E-Commerce Fraud: Offense is Your Best Defense

If you are in the e-commerce business, fraud does not come as a surprise to you. However, it is becoming an increasing problem now that e-commerce businesses are the primary target for fraudulent transactions, instead of primarily financial services. This became particularly relevant as the financial services and banking sector realized this problem quickly enough and took significant measures to address it. This deliberate action limited fraudulent activities in this sector and as such, predators focused their energies in the less defended e-commerce sites. Let’s explore some of the common fraud threats to businesses and defensive measures you can take to reduce risk for your business and your customers.

The most common form of fraud is identity theft. By assuming the credentials of an authorized user, the hacker essentially takes over the account. Once the user account is accessed, basic login information, password, and shipping address can be changed, while using existing credit card information to make fraudulent purchases. Moreover, the increasing use of mobile devices versus desktops is the perfect ground for successful fraudulent activities for two reasons: 1) Mobile devices, such as smartphones and tablets, present users with opportunities to conduct online transactions in a way that mirrors a Windows or Apple platform, but without backing it up with requisite firewalls or security protection measures. Defense software applications do not work as well on mobile devices as they do on computers, or are more than likely not even installed. 2) The geographic location of the hacker is usually more difficult to track; hence, predators cannot be identified based on the location from which accounts are being accessed.

Another important problem fueling fraud in e-commerce is non-human malware. Businesses can easily adapt to fraud patterns committed by humans, but since malware is able to derive infinite new and more intelligent hacking algorithms in a time frame of picoseconds, it is very difficult to prepare against these dynamically changing conditions. Since mobile devices are seldom properly protected, they provide an ideal platform for e-commerce fraud. Malware often penetrates the user’s account and plays the role of a trusted or familiar customer. This brings the threat directly from a “known” customer of your business making it more difficult to detect.

These problems and more make handling payments online a tricky business. For e-commerce, it is never wise to provide account information or payment details that involve sensitive data. Best practice is to have a virtual account or one-time-use account that veils your personal financial data and keeps it out of reach of criminal intent. Another layer of protection against fraud and loss is to ensure that payment is made with good funds only, thereby eliminating the risk entirely. Furthermore, ensuring that payment is not released until merchandise is delivered provides the ultimate in security to the buyer in a transaction, and ensures customer satisfaction at the same time. Taking these steps in tandem with traditional financial cryptography, multi-level authentication, and data security measures gives you an ironclad defense against would-be hackers. In this case, a good offensive strategy is your best defense.

The engine of e-commerce presents unprecedented opportunities for businesses to open up to new markets and new customer segments. However, buyers are still fearful to make their purchases online due to the potential of online fraud. Protecting your business and your customers against this risk and giving them the confidence to buy from your site is key, and is the grease that will keep the e-commerce engine running at peak performance. Traxpay can show you how.

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