The e-commerce market continues to boom, with more people than ever making online purchases every single day. With a rise in popularity comes another more unfortunate consequence – the rise of e-commerce fraud. To ensure that you are keeping your business and your customers protected, it is vital that you understand and implement adequate e-commerce fraud detection.
The Growth of Fraud in E-Commerce Market
Fraud is almost as old as time (there’s a reason that the first written human records are receipts). There has, however, been an increase in e-commerce fraud as the number of transactions that don’t involve physical cash has increased. The trend for e-commerce fraud is only set to rise, and malware is regularly being found that seeks to subtly steal credit card information. As a result, there has never been such a need for protection. The most common way of protecting an e-commerce store is chargeback protection.
What Is Chargeback Protection?
Chargeback protection was designed to protect e-commerce stores from fraudulent payments. Data can be leveraged from a global network of enterprise retailers to identify fraudulent payments and prevent loss of revenue. This protection uses machine learning or AI to vet orders as they are being placed, serving as an invisible protective force. With chargeback protection in place, businesses can concentrate on growth-oriented operations, safe in the knowledge that they are protected against potentially costly charge-back fraud.
E-commerce fraud not only impacts chargeback, but can compromise valuable company data. A data-breach can impact your business in two ways:
- Firstly, you can lose valuable data, such as trade secrets; this leaves you more vulnerable to competition.
- Secondly, you lose customer data. This can have a big impact on customer relationships, as they will trust your brand less. It can have a more serious consequence as it might leave you liable to legal action if you have not taken appropriate steps to safeguard information.
Why Is Fraud Detection Important for Your E-Commerce Store?
The rate of e-commerce fraud is high and it is getting higher. 2020 was an exceptional year for e-commerce, but it also coincided with high levels of unemployment. Those with the ability to commit fraud were more driven towards doing so. E-commerce sales reached over $630 billion in 2020, and $16 billion has been estimated to have been stolen by e-commerce fraudsters.
If you are an e-commerce store, fraud won’t just have an impact on your bottom line, but it can have an impact on your customer base. Recent research has found that 21% of consumers are wary of shopping online as they believe that their data will be stolen; 19% believe that confidential data might be sold on to third-parties, and 54% of consumers said that they have encountered fraud scams on the internet.
Why is E-commerce Fraud So Unique?
E-commerce fraud is different to other types of fraud. It happens when a fraudster buys something on an online store by using details from a fake or a stolen credit card. The store merchant does not actually receive payment for the goods, so either the store or a customer whose details have been stolen ends up footing the bill.
This fraud is different to real-life credit-card fraud because nobody has stolen a physical card. It is also much harder to detect and combat because there will be no physical interaction unlike when a thief steals with a real-life card.