Everybody likes to shop at e-commerce nowadays, which makes them a big target for fraudsters lurking in the shadows. Hence, ecommerce fraud prevention is necessary to provide a secure online shopping experience.
Many digital businesses have been steadily investing in better fraud protection for ecommerce. A recent 2024 report from Statista suggests that market size for global e-commerce fraud detection and prevention was estimated at US$36.7 billion in 2021.
Based on this report, the size will continue to expand until it surpasses US$100 billion in 2027. In order to stay secure, online retailers need to know about the best strategies for implementing security for e-commerce.
What is e-commerce fraud?
E-commerce fraud is an act of stealing a victim’s login credentials to perform online transactions in e-commerce. Of course, it is an unauthorized purchase, which makes it a criminal action.
To do this, fraudsters perform various methods, ranging from stealing credit card information to taking over the e-commerce account itself. The intention is mainly the same: to obtain an item without paying for it.
There are also plenty of ways that these bad actors can use, and they all equally pose a major problem that requires the most attention, such as:
- Chargeback fraud, which is an attempt to make a refund after making a purchase by abusing merchant return policies.
- Buy now, pay later fraud, which can be done by taking over a victim’s account and abusing the pay-later system, leaving the victim with huge debt.
- Promo abuse, which is a fraud attempt by abusing the flaw in the e-commerce promotion system. Fraudsters can easily stack promotions and coupons to gain infinite deals, leaving retailers with financial loss.
- Card cracking and testing, which is attempting to use or obtain a victim’s credit card through purchasing info on the dark web and testing if it works.
Importance of E-commerce Fraud Prevention in Business
Fraud prevention for ecommerce is as important as managing the e-commerce itself. This is because any online transactions made on the sites will become a forefront to keep the business going for a long time.
Also, many e-commerce sites globally face an ongoing battle with numerous types of fraud. For example, CNBC reported that the United States is the most credit card fraud-prone country, due to not having strong regulation.
Another reason why ecommerce fraud prevention is necessary is to prevent its impact on both customers and the retailers, to name a few:
- Financial losses to victims and e-commerce potentially losing base customers due to failing to protect online transactions.
- E-commerce sites being forced to increase operational costs, either from the disputes made by affected customers or facing lawsuits from victims.
- Customers are at serious risk of having their data privacy breached, which can lead to further damage to both victims and e-commerce sites.
Key Strategies for E-commerce Fraud Prevention
With no doubt, ecommerce fraud protection is now more important than ever. Online business and ecommerce owners need to prevent e-commerce fraud by utilizing the best strategies.
However, it is understandable that choosing the right strategy can be confusing, especially the one that suits e-commerce’s own conditions. Therefore, let’s delve into all key strategies that fit with e-commerce:
1. Implement Security Payment Gateways
Preventing e-commerce fraud can start with getting better security payment gateways first. For example, 3D Secure Authentication can help detect frauds by checking if a transaction is done by a legitimate user by various methods.
Another solid payment gateway is SSL encryption, which can help protect customer transactions in e-commerce. This can keep their credit card numbers and personal data from being intercepted by e-commerce fraudsters.
2. Enable Multi-Factor Authentication (MFA)
Having MFA, such as OTP (one-time password), authenticator apps, and two-step verification, can also help combat fraud in e-commerce. This authentication system makes account takeover attempts harder, reducing e-commerce fraud attempts.
3. Implement Advanced Fraud Prevention Solution
Right now, there is the best ecommerce fraud prevention solution by utilizing artificial intelligence (AI). This seamless AI authentication can greatly secure online transactions while also reducing friction for users.
Keypaz, for example, provides the best advanced fraud prevention with AI. Here are several key benefits e-commerce retailers can get:
- Enhanced security by providing real-time fraud detection and multilayer protection.
- Provide better protection that does not add friction to its authentication process.
- Customizable security that can suit any kind of business by leveraging device intelligence.
- Adaptable to possible future fraud methods, making sure e-commerce is always prepared.
Also Read: AI Authentication: Top Fraud Prevention Solutions in 2025
4. Utilize Address Verification System (AVS)
Since e-commerce relies on online payments, Address Verification System can also prevent ecommerce fraud. This is because AVS checks on whether the credit card address matches with the billing address.
In short, AVS can be used to prevent credit card fraud, which is also one of the e-commerce fraud methods. Transactions will not happen if the shopper is not the same as the legitimate owner of the credit card.
5. Monitor IP Geolocation with Device Fingerprinting
Another one of ecommerce fraud prevention tools that is worth considering is IP geolocation data. This tool will detect any suspicious transactions based on their geographical location.
This tool is mainly used to combat fraudsters that use geo-spoofing to hide their real location. It also comes with device fingerprinting, which can detect whether someone is using a VPN or proxy for attempting fraud.
6. Analyze Purchase Behavior
Some customers may unintentionally create a pattern when they perform online transactions. Whether when they usually purchase and what kind of items they usually buy in e-commerce.
E-commerce retailers can take advantage of this by implementing behavioral analytics. If a fraudster buys a completely different item or logs in at an unusual time, this system can trigger an additional verification requirement.
7. Add Real-Time Monitoring Alerts
The sooner the fraud is detected, the better. These ecommerce fraud prevention tools can detect a possible fraud attempt in just a millisecond, thanks to their advanced machine learning (ML) capabilities.
By combining data collection and pattern recognition, this tool can make a real-time decision on whether an activity is flagged as fraud. As a result, e-commerce can quickly stop fraudulent acts before their danger starts to impact on victims’ credentials.
With proper ecommerce fraud prevention, customers won’t have to worry about making online purchases. All it takes is a tool like Keypaz to secure digital transactions and put an end to these unlawful fraudsters.