Understanding and Optimizing Fraud Prevention

The Scope of eCommerce Fraud

Most Common Types of eCommerce Fraud

1. Card Not Present (CNP) Fraud or Payment Fraud

2. Friendly Fraud or Chargeback Fraud

3. Card Testing

Why Are eCommerce Merchants Particularly Vulnerable to Fraud?

eCommerce Fraud Prevention Best Practices

  • Knowing where your customer base tends to be located. When getting high-value orders from countries which don’t typically generate sales, it may be a good idea to apply extra care before fulfilling them.
  • Knowing what types of sales are typical for your customer base (dollar amount, frequency, preferred products/services, item quantities, etc.). Out-of-pattern transactions can sometimes indicate fraud, and it might be a good idea to screen such orders more carefully.
  • Requiring CVV and Billing Address input for all orders. A good way to combat eCommerce fraud is to require the CVV number when the online transaction takes place. The card security code (CVV) is a three-digit code that can be found on each card and can help authenticate online transactions. Collecting a full billing address also allows using address verification systems (AVS) when available. AVS is a transaction security measure that helps merchants prevent fraud by verifying if the cardholder’s address is correct or invalid, based on the cards’ billing address that is registered in the bank’s files. While only available in certain countries like the US, this can be an effective prevention tool when selling physical goods.
  • Utilizing 3D Secure 2.0 authentication. Another great way to prevent fraud is to implement the latest 3D Secure Systems as an additional security layer. The latest technology version of 3D Secure (3DS2) allows the card issuer (bank) to use a wide range of data points from the transaction to run a risk-based analysis. It enables a real-time, secure, more accurate way to authenticate customers without asking for a static password or slowing down commerce. For example, for low-risk and low-value transactions (i.e., less than 30 EUR), the card issuer will not send any extra authentication requests to the cardholder. However, for all other customer-initiated transactions, the cardholder will be required to go through Two-Factor Authentication (2FA), whether via text (SMS), app push notifications, or biometric means (fingerprint, etc.).
  • Implement CAPTCHA or customer authentication. One of the most effective solutions against card testing fraud is CAPTCHA. Many providers offer both visible and invisible captchas, as well as configuration options to help tailor validation to the behavior of your customers and reach an optimal level of protection with minimal friction.
  • Communicate with your users. As a merchant, keeping yourself up to date with the status of your customers’ orders, shipping details, and past orders will make the whole payment process more resilient to fraud, as well as boosting your shopper’s confidence in your services and business.

Why Fraud Prevention Requires Teamwork





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