Fraudsters are constantly innovating which means that the businesses that are a target of fraud can develop blind spots - with costly consequences. In this article, we outline how e-commerce fraud is changing, why that leads to a fraud blind spot for many e-commerce businesses, and which strategies companies can follow to combat the evolving threat of fraud.
Fraud is increasingly complex
Fraudsters are becoming experts at assimilating the behaviour of a normal customer. Simple checks based on individual data points no longer cut it because fraudsters increasingly look like everyday consumers — including all their nuances and complexities.
At the root is e-commerce, which is growing in complexity, with new risks throughout the user journey. Every touchpoint in the customer journey, from initial landing page traffic and account creation to platform usage, payments, and more – all present distinct fraud threats.
However, it’s also a matter of a growing fraud universe. In one study, 59% of businesses reported a rise in online payment fraud. And that goes for every fraud vector: we already know that account takeover (ATO) fraud is a major risk vector, but it’s compounded by the widespread availability of large volumes of stolen credentials on the dark web — which grew by 65% in just two years.
The challenge: focusing on endless variations
E-commerce complexity leads to a variety of fraud techniques. Consider payment card fraud which manifests distinctly across different payment types with cards, digital wallets, and alternative payment methods all suffering from unique vulnerabilities. In terms of anti-fraud measures, merchants have seen progress in reducing payment card fraud by complying with increased security measures, e.g. the 2-factor authentication mandated in several regions.
Payments through digital wallets including Apple Pay and PayPal are more vulnerable – and lead to chargebacks that are difficult to contest successfully. Understanding the nuances of the fraud vectors for each payment method is important to correctly mitigate the associated fraud schemes – relying on minimum compliance requirements risks leaving a huge blind spot.
And that’s broadly true for e-commerce fraud. It’s increasingly the case that for every fraud method merchants require tailored logic and data to effectively mitigate the threat. It requires intelligence.
Case in point: bots are a rising threat because bots can imitate human behaviour to create fake accounts, test stolen cards, or scrape valuable data. Distinguishing between good bots performing legitimate activities vs bad bots is critical – but that requires significant insight.
Protect your business with cross-team capabilities
Siloed thinking centred around a single team’s function makes it more difficult to spot complex fraud techniques. After all, fraudsters don't care which team handles which part of the process and won’t necessarily behave in a way that meets a specific viewpoint or specific fraud criteria.
Merchants should therefore involve different departments in anti-fraud activities. For example, product development teams should communicate with fraud and cybersecurity colleagues whenever they are entering a new market or launching a new feature.
Similarly, fraud teams thus need to equip a broad range of business stakeholders with relevant intelligence around fraud risks and customer impact. It allows leadership to guide priorities and provide adequate detection capabilities across various initiatives.
That means tight anti-fraud collaboration across marketing, operations, and technology teams right from the initial customer login. The aim should be to unite the understanding of risks and accountability to better address novel vulnerabilities and counter an ever-evolving fraudster playbook.
Balance friction and user experience
The only thing worse than failing to prevent fraud is stifling a viable business through excessive anti-fraud measures.
As account takeover fraud and payment manipulation through digital wallets rise there’s always the challenge of balancing anti-fraud measures with the customer experience. Blanket steps like two-factor authentication often backfire as excessive friction hurts users, though it’s hard to argue against the increased security.
A measured, dynamic approach supported by enriched data collected across customer touchpoints can help. Intelligent risk scoring separates trusted users from potentially fraudulent ones, and higher-risk transactions may necessitate added authentication, while low-risk transactions retain a frictionless experience.
Such layered defences also require assimilating insights from an array of anti-fraud tools. That includes combining detection inputs across the organisation into a single place to manage user journeys – and reduce fraud blind spots by aggregating risk profiles using both internal and third-party data.
Learn more about this topic:
How reducing friction at checkout boosts conversions
Recap & additional insight
Navigating the world of online transactions can be a tricky business, especially when it comes to dealing with account creation fraud and fraudulent transactions. For online merchants, ensuring the security of their platforms is paramount. They rely on ecommerce fraud prevention software to protect their customers and business from various threats like credit card fraud and chargeback fraud.
Ecommerce fraud prevention tools have become essential in the fight against identity theft and the use of stolen credit cards. These tools not only help in fraud detection but also aid in new account fraud prevention.
One of the significant challenges faced by online merchants is managing stolen credit card incidents and multiple failed login attempts. Both are clear indicators of potential fraudulent activity and require immediate attention. The integration of ecommerce fraud protection solutions helps in mitigating these risks effectively.
For a deeper understanding and additional insights into these issues, the blog post on Alphacomm's website titled "Navigating E-Commerce Fraud Blind Spots" provides a comprehensive overview. It highlights the critical need for robust security measures in preventing fraud and ensuring the smooth operation of e-commerce platforms.
A holistic view to combat fraud blindspots
Without superior visibility and collaboration, you leave the door ajar for elaborate fraud schemes that often span web, mobile, payments and identity channels. Attackers actively seek out these cracks to infiltrate businesses and commit fraud.
The scale of rising fraud requires checking blind spots with shared vigilance across the business. Yet fraud teams equipped with a holistic view of user behaviour throughout their journey, supported by automated analytics can dynamically optimise security and user experience.
Your toolset matters too. Alphacomm’s Protectmaxx is a next-gen fraud solution that delivers the insight and protection you need to prevent e-commerce fraud - including a 100% chargeback guarantee. To find out how Protectmaxx can protect your e-commerce business from payment fraud get in touch with one of our Revenue Geeks here.
