This blog is an extract from our latest ebook ‘The Digital Transformation (DX) Revolution: Growth Strategies for ecommerce brands & retailers’ by Whiplash partner NoFraud, a top ecommerce fraud prevention platform.
As the world witnessed a slowdown in the brick-and-mortar business arena due to the global pandemic, COVID-19 has yielded an impressive uptick in DTC ecommerce. According to eMarketer, direct-to-consumer ecommerce sales in the United States are forecast to reach $151.20 billion in 2022 – an increase of 16.9% compared to last year.
Dubbed as the “new normal” online transactions are continuing to increase as a preferred method for shopping for everything from apparel, electronics, toys, home decor, luxury goods, health and pet care items, construction materials, even vehicles, and more.
While the growth of ecommerce is a positive development that offers increased convenience and flexibility to consumers, it also has a dark side: The growth in DTC ecommerce translates to an exponential broadening of the playing field for opportunistic fraudsters.
Ecommerce fraud protection refers to a range of methods designed to combat fraudulent activity that takes place via online stores. This includes fraud detection tools, mitigation strategies, and identifying areas of vulnerability in your ecommerce storefront.
But rather than being a ‘set and forget’ strategy, ecommerce fraud prevention needs to evolve alongside increasingly sophisticated fraud tactics that are making it more challenging than ever for brands to keep their stores secure.
Ecommerce fraud has existed for as long as ecommerce has been around, but there’s been a significant uptick in fraudulent behavior during the COVID-19 pandemic. The sharp rise of CNP (Card Not Present) transactions has opened up fresh opportunities for fraudsters to steal sensitive data – and do so undetected.
Moreover, the growing popularity of Buy Now, Pay Later services has further complicated fraud prevention for merchants. The lack of centralized management and monitoring of BNPL activity makes deferred payments vulnerable to fraud than traditional credit card transaction.
And with these newfound shopping habits likely to outlast the pandemic, things are set to get worse rather than better. According to Juniper Research, ecommerce merchants are estimated to lose $206 billion in payment fraud between 2021 and 2025.
Fraudsters are seeking to exploit both veteran and emerging online businesses and storefronts through an array of ever-evolving tactics. Some of the most notorious methods include fraudulent returns and chargebacks, mixed cart and gift card fraud, volume bot attacks, human chat manipulations, account takeover attempts, mule rerouting, triangulation fraud, phishing, pharming – and many more.
Prudent ecommerce brands and retailers that maintain online sales platforms will make it their business to keep themselves educated on the latest cyber threats and employ the most reputable anti-fraud software to monitor and safeguard their transactions. By ensuring that systems, hardware, and software are all up to date with the most comprehensive and advanced solutions, brands can be confident that their online store and transactions are secure.
Here are some basic best practices that enable brands to offer secure online transactions while providing the assurances that today’s consumers are looking for:
Other things that your brand should consider are the human considerations, such as ensuring that employees with varying levels of security access have been appropriately vetted and monitored, especially during peak season when many businesses employ extra staff to handle the increased volume.
Another human consideration involves training your employees on how to recognize, flag, report, and ultimately mitigate fraud attempts—through the monitoring of online sales, reviewing transactions, embracing secure email and social media protocols, as well as phone and online chat communications. These are essential basic steps that every online business ought to take seriously to minimize incidences of fraud.
The cost of not taking ecommerce fraud seriously is sobering. A recent TransUnion credit bureau report cited a whopping 25% increase in online fraud attempts in the U.S. across industries within the first four months of 2021 alone, compared to the last four months of 2020.
With increases like that, it would be understandable for a business to cast a wide, hermetic, and expansive security net surrounding their ecommerce activities. Doing so, however, might ultimately yield too many barriers for would-be customers, resulting in an unreasonable level of “false positives” on flagged transactions, leading to an untold loss of potential sales and consumer goodwill, which will end up costing businesses many times more than the fraud itself.
Striking a healthy balance between a robust security program and a thoughtful customer-centric approach makes good sense for all ecommerce merchants who are interested in expanding and securing their sales in the increasingly sophisticated and complex ecommerce arena.
Enjoyed this extract? Check out the rest of our eBook on how the digital transformation of online storefronts is making strategies including fraud prevention more important than ever.