How To Prevent Ecommerce Fraud In Your Online Store

How To Prevent Ecommerce Fraud In Your Online Store in 2023


As the rate at which people shop online increases, it’s a mixed feeling for e-commerce merchants. While they are happy the sales keep rolling in, they worry about fraudsters targeting their online store and shoppers patronizing them. Before now, it used to be physical store owners fighting to shoplift. Now online store owners lose sleep because of the activities of scammers. 

To tell you how bad the situation is, $20 billion in e-commerce losses were reported in the United States alone in 2021 due to online payment fraud. 

Are you an online store owner who worries about ecommerce fraud? 

This guide is for you because we will teach you common types of ecommerce fraud, how to identify them, and different ways to prevent them from happening in your online store.

What Is Ecommerce Fraud?

Ecommerce fraud is the process by which fraudsters intercept a commercial transaction in an online store with the motive of benefitting from it. Another way to put it is that it’s a criminal act in which scammers use tactics to steal funds from ecommerce merchants and their customers.

With global ecommerce forecasted to grow by 10.4% in 2023 and sales expected to hit $6.3 trillion, scammers are looking to hijack customers’ data and steal from them. 

global ecommerce growth rate from 2021 to 2026 data from Oberlo
Image from Oberlo

The Common Types of Ecommerce Fraud

Let’s briefly discuss seven common types of ecommerce fraud you should look out for in your store

Card testing fraud – Fraudsters test was stolen credit cards to see if they work. They make low purchases to see if the payment will be processed. If victorious, they celebrate knowing they can use it to buy high-ticket products. 

Friendly fraud  – Scammers make purchases in your store and later file a chargeback with their bank. They claim the product wasn’t delivered and want your refund. This type of ecommerce fraud accounts for 39% of global fraud attacks. 

Refund abuse – Customers return items they bought from your store, claiming they weren’t in good condition when delivered. And it’s expected that you refund the amount they paid if you have it in your refund policy. 

Online payment fraud – Scammers steal another person’s credit card and use it to buy high-ticket products in your store. 

Triangular fraud – ecommerce merchants and their customers are victims of this fraud. It happens when scammers hijack the credit card details of marketplace shoppers and impersonate them when shopping on a retailer’s ecommerce store. Retailers process such fraudulent orders without knowing they are from scammers. 

Loyalty fraud happens when scammers who pretend to be customers join a loyalty program in your online store and earn points through stolen credit cards. 

To play safe, they resell whatever they have earned on the dark web at a percentage of the actual value. 

Promotion fraud is common during holiday seasons like Black Friday when ecommerce stores offer different promos to boost sales. Scammers explore loopholes in any promotion you offer in your store to claim products for free. 

Now you know the different types of ecommerce fraud scammers commit, let’s move on to how to identify and prevent them. 

What Is Ecommerce Fraud Prevention?

It’s the strategy ecommerce merchants deploy to detect, prevent and fight any online scam in their business. The security of your ecommerce business matters, and the aim is to protect their store and customers from fraudsters who explore all options to cause them financial losses. 

How To Identify Ecommerce Fraud –  6 Red Flags You Should Look out For

Low volume orders – Orders of $1 – $5 are extremely low, and it could be a fraudster testing if a stolen credit card works.

Different credit cards – It’s a red flag when a customer purchases with different credit cards. This could be a scammer testing different stolen credit cards to see if they work.

High ticket orders – Scammers order expensive items in large volume since the money they spend isn’t theirs.

Multiple declined transactions – Scammers will continue to try different passwords and pins to use a stolen credit card to pay for an item. The payment gateway will continue to decline since the wrong information is being entered. 

Suspicious IP locations – Be wary of orders from suspicious and unfamiliar IP locations. Let’s say most of your customers are in Australia. Any attempt to order high-ticket products with a Malaysian IP address should be blocked. 

A discrepancy in billing and shipping addresses – Scammers use stolen credit card details to ship items to customers. And there is always a discrepancy between the billing information on the credit card and the customer’s shipping address. 

9 Ways To Prevent Ecommerce Fraud In Your Online Store 

1. Run a penetration testing

A porous and vulnerable ecommerce store is an advantage to fraudsters. They can easily exploit it to compromise your site and gain access to your sensitive information as a merchant. The best strategy to put them out of business is to run penetration testing. It involves ethically launching an attack on your ecommerce store to identify security loopholes scammers may exploit and fix. You learn if your store is robust enough to withstand any unauthorized attacks, especially those targeted at customers who shop there.

Running penetration testing is a security measure you can’t handle yourself. You may need to involve an IT expert specializing in cybersecurity and online fraud. 

2. Stop Account Takeover 

If your ecommerce store is the type that allows customers to create an account and save their credit card details for convenience purposes, then you must prevent account takeover

Remember that fraudsters will try all tactics to forcefully gain access to your customer’s accounts and steal their sensitive details. A customer whose shopping account is compromised in your store is a lost customer.

They will never return to patronize you again, and you will lose the excellent reputation you have built for a long time.  Some will even leave negative reviews and inform their friends of the dangers of using their credit card details in your store. All these are what fraudsters can cause you if you aren’t proactive.

 You can install numerous software in your ecommerce store to prevent account takeover. Netacea, Authsafe, and Avanan are the top ones that use brute force to block suspicious behavior in real time. 

Brute force attack definition by AuthSafe
Image from AuthSafe

3. Review Risky Orders Manually 

When a customer suddenly places orders far above what they used to be, your next move should be to flag them. Such orders are risky because a scammer could make outrageous orders with a stolen credit card.

 Online Store owners use ecommerce software to flag risky orders, and the next move is to review manually. The standard procedure is to contact the customer and ask for further verification for security reasons. 

A legit customer will respond almost immediately. In the event you don’t hear back, chances are the order was made with a stolen credit card. Another approach is to use the IP address to trace the customer’s purchase history.

 There is no cause for alarm if a regular customer from Canada orders a similar amount from Australia. But something is fishy if they place higher ticket orders than usual with a different IP address and credit card.

4. Collect Delivery Proof

This is one of the ways to prevent return fraud, where fraudsters who claim to be legitimate customers ask for a refund of their money because their item wasn’t delivered. Work only with shipping companies that collect delivery proof. That’s evidence to counter fraudsters who want you to refund their money after the purchased item has been successfully delivered. 

5. Comply With PCI

You must be PCI ( Payment Card Industry Data Security Standards) compliant while operating an ecommerce store. This ensures that you keep to standards while processing payments to avoid sanctions.

PCI informs you of the preventive measures to stop fraudsters from stealing the credit card details of your customers when they pay for orders. 

They are as follows:

  • Restrict employees that can access cardholder details 
  • Use anti-virus software to prevent malware attacks 
  • Test your security systems regularly to ascertain their efficiency 
  • Encrypt cardholder data across public networks 
  • Change the default password for systems and software. 
  • Make Your Store Policies Clear For Customers To Understand 

A policy page that states how your ecommerce store operates will save you a lot, including ecommerce fraud.

While you cite your policy page where customers can read it quickly, state your refund policy to fight refund fraud and charges. Define what qualifies for a refund and the processes to get one. This will put fraudsters who feed on refund abuse out of business. 

Another is to emphasize the essence of customers creating strong passwords and enabling two-factor authentication to prevent scammers from taking over their accounts. 

6. Be Careful During Holiday Season

Image from E-commerce Times

Holiday seasons like Black Friday, Thanksgiving, Christmas, and Halloween come with an increase in orders from ecommerce stores. While you are busy processing orders, be careful because fraudsters can take advantage of you being preoccupied with defrauding you and your customers.

Promo fraud is expected since you are likely to join your competitors in offering discounts to customers. You can deploy promo software to stop fraudsters from partaking in it or have a store assistant who will manually check to ensure only legit customers benefit from it. 

7. Leverage the IP Fraud Scoring Tool

A fraudster can commit different types of ecommerce fraud using the same smart device. To stop this, use IP fraud scoring tools like Scam analytics, Spotrisk, and SEON to analyze IP addresses to see if they have been used to commit fraud in the past. 

Using the following signals, you can spot the IP address of a fraudster trying to defraud you or your customers:

  • If they are using VPN to hide their actual location 
  • The type of internet service provider they use to operate 
  • Their location to ascertain if it matches the country in their credit card is officially registered.

The higher the IP address fraud score, the higher the chances of committing fraud. 


If it’s the case with the detected IP address, automatically block every order placed and request further verification from the user.

8. Set Order Limits

Scammers who commit online payment fraud – ecommerce fraud place outrageous orders. Once they place a few orders to confirm that the stolen credit card details work, they return to order high-ticket products in large quantities. 

Setting a limit on the number of orders and the total amount of purchases you can process from a customer in a day is a way to tame it. You can manually review the order if a customer regularly hits that threshold. 

A final thought on preventing ecommerce fraud in your online store

The cost of setting up an ecommerce store is high, and you lose trust and sales for every fraud in your online store. Fraudsters don’t care because they want to satisfy their financial motives. It’s up to you as an ecommerce merchant to fight them to protect your customers and your online store.

 We have shown different ways to prevent it, from running penetration testing down to set order limits. 

Implementing them should be your action to give scammers a run for their money.


Access our exclusive content!