When any industry experiences rapid growth, it tends to draw the attention of scammers and con artists looking to make a quick buck. Unfortunately, the recent surge in online shopping has shown that eCommerce is no exception.
At the onset of COVID-19, retailers and buyers alike were turning to digital marketplaces for the first time, creating a large pool of inexperienced internet users exchanging information and payments without knowing how to spot eCommerce fraud warning signs.
According to Statista.com, losses from online fraud climbed to $20 billion in 2021 alone, signaling a strong need for brands to make a stronger effort when protecting their customers from eCommerce scams.
What is eCommerce fraud?
eCommerce fraud is a criminal activity that involves stealing money or information from an online transaction. Also known as payment fraud, these scams typically target online retailers using misrepresentation, falsified orders or stealing customer information.
Whatever form eCommerce fraud takes, it always has a significant and negative impact on the retailer’s bottom line. In addition to directly impacting profit margins, a breach of customer data can permanently damage a brand’s reputation, with customers regarding them as an unsafe option and turning to competitors for their shopping needs.
Examples of eCommerce Fraud
eCommerce fraud takes many forms, and in order to properly protect yourself and your customers, it’s important to have an idea of what scams could be out there.
eCommerce Credit Card Fraud
As an emerging trend in online scams, card cracking is becoming a major threat for online brands and their customers. Card cracking involves stealing a customer’s debit card information under false pretenses, usually over social media.
These scammers typically message social media users with the promise of easy money or direct deposits that they’re owed from a financial institution. Assuming these messages are legitimate, users gladly send over their debit card info expecting to make a quick buck. Instead, their information is either sold to other fraudsters, or used to buy items on the victim’s dime.
Card cracking can be tough to spot, but there are a few warning signs. If a new customer account starts making large volume purchases, or sends those orders to a number of addresses not tied to the card itself, it’s possible there’s a scammer on the other side of the transaction. Stolen card information is also commonly used in conjunction with other online scams, such as account acquisitions.
Account Acquisitions & Takeovers
Once a customer’s information is stolen, it can be used to either create a new account under a falsified name, or infiltrate an existing account to make purchases. This form of eCommerce fraud is known as account takeovers, and are often the result of substandard cyber security practices.
Hackers get access to these accounts by setting up phishing scams, which trick users into logging on to a copycat website and handing over their credentials in the process. Once this layer of security is breached, accounts can be accessed and customer information can be stolen.
As security protocols like two factor authentication become more commonplace, the tactics used to take over customer accounts have become more sophisticated. Rather than attempting a break-in for one account at a time, today’s hackers will use an army of online bots to attempt millions of these attacks each day.
How to Prevent eCommerce Fraud
With so many bad actors looking for ways to make money off of you and your customers, protecting customers from eCommerce fraud requires a little bit more than just a strong password. Let’s take a look at some of the steps you can take within your own site’s infrastructure to make sure hackers are stopped in their tracks.
PCI Compliance
PCI Compliance refers to the Payment Card Industry Data Security Standard, which sets a threshold of security protocols that online merchants should meet to safely process and store customer information. Meeting this set of standards helps ensure transactions can be made without the risk of scammers infiltrating the system.
Setting up protocols for PCI compliance can be complex, but most warehouse management software providers come with these protections included. If you’re new to the world of online data security, working with a reliable software provider might be the best way to protect your customer information.
Internal Security Audits
Even when using software providers to help protect your brand’s data, it’s important to keep online security top of mind. Regular housekeeping strategies like security audits can help identify weak points before hackers get a chance to take advantage.
Taking steps to frequently update software, change passwords and conduct sitewide malware scans can avoid future headaches and help keep your site’s reputation intact. Without these audits, hacked accounts can go undetected, allowing scammers to cause more issues over an extended period of time.
Understand the Warning Signs of Ecommerce Fraud
Even with reliable software partners and periodic security audits, hackers won’t stop trying to make a quick buck from an online store. eCommece fraud can take many forms, but there are a few warning signs that a scam could be underway.
Inconsistencies in data, for example, can sometimes point to fraudulent activity on your page. Accounts with addresses that don’t match their city, or mismatched names and emails can be a strong indicator that an account acquisition has taken place, or a user is misrepresenting themselves for a nefarious reason.
Other red flags might pop up when an account starts behaving unusually, or shipping items to multiple different locations. If an account that tends to buy one or two items at a time suddenly ships an expensive, large volume order, it’s a good idea to verify its legitimacy before the fulfillment process starts.
Conclusion
Although card cracking and account takeovers have become a regular occurrence in online shopping, that doesn’t mean your eCommerce store has to fall victim. By understanding the warning signs and taking preventative measures, you can protect your brand and your customers from eCommerce fraud.
If you’re looking for a warehouse management software provider that prioritizes data security, contact the experts at ShipHero today.
Aaron Rubin, Founder & CEO
About the author: Aaron Rubin the Founder & CEO of ShipHero. He is responsible for planning and executing the overall vision and strategy of the organization. Rubin’s greatest strengths are leadership, change management, strategic planning and a passion for progression. He is known for having his finger on the pulse of ShipHero’s major initiatives, his entrepreneurial spirit, and keen business acumen. His leadership of ShipHero is grounded in providing excellent customer service that drives improved business operations. His passion for ShipHero comes from the culture and his ability to have an impact on the lives of employees, customers, partners, and investors.
