Ecommerce Fraud: What is it and How Do We Prevent It?


A study conducted by PwC in 2022 showed that more than 50% of the companies surveyed had experienced some form of fraud in the past two years. Although the stats are the highest reported in the 20 years that PwC has been conducting the survey, it’s important to understand why fraud is soaring in the industry and what companies can do to better protect themselves.

The e-commerce industry is particularly vulnerable to fraud as it is estimated that e-commerce companies will lose approximately $41 billion to fraud globally in 2022, with the figure expected to reach $48 billion in 2023. The COVID-19 pandemic has also helped many scammers as the number of e-commerce businesses has grown significantly over the years that the world has been in nationwide lockdowns.

Identity theft is the most common form of e-commerce fraud, with scammers using fake accounts or someone else’s details and credit cards to shop online. Phishing and lottery scams, payment and investment fraud, and malware are also popular types of scams that ecommerce businesses can fall victim to, but why is it all happening?

An increase in online transactions and the use of digital payments have made it much easier for scammers to target online businesses because when nobody knows who is behind a computer screen, anything is possible. Advances in technology have also led to more sophisticated fraud methods, such as using different IP addresses to complete online purchases. Some of the main reasons for the increase in ecommerce fraud are simply businesses that lack security measures or find that lower budgets make them more vulnerable to malware attacks.

However, the red flags are not that difficult to spot.

Unusual or high-risk behavior is one of the top clues that a scam attack might be underway, while investing in some advanced scam detection tools and machine learning algorithms might be the easiest and best way to prevent a larger catastrophe. Reviewing customer information and paying closer attention to inconsistent patterns of behavior could also help e-commerce companies spot a scammer in action.

I think the most important thing that many ecommerce companies forget to consider is that many employees and customers are unaware of all aspects that can lead to a fraud attack. Therefore, it is prudent to educate customers that only downloading documents and taking actions on the website after verifying the URL is correct would be the first step in mitigating a potential disaster. The steps to do this are also very simple and can be integrated into the login pages of the website.

Implementing two-factor authentication and an encryption security method, as well as blocking repeated card tests are also some easy ways online businesses can protect themselves from falling victim to fraud attacks. Phishing can be prevented by emailing customer identification codes, and businesses should invest in developing a strong fraud response plan that will help them quickly identify and prevent fraud.

I’ve noticed that many online businesses choose not to invest in fraud detection tools and algorithms, which are the easiest way to spot and prevent future fraud attacks.

With recent data showing a rise in online businesses coming under scam attacks, it never hurts to be overly cautious and take an extra step to secure your ecommerce site. The red flags are easy to spot and even easier to activate precautionary measures. This will help you save both your customers and your business. Think of it as a flu vaccine, boosting your company’s immune system should a virus attack.

Daniele Servadei is CEO and co-founder of Sellix, a digital e-commerce platform for entrepreneurs. It allows startups to launch their products and accept payments without a single line of code in minutes. His vision is to pave the way for a future where every entrepreneur can sell digital goods and accept payments online quickly and easily. He makes it easy for people to turn their ideas into profitable businesses. Servadei has an inspiring entrepreneurial history. He taught himself to code as a young teenager and founded his first global company at the age of 18. A year later, Servadei and his team survived the crypto winter. He is about to study computer science and wants to expand Sellix parallel to his studies.

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