Ecommerce fraud is skyrocketing — but don’t worry, we’ve got you covered. Check out this on-demand VB Spotlight for a deep dive into the most common types of fraud and how to protect your business without disrupting the user experience.
We all remember how the pandemic supercharged digitalization back in 2020, but the ecommerce landscape hasn’t stopped evolving since. In fact, ecommerce in the U.S. is projected to surpass a whopping $1.3 trillion by the end of this year. However, with such explosive growth comes a surge in fraud, with businesses losing an estimated $100 billion just last year. Account takeovers have doubled in recent years, and social engineering scams are getting a significant boost from artificial intelligence.
Tapping into insights from Telesign’s recent whitepaper, “Reduce friction and combat fraud in ecommerce,” ecommerce experts Michael Lappin, head of solutions engineering at Telesign, and Bart Goethals, TeleSign’s solutions engineering lead, shared their perspectives on the current state of ecommerce and how to tackle the growing fraud problem.
“On one out of every three platforms, even if it’s a multi-billion-dollar company, I am still able today to create a fake account,” Lappin revealed. “That’s shocking.”
Goethals added, “Any business out there is responsible for safeguarding, protecting, and encrypting their data. Every single minute, a breach is happening somewhere in the world — my name, my address, all my information, where I have accounts — it’s all up for grabs on the dark web.”
Major Types of Fraud to Watch Out For
Fraud comes in many forms, some old-school and some brand-new, thanks to AI. Here are six major fraud risks you need to be aware of:
- Social Engineering: This includes phishing and in-person attempts to gain access.
- Fake Account Fraud: Businesses still lack sufficient safeguards to verify new users’ identities.
- Account Takeover: A major risk where fraudsters gain control of legitimate accounts.
- Promo Abuse: Fraudsters exploit loopholes in promotions or coupons.
- Chargeback Fraud: A persistent issue where customers dispute legitimate charges.
- Artificially Inflated Traffic (AIT): Fraudsters manipulate traffic to generate revenue through schemes.
AI is making these schemes even more sophisticated. Tools like fraudGPT can churn out phishing campaigns based on fraudsters’ prompts, and private fraud summits on communication channels are helping them crowdsource new ideas.
Balancing Security and Customer Experience
Security measures often add extra steps, like double authentication or ID verification during onboarding. The challenge is finding the right balance between critical security controls and a seamless customer experience.
“It’s always a trade-off between high-friction and low- or no-friction, high security versus low security, high-cost versus low-cost,” Goethals explained. “By combining different solutions and spreading them over various providers, you can set up an effective real-time solution.”
Machine learning can assess the real-time risk of new customers using digital identifiers like phone numbers, IP addresses, and emails. Depending on the risk level, actions like blocking or confirming the user can be taken. Despite the sophistication of these systems, Goethals insists multi-factor authentication remains crucial. Fraudsters look for easy targets, so making things difficult for them often means they’ll move on.
Investing in Technology and the Right Perspective
It’s crucial to track any changes in account logins, from behavior to device or IP address. This requires a robust risk assessment process to anticipate and react to suspicious changes. For instance, if a customer who usually spends $200 suddenly makes a $5,000 purchase, how does your platform handle that?
“Your system needs to be configured to automatically understand whether to allow or block such transactions,” Goethals said. “A zero-trust policy is essential today. You have no idea who is accessing your services unless you have multiple safeguards in place.”
Digital identity solutions, verification, authentication, behavioral analysis, and biometrics should be seen as investments, not costs. “These safeguards are investments,” Goethals emphasized. “They create a clean, high-revenue ecosystem with good profits.”
Stay Informed and Protected
To learn more about the fraud landscape, strategies, and technological solutions to safeguard your business, no matter its size, connect with [Arrow PC Network](https://arrowpcnetwork.com/contact.html).
The fight against ecommerce fraud is ongoing, but with the right mindset, technology, and tools, you can protect your business and keep your customers happy.
