eCommerce fraud is a growing concern, with fraudulent activities costing businesses billions of dollars each year. Estimates suggest that eCommerce fraud results in $240 billion in losses across U.S. online retailers annually.

Such frauds affect everyone, from niche boutiques to global giants. One fraudulent order might trigger penalties, loss of stock, or a damaged reputation.

Therefore, you’ll need to take defensive steps to protect your brand and maintain the customer’s faith. However, there are a few ways to deal with such situations without impacting customers’ loyalty.

Let’s check out a few tactics to get started.

How to Prevent eCommerce Fraud

Fraudsters looking to exploit eCommerce websites are always looking for loopholes. These loopholes open up when stores experience high traffic. 

Cybercriminals take advantage of quick-moving inventory and flash sales to bypass weak security settings and exploit payment systems.

Therefore, you will need to implement a few methods, which are discussed below.

1. Strengthen Payment Security Measures/Use Multi-Layered Authentication Tools

Meeting PCI DSS compliance is the first step in safeguarding cardholders' data. These guidelines direct how you handle payment information, including encryption, storage methods, and ongoing security checks.

Make sure to adhere to cloud compliance by configuring servers to meet PCI standards to enforce strong encryption. It includes setting up virtual firewalls and running regular vulnerability scans. Moreover, security audits and penetration tests help identify weaknesses before attackers do.

Implementing role-based access controls (RBAC) further strengthens security by restricting sensitive payment data to authorized personnel only.

Further, Let’s look at three core steps:

I. Enable AVS and CVV

Address Verification Service checks if the billing address matches the card provider’s records. 

CVV confirms the card’s physical presence. 

Together, they create extra hurdles for cyber criminals so that they can’t press ahead. For example, if a ZIP code doesn’t match, the order can be flagged before it proceeds.

II. Adopt 3D Secure 2.0

Include an extra verification step to confirm the cardholder. This updated version of 3D Secure 2.0 sends a one-time passcode by text or shows a prompt in a banking app. It works well on mobile and reduces abandoned carts while verifying each purchase.

III. Review Fraud Settings

Limited-edition sneakers or popular console releases can attract scammers. They know there will be high traffic during the launch or drop of trending products. Payment gateways must be used to purchase these sought-after goods. 

Here are some maneuverings that you can do:

• Restrict high-risk IPs and regions by using geolocation tools like IP2Location, Geotargetly, etc., to block or flag transactions from countries with high fraud rates.
• Limit bulk purchases to prevent bots and resellers by capping order quantities per account, device, or card.
• Tighten velocity checks by monitoring multiple transactions from the same source within a short window. If a new account suddenly places five large orders, flag it for manual review.
• Enable address verification (AVS) and device fingerprinting. Make sure billing details match card records and track device behavior to spot inconsistencies.

2. Deploy AI-Powered Fraud Detection

AI-driven fraud detection tools help analyze real-time transaction patterns, provide reports, and even identify risks based on signals like device type, mouse movements, and typing speed.

You can use Chargeflow for its powerful Insights and Automation tools. You can use Insights to explore deep analytics and track fraud trends and customer behavior to flag high-risk transactions. Automation will streamline dispute management, using AI to handle chargebacks efficiently, reducing manual workload while maximizing recovery rates.

I. Pick a Reputable Tool

Compare tools by their track record, response speed, and ease of connection to your site. For example, compare Chargeflow vs. Chargebacks911 based on your requirements and different parameters to help pick the right one.

II. Customize Risk Thresholds

Basic defaults might be too lenient or harsh. So, you’ll have to fine-tune the filters so they fit your shop’s transaction history. If certain countries pose a higher risk, you might hold those orders for manual inspection. 

For more expensive orders, you could require extra identity checks.

III. Leverage Chargeback Alerts

Get hold of chargeback alerts that send notifications when a dispute arises while helping you proactively prevent 90% of chargebacks. Quickly gathering proof of delivery or showing a match between IP and billing info can turn the tide. Also, there’s an option for partial refunds to avoid a full chargeback.

Stay vigilant to security breach patterns in such alerts. If the exact addresses or accounts keep popping up, adjust your rule set to avoid fraudsters. Over time, integrated AI filters will get better at differentiating genuine buyers from scammers to reduce challenges for everyone.

3. Encourage Strong Customer Authentication

Implementing eCommerce fraud prevention strategies will require endorsing strong customer authentication methods so that cyber thieves do not make purchases with stolen details. Sure, it's a hassle for users, but it does lead to fewer chargebacks and builds trust overall.

Work these three ideas to do the same.

I. Offer 2FA at Checkout

A one-time passcode texted or emailed for higher-priced orders adds a layer of reassurance. For example, if a user places an order for an item that costs over $400, ask them for a quick Captcha entry or even an OTP (one-time password). 

This way, criminals who stole a card number alone won’t have access to the owner’s phone or email, which stops them in their tracks.

II. Promote Account Security

Ask customers (via email and other social channels) to choose unique passwords and refresh them periodically. Simple prompts or a strength meter can steer them away from weak credentials like “pass123.” You could also reward them with a small coupon to encourage more people to strengthen their settings.

III. Implement Biometric Logins

Fingerprint or face scanning replace basic usernames and passwords for returning users. Implement this feature in your e-commerce app development or eCommerce store for faster checkouts without exposing card info.

Leverage WebAuthn (Web Authentication API) so that the browsers can authenticate users through fingerprint, face recognition, or security keys. Major browsers support this and work with FIDO2-compliant authentication systems like Passkeys, Yubikey, or Windows Hello.

Tying purchases to biometrics ensures there won’t be unauthorized individuals to sneak in.

4. Platform and Plugins Up to Date

Apply software patches to fix vulnerabilities that cybercriminals can otherwise exploit in terms of accessing customer data, injecting malicious scripts, stealing payment details, or creating fake admin accounts to manipulate transactions.

In fact, in the year 2020, almost 2000 eCommerce stores running the then-older version of Magento were hacked, and hackers loaded a web skimmer by injecting code on a site’s payment page.

You can take the below actions to keep platforms and plugins updated.

I. Enable Automatic Updates

Shopify and WooCommerce sites are open to easing security patches as part of their upgrades. Setting them to auto-updates so you don’t forget essential fixes. 

If you rely on self-hosted platforms, review updates each month. Moreover, the use of a staging environment can help confirm that nothing breaks before changes go live.

II. Secure Hosting and SSL Certificates

Host your site with providers who emphasize protective measures, such as dedicated firewalls and real-time scans.

An SSL certificate encrypts data between your website and the user’s browser, keeping personal information leakproof. If your site handles large transaction volumes, you can use advanced SSL options to add more encryption layers.

III. Limit Third-Party Add-Ons

Every plugin can open a new security gap, so you need to check user feedback and developer activity before installing anything.

Outdated apps might contain unchecked flaws that invite intruders, leading to eCommerce security threats like data breaches and fraud risks. To mitigate these risks, remove or replace any add-on that hasn’t been updated (for a long time). Also, keep an eye on active plugins and retire those no longer in use to reduce risk.

5. Combine Automated Checks with Manual Review

Algorithms are powerful at catching common fraud signals. For starters, use fraud analytics to stay ahead of the curve in detecting online threats. 

But still, you’ll need the help of experts who are best at spotting gray areas.

So, check for inconsistencies by blending both the automated and manual methods to balance security with minimal disruption.

Prepare to take the following steps here:

I. Set Clear Triggers for Review

Mention specific conditions that send an order to manual inspection. For instance, it can be about a purchase over $700, a mismatched billing and shipping address, or a shipment destined for a known high-risk region. An employee can then contact the buyer for confirmation or request an extra ID.

II. Provide Staff Training

Provide your team with the tools to handle suspicious orders calmly. A short handbook or session can show them how to confirm phone numbers, spot phishing attempts,  check IP details, and notice repeated declines.

Also, consider training your employees to manage specific fraud cases, which will prepare them to judge when to halt a transaction or alert higher-ups if something seems off. A well-prepared team reduces the risk of fraudulent losses while preventing false declines that could drive away legitimate buyers.

III. Track and Document Fraud Cases

Keep a log of questionable activity, including the outcome and any notes from payment processors. Revisit these records to see if patterns emerge or if criminals try new tactics. 

Based on such collected data, adjust your automated filters as needed and use the data to train newcomers on how to deal with specific threats. This process makes sure that you have ongoing improvement in your fraud-fighting strategy. 

Conclusion

To protect your brand from eCommerce store fraud, you must prepare yourself with layers of defense — from core payment checks to real-time alerts and frequent software updates.

Each method and subsequent step we discussed here are necessary to prevent cyber attackers, hackers, and spammers from exploiting your website. All these activities happen at the backend, where users are the least affected, making their online shopping experience hassle-free and smooth.

However, even with the best security measures in place, chargebacks remain a challenge. 

Take steps to reduce manual workload, increase recovery rates, and safeguard your revenue with Chargeflow. 

Start automating chargeback management using Chargeback’s AI evidence processor to fight disputes on your behalf.