Fraud Prevention for Ecommerce

Video Transcript: Fraud Prevent for Ecommerce

Today we are talking about ecommerce fraud, what tools and systems can you implement to help prevent it. You’re going to learn about the current state of ecommerce fraud, get examples of some tools that are out there, and learn about systems to implement and also some of the varieties of eCommerce fraud.

Currently, it’s estimated that $48 billion per year is lost to fraud. That’s expected to grow to $91 billion in just a few years. It’s been found that on average stores are spending about 11% of their yearly revenue just managing fraud on their stores.

Some of the most common types of ecommerce fraud, you might be familiar with some of these, phishing, chargebacks or friendly fraud, card testing, identity theft, and coupon discount, and refund abuse. Some other examples include bad actors, scammers or resellers. There’s also authorized resellers, people who create fake accounts, account takeovers, chargeback fraud, and as mentioned in the last slide, people abusing coupons and promotions. We also have people sending their items to reshippers, limited item abuse, that means stores that sell limited amount of items. They might do a drop of 100 items, people going in and purchasing up all of those items or using bots to purchase the items. Visitors and customers saying they didn’t receive an item when they actually did, people returning items, either returning when they use the product or saying they returned, but returning the wrong thing on purpose. There’s also triangulation fraud, which I’ll get into on another slide, and then card testing and stolen cards.

When it comes to coupon fraud, this is when visitors are using coupons that aren’t meant for them. What you can do is utilize unique coupon codes. This is something Walmart does. They tie the coupon code to your account. You can’t use it on another account. Limit the number of times they can use the coupon per day and even try testing out, there are some apps out there that block coupon extensions. Another company that is big on this is Chewy. They even have a whole department of people that will flag and reach out to customers if they think there is coupon fraud. But the downside is that this can really annoy customers. Customers who may have gotten used to using coupons who may feel that they should be allowed to use the coupon and then choose not to purchase because their order keeps getting flagged or blocked.

There’s also return abuse. That means people returning items when they know they probably shouldn’t. Maybe they buy a pair of shoes to wear out to an event and then they return them, or even purchasing items and returning the wrong thing on purpose. What you can do is consider charging for returns, though a lot of customers don’t tend to like this, especially for things you need to try on, like clothes or shoes. You can also change your terms. Above here you can see Sephora includes that they have the right to limit returns and exchanges. Also include a mechanism for inspecting wherever you end up getting them, at your warehouse or store, and have a returns management platform that screens returns. You can see down here that they’re asking if the item’s been open or worn. Most likely if you say yes, that the return probably cannot happen.

There’s also limited item abuse. I spoke about this before. This is about blocking resellers and people who are buying up limited stock items and reselling them on places like eBay. Make sure that you have bot detection and prevention, but also consider how aggressive to be with this because you don’t want to block legitimate purchasers.

Triangulation is a tricky one. This is when a customer makes a purchase, let’s say on Amazon or eBay. They use their actual card. The person selling, the third party on Amazon or let’s say eBay, then goes, they don’t actually have the item, let’s say a sink faucet. They then use a stolen card. They go to Home Depot, purchase that item and ship it to this customer. This is very difficult to catch. Some of the things you can do are device fingerprinting and address and location verification.

There are tons of ecommerce fraud tools and companies and services that are out there. These are two of them. We don’t necessarily recommend a specific one. Go out there and see what they offer. A lot of them offer very similar things, chargeback recovery. They’ll resolve disputes for you. They’ll optimize payments. They’ll block fake accounts. Look into what your store really is looking for.

Some other systems that you can put in place, manual review. Think about somebody purchasing, maybe if you sell a lot to the US and somebody purchases from overseas, maybe have that item or that order manually reviewed just to ensure that everything looks proper.

You can also have rules-based prevention. There are known reseller locations or addresses. You might want to stop any shipping that’s going to those locations just to prevent those people reselling. Have two-factor authentication for people creating accounts on your store. That just helps prevent somebody from taking over the account, and have device fingerprinting for your employees to prevent people taking over employee accounts and getting into your system.

Hopefully you got a lot of information out of this video. Fraud is a big issue. Hopefully some of these slides went over things that you might want to try out, whether it’s a tool or sending up some of these systems to try to reduce your fraud risk as much as possible.