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"The Art of Finding Winning Products"
Are you considering launching an ecommerce business? If so, you’ve definitely got the right idea.
Ecommerce is becoming increasingly popular, with the number of digital buyers climbing every year. In 2020, over two billion people purchased goods or services online, and during the same year, e-retail sales surpassed 4.2 trillion U.S. dollars worldwide.
Once you know how to start an ecommerce business, you need to make sure you know how to protect it from online fraud.
That’s because as the popularity of ecommerce grows, so too does the potential for online fraud. Fraudsters can take advantage of businesses that aren't properly prepared, costing time, money, and damage to their reputation.
So what can you do to keep yourself and your business safe from ecommerce fraud?
We've put together a list of six best practices to follow. But first, let's take a look at what ecommerce fraud is and some of the different types of fraud that can occur.
Ecommerce fraud is the use of online channels to commit crimes, such as identity theft, credit card fraud, and fraudulent purchases. It can also involve the sale of counterfeit goods or the use of stolen credit card information to purchase items.
There is a variety of different types of ecommerce fraud, but some of the most common are:
This is the unauthorized use of a credit or debit card to make purchases. This can include stealing someone's credit card information to make fraudulent purchases or using a fake credit card to make purchases.
Let's say your business sells goods on shopping channels, such as Amazon or eBay. A fraudster could purchase your products with a stolen credit card, and you would be left with the chargeback.
This is the use of malicious bots that allow a single buyer to purchase large quantities of discounted items for resale on a different marketplace. This can quickly undercut revenue and profits, drain inventory, and steal discount-conscious customers away.
Let's say you sell an auto attendant phone system for small business owners. A fraudster could purchase hundreds of these systems through your site and then resell them on a different site at a higher price, making a profit while you take the loss.
This is the theft of an account holder's login credentials, often through a phishing attack, in order to make fraudulent purchases or gain access to sensitive account information.
For example, a fraudster could gain access to your customer's account and purchase items with their credit card or change the shipping address for an order so that the package is sent to them instead of the customer.
This is when customers make unauthorized or excessive charges to their account, often with the intention of avoiding payment. This can include returning items that were never actually delivered or making multiple orders and then canceling them.
Let's say you provide custom business website design services. A customer could order a website design then dispute the charge with their credit card company, saying that they didn’t receive what they were promised or that they were overcharged.
This is the abuse of a business's promotional policies, such as using promotional codes multiple times or abusing coupon policies to obtain goods for free.
For example, if you're starting a virtual call center, you may want to offer a coupon for first-time customers. A fraudster could use the coupon code multiple times or purchase an item and then return it for a full refund, obtaining the product for free.
This is the use of multiple fraudulent credit cards to purchase items in order to avoid detection. For example, if you're an online retailer, a fraudster could purchase products with three different stolen credit cards, splitting the orders among different cards to avoid being caught. This will make it more difficult to track the source of the fraud.
While there's no sure-fire way to prevent all ecommerce fraud, there are a few things you can look out for that may indicate fraudulent activity.
Some common signs of fraud include:
Now that we know what ecommerce fraud is and some of the different types of fraud that can occur, let's take a look at six best practices to follow to help keep your business safe.
One of the best ways to prevent fraud is to make sure your systems and integrations are up-to-date and secure. This includes:
You want to make sure that any sensitive information is protected from hackers and other cybercriminals.
Any business that uses online software or services should take these precautions from large international organizations to one-man freelancers who create affiliate marketing programs.
When processing payments, it's important to use a payment gateway that is secure and PCI compliant. Put simply, a payment gateway is a secure connection between your website and the payment processing bank. This helps to protect your customers' credit card information and helps to reduce the risk of fraud.
There are a variety of payment gateways to choose from, so it's important to do your research and find one that meets your needs and is compatible with your ecommerce platform. For example, some gateways allow you to set up fraud prevention rules, such as requiring customers to provide additional information (like a CVV number) for high-value transactions.
Your employees are your first line of defense against fraud. Make sure they're aware of the different types of scams and how to spot them. You may also want to consider training them on how to use secure passwords and authentication methods and how to protect their devices from malware and other security threats.
Hold monthly or quarterly meetings to update your employees on the latest scams and how to protect themselves and your business. You could make this a part of their regular training schedule. Be sure to keep the training engaging and fun, so your employees will be more likely to participate. You may also want to consider rewarding employees who report suspicious activity.
There is a variety of fraud detection and prevention tools available, both free and paid. These tools can help you protect your business from a variety of scams, including account takeover fraud, promotion fraud, and friendly fraud. Some of the most common fraud detection and prevention tools include:
It's important to regularly monitor your transactions, both online and offline. This includes checking your account statements and credit reports regularly and reviewing your customer data for suspicious activity.
You can also use fraud detection and prevention tools to help you automate this process and identify any suspicious activity quickly. Let's say you're running a virtual business phone service. You may want to monitor for abnormal calling patterns, such as large numbers of calls in a short period of time.
If you do experience fraud, it's important to have a plan in place for how to deal with it. A good response plan should include:
Creating a fraud response plan can help you to minimize the damage caused by fraud and help you to get your business back up and running quickly.
So there you have it. Six best practices to help keep your business safe from ecommerce fraud.
Implementing these practices will help reduce your risk of fraud and protect your business from financial losses.
It's important to remember that fraud can happen to any business, large or small. So, it's always a good idea to be prepared and take the necessary precautions to protect yourself and your business.
Good luck and stay safe!
Jessica Day is the Senior Director for Marketing Strategy at Dialpad, a modern business contact center solutions platform that takes every kind of conversation to the next level—turning conversations into opportunities. Jessica is an expert in collaborating with multifunctional teams to execute and optimize marketing efforts, for both company and client campaigns. She has also written content for DataFeedWatch and Brightpearl.