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Fraud Risk Management

What Is Fraud Risk Management?

Fraud risk management in eCommerce entails employing methods and tools that detect risky or dubious transactions before they cause the business untenable losses. These tools and methods can also mitigate fraud cases in advance, even before they get on the store owner’s radar.

What Is eCommerce Fraud?

Also known as payment fraud, eCommerce fraud happens when a customer with bad intentions or driven by personal gains tries to deceive the eCommerce store when doing a transaction. Although fraud in eCommerce is prevalent with pseudo accounts, some fraudsters are bold enough to commit this heinous act behind their real accounts.

How Is eCommerce Fraud Detected?

eCommerce fraud management is critical if you’re going to realize profits and stay in business. Detecting fraud in your online store starts by screening all customers through the data you collect from them. With the user data at hand, you can flag suspicious customers before they log into your store or even access information that points to chargeback fraud risks.

Alternatively, you can use the data collected to create customer profiles. For instance, a customer’s email address can lead you to their social media profiles, where you can verify if the user really exists and is a real human. If not, you can block their profile from accessing your online store.

What Are The Effective Methods To Reduce The Risks In eCommerce Transactions?

The best eCommerce fraud solution is to prevent the risk’s prevalence before it actually happens. There are various ways of doing this, including:

Employee training and sensitization to ensure that they can implement policies and procedures;
Apply the Payment Card Industry’s Data Security Standard to shield your online store from data breaches;
Update shopping cart software to seal any loopholes that fraudsters might exploit;
Implement Address Verification, as well as Card Code Verification before processing payments;
Be vigilant enough to notice any suspicious user activity, such as a fake phone number.

What eCommerce Fraud Prevention Tools Should Merchants Deploy?

Businesses can leverage various online tools to prevent and mitigate eCommerce scams before they happen. That said, reliable eCommerce fraud prevention techniques include:

Implement Device Fingerprinting

This will help you flag suspicious users who recycle IP addresses and smartphone devices to target eCommerce stores with the intention of committing fraud.

Enrich Your Data

Take advantage of a single data point to profile customers and flag fraudsters hiding behind pseudonyms and fake user profiles.

Social Media Lookup

You can do a reverse lookup of the user profile in question to determine whether they have valid social proof. Zero social media activity is a red flag.

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Frequently Asked Questions About Fraud Risk Management

What kinds of fraud target eCommerce?

Now that you understand what is fraud risk management, what are the kinds of frauds that target eCommerce retail stores? They include:

Payment fraud;
Triangulation fraud;
Clean fraud;
Friendly fraud;
Affiliation fraud.

What are the 3 most common types of online frauds?

Three prevalent online frauds include:

Phishing – a cybercrime performed via email, text message, or phone call by attackers who are posing themselves as a reputable person or institution;
Malware attacks – a cyberattack performed by malicious software as an unauthorized action on the victim’s software;
Hijacking – when an attacker takes control of someone’s computer system, network, or software programs.

What is triangulation fraud?

This type of fraud occurs when the bad guys use a fake storefront, disguising themselves as middlemen to receive orders and money from unsuspecting customers.