in an unfathomable loss of potential sales and consumer goodwill, costing businesses many times more than the fraud itself.

    All eCommerce merchants interested in securing their sales in the increasingly sophisticated and complex eCommerce field should strike a healthy balance between a solid security program and a robust customer-centric approach.

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