Fraud Prevention Best Practices for Your Online Store

Online shopping has become the norm for most people over the last decade. But as convenient as e-commerce is, it’s also the ideal target for fraudsters. There are thousands of people shopping online, and no shortage of tricks to deceive them. 

According to Juniper Research, e-commerce stores lost over $48 billion in online payment fraud in 2023 alone. That’s 16% more than in 2022 ($41 billion), and likely much less than what we’ll see in the coming years.

Let’s look at some of the main risks your online store faces in 2024 and actionable steps to ensure your business stays secure and resilient.

Common Types Of Digital Fraud Against Online Stores

Fraudsters are using various schemes to deceive shoppers and steal money from online stores. Among the most popular are:

Credit Card And Refund Fraud

Stolen credit card details are one of the oldest methods of online fraud, and it’s still the most common. There are millions of stolen cards for sale on the Dark Web, which scammers can use to make purchases online. Scammers also often take advantage of generous refund policies to get money for items they falsely claim haven’t arrived or were defective.

Buy-Now-Pay-Later (BNPL) Fraud

Another significant vector for fraud is Buy-Now-Pay-Later. BNPL is a consumer-friendly practice in online-stores that’s unfortunately being spoiled. Because of the delayed nature of BNPL payments, fraudsters can make several illegitimate payments with stolen credit cards before the activity is detected. 

Account Takeover (ATO) Attacks

Account takeover attacks are when cybercriminals use stolen credentials to access customer accounts, where they can make illicit purchases, steal sensitive information, or change account details. This type of attack is very common among large online retailers like Amazon and Walmart, but it could also affect your store if you have weak security and authentication measures in place.

Digital Impersonation

Scammers may also create fake websites that look exactly like yours to trick customers, likely stealing their personal and financial information. The worst part about this is that you may be held accountable for not protecting your customers from these attacks.

In the UK, there is already legislation which requires companies to reimburse customers who’ve fallen to Authorized Push Payment (APP) fraud.

Protecting Your Online Store From Fraud

Protecting against these varied threats isn’t easy and requires a multi-faceted approach. With that in mind, here are some best practices you can implement in your online store to make it more resilient to fraud: 

Emphasize Proactive Protection

Due to the highly dynamic threat landscape, incidents can happen when you least expect them. That’s why it’s crucial to have the ability to respond to fraud attempts in real time. Proactive solutions like Memcyco provide real-time digital impersonation and ATO fraud prevention. 

Memcyco’s solution has several essential capabilities, including:

• Notifications when bad actors research your site’s code or create impersonation sites
• Instant detection of malicious sites as they pop up
• Red Alerts for customers if they visit an impersonated site
• Marked decoy data that replaces customers’ real credentials from theft
• Proactive measures to keep fraudsters out
• Full visibility into attacks (i.e. victim details, scope of attack, etc.)

Only Use Reputable Third-Party Tools And Plugins

One of the main causes of vulnerabilities in sites, especially those that rely on many external tools for various functionalities, such as online stores, is the use of poorly maintained plugins. No matter how enticing the capabilities of a certain tool or plugin are, do not ignore its security maintenance record. 

• Does the tool have a long history of version updates? 
• Has it had any security incidents in the past? 
• Are there any negative reviews regarding its performance or data privacy? 

These are some of the questions you must consider before clicking the “install” button.

Implement Strong Authentication Mechanisms

If your customers experience an account takeover attack, the blame will be all on you, regardless of how careless they might’ve been. That’s why you should implement strong authentication mechanisms for your store, including complex passwords and two-factor authentication (2FA).

While managing complex passwords can be difficult, password managers such as LastPass can simplify this process.

Use Secure Payment Gateways

Since the majority of fraud happens during the payment process (one way or another), you must use secure payment gateways. The gateways should be PCI DSS compliant, and ideally have fraud detection capabilities to protect transactions. Among the most popular and secure payment gateways are Authorize.net, PayPal, and Stripe.

The Future Of E-commerce Fraud

As e-commerce continues to grow, so will the sophistication and frequency of online fraud. With powerful, AI-powered tools at their disposal, online fraudsters will have an easier time creating highly believable phishing schemes, including site impersonations and email spoofing.

One technology to watch that could greatly increase fraud activities is deepfake, which can now create nearly indistinguishable fake videos and audio recordings. And who knows just how advanced this technology will become in the near future.

Final Thoughts

While it may not be nice to hear, online fraud will likely stay with us forever. It’s up to us to take the necessary measures to protect our businesses and customers. Proactive fraud detection and other best practices must become integral parts of our security strategies. 

Fraudulent schemes are only getting more advanced, so it’s also important to stay updated on the latest trends, and implement the latest security solutions for your online store.