According to findings by Digital Commerce 360, in 2020, U.S. e-Commerce penetration hit a record high, attaining 21.3% of retail sales. This was an increase of over 5% from the year prior.
With the surge of e-Commerce use comes the greater threat of digital fraud. As the numbers of consumers that engage and purchase online have increased, especially since the pandemic, the more fraudsters have perfected their craft of swindling customers out of their hard earned cash.
Fighting Fraud: A Juggling Act
A study by Juniper Research estimated that by 2024, e-Commerce merchants can potentially lose $24 billion to online payments fraud. While it is to be expected that e-Commerce fraud continues to rise, especially with more consumers online, what is disturbing is just how sophisticated their tactics have become.
Merchants must double down and take proactive steps to not only detect but to prevent e-Commerce fraud. This means investing in the best e-Commerce fraud prevention solutions.
By implementing these effective strategies and following industry best practices, merchants can mitigate e-Commerce fraud:
- Use AI And Machine Learning
By using AI fraud prevention, it weighs the risk of fraud against the customer’s value at a speedier, more scalable basis than a human. AI can weigh fraud risk with the assistance of “supervised” and “unsupervised” machine learning.
Supervised machine learning is able to identify emerging fraud attacks, while unsupervised machine learning takes into account past decisions. AI not only detects and prevents fraud, but it also accepts more legitimate orders, decreases manual reviews, and has more control over business outcomes.
- Apply Risk-Based Or Step-Up Authentication
Having robust password requirements on your customer accounts can diminish fraudulent activity. The stronger the password, the harder it will be for a fraudster to break into a customer’s account.
By using risk-based authentication (RBA) or step-up authentication, issuing banks utilize various levels of analysis to authentication processes that are based on the interaction’s level of risk. If the risk is higher, the authentication process will be more rigorous. Step-up authentication presents a challenge to experiences that could lead to higher probabilities for fraud.
- Card Security Code Requirements
Card-not-present (CNP) transactions are notorious for having a higher-risk for fraud. During a CNP transaction, a customer is not required to present a card in order to complete a purchase. CNP transactions are used for making purchases online, over the phone, or via a mobile app.
They pose a higher risk of fraud since a business cannot verify a cardholder’s identity. By implementing card security code requirements by asking for each card’s three or four-digit code, this can significantly reduce the probability that the transaction will be fraudulent.
- Address Verification Services (AVS)
Credit card companies provide AVS by comparing the address a customer submits with their “known address” that is on file with their issuing bank. The issuing bank then returns an AVS code to the business or merchant.
AVS codes reveal any discrepancies such as house and unit numbers that don’t match ZIP codes. AVS lowers the likelihood for fraud by assisting businesses to reject, accept, or flag transactions.
- Maintain Fraud Prevention Software Updated
Fraudsters are always re-inventing their tactics to commit fraud without getting caught. Software that is out-of-date leaves the business vulnerable to new attacks due to more sophisticated fraud patterns. Anti-fraud software depends on “security patches” to halt evolving fraud behaviors and guard against new malware and viruses. Without the necessary updates, bad actors can access data and evade measures that reduce fraudulent activity.
Fraud Detection Has Become More Sophisticated
Fraudsters and bad actors have evolved with their ever-growing and sophisticated tactics to commit fraud. Luckily, fraud prevention solutions have also stepped things up with more advanced technology. The key is to utilize as many solutions and tactics as possible to launch the most preventative and protective mechanisms available.