Identify eCommerce Fraud: Is This Order Too Good to Be True?

One of the most essential things about running your e-commerce store is protecting your customers from e-commerce fraud. Compared to e-commerce sales, e-commerce fraud has increased almost twice as much. That's why your e-commerce store requires fraud management systems now more than ever that will detect and protect against fraud while also assisting you in managing chargeback disputes.

This article will review how to identify eCommerce fraud and whether this order is too good to be true. Let’s get started.

What Is Ecommerce Fraud?

Ecommerce fraud means the interception of commercial transactions on an e-commerce store by scammers for individual or financial gain. It's a criminal act known as payment fraud in which scammers steal money from the customer or the merchant.

According to a report by MerchantSavvy, payment fraud is predicted to cost $40.62 billion in 2027, a 25% increase over its 2020 cost. So, it’s high time to identify eCommerce fraud.

6 Common Reasons Why Good Orders Look Like E-commerce Fraud

1. A Large Order from a First-Time Visitor

If you get a large order from a first-time visitor to your e-commerce store, that means it could be an e-commerce fraud. It's because if the scammers verify the stolen card number and all the information is correct, they usually want to order as much as possible.

That doesn't mean all the first customers who make large orders are fraudsters. However, you should be careful of the large orders placed by the first visitors to your site.

2. A Large Order from a Suspect Country

You must be aware of the large orders from some high-risk countries to your e-commerce store, as these countries have a high rate of fraudulent online purchases. You can set fraud systems to deny these fraudulent orders automatically.

Even though all the large orders from these countries are not fraud, you might run into problems if you don't have the process to analyze these orders and transactions.

3. Makes a Quick Purchase

As we have mentioned, scammers want to complete their order process as quickly as possible because they don't tend to spend more time on the website before purchasing. That's why fraud filters mark customers who make their purchases very fast. So, as an e-commerce store owner, you must be aware of the customers who make orders quickly without spending time browsing your website.

4. Unusual Shopping Patterns

During holidays like Black Friday, Christmas, and other busy seasons, visitors usually make large orders and ship them to different addresses than the addresses given on their credit cards.

Your genuine orders might seem fraudulent f your fraud detection system is not set to adapt to seasonal shopping behaviors.

5. Billing and Shipping Addresses Are Different

As the scammers make purchases with the stolen credit card, they provide other shipping addresses instead of the billing address. Thus, to identify this type of fraud, fraud filters run the Address Verification Service (AVS) to check whether the shipping address and billing address match.

But there are also valid reasons behind the shipping and billing address mismatch, like when the customers make orders for gifts. Therefore, AVS mismatch means fraud, which is not always true.

6. IP Address Mismatches the Billing Address

Usually, the customers' IP address matches their credit card billing address. If the IP address of the visitors doesn't match, it could be a sign of e-commerce fraud. But there are also reasonable causes for this mismatch, like when customers make orders while traveling. So, an IP address mismatch doesn't always mean the orders are fraud.

Conclusion: Is This Order Too Good to Be True?

It's true that many suspicious orders are most likely legitimate. You shouldn't only depend on fraud filters for commerce fraud detection. You have to apply an automated process as an ideal solution to scan incoming orders for potential fraud indicators and allow these suspicious orders to be further investigated to determine if they are fraudulent or legitimate.

(Contributed by Sohel Rana & Hermes Fang)