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A few years ago, brick-and-mortar business owners would have given you a crazy look if you were to tell them that the only way their business would have continued success is if they opened an e-commerce store in addition to their physical store. Since the emergence of e-commerce, it has set a new standard for retailers to survive in the industry.

Two of the biggest threats to brick-and-mortar stores are theft/fraud and business interruptions. With the COVID-19 pandemic among us, businesses have had to shut down, causing them to lose business. Fortunately, businesses like gyms and salons are opening back up but under strict restrictions.

But just as theft/fraud and business interruptions happen in physical stores, e-commerce businesses experience the same type of threats but on a much larger scale with more severe consequences.

The threats may not include someone physically taking merchandise out of online stores but the equivalent of that would be credit card chargebacks for online purchases after the shipments have already been received… Fraudulent activities may not happen on the same platforms, but they still have the same level of damaging effects, nonetheless.

E-Commerce vs Brick-and-Mortar: Which is More Susceptible to Fraud?

Fraud is a major concern in all industries and sectors but the place where fraud is most seen is with e-commerce stores. According to chargebackgurus.com, fraud within online stores rose by over 30% and it is expected to rise even higher rounding out to around $7.2 billion in financial losses. The site goes on further to discuss the five types of online fraud to be on the lookout for. Those fraud types include:

  • Phishing
  • Friendly Fraud
  • True Fraud
  • Card Testing
  • Refund Fraud

With brick-and-mortar stores, there are cameras to capture footage of such crimes and there are employees that keep an eye on customers as well. With online stores, it can be a little harder to find the culprits responsible for e-commerce fraud.

Luckily, as “fraudsters” are learning more fraud tactics, e-commerce business owners are also learning those exact same tactics to protect their businesses from fraudulent activity. Because of their stricter safety measures, more and more business owners are seeing a decline in fraud concerns.

If you own an online business, make sure you’re implementing these preventative measures to protect your e-commerce site from some of the biggest threats from fraudulent activity.

Top Ways to Protect Your Online Business From Fraudulent Activities

Use a Well-Known and Trusted E-Commerce Platform

Software as a service (SaaS) is a platform that helps you build and host your e-commerce store as well as take care of issues like security. If you’re considering opening your own e-commerce store, you will want to use a trusted platform to find your domain name and host your site.

Managed e-commerce solution provider Shopify has built-in fraud analysis that allows you to thoroughly investigate any type of suspicious activity on your website. It offers its users capabilities to

  • Verify IP Addresses
  • Search Email Addresses
  • Call Phone Numbers Associated With and Order
  • Check If Multiple Orders Use Different Billing Addresses Than the Shipping Addresses

All of those instances are effective ways to catch fraudsters trying to get over on your business. By implementing this tactic, you’ll be able to monitor your store for any security issues that may arise before they turn into irreversible problems.

Make Sure Your Business is Protected By Business Insurance

Another effective way to protect your business from fraud is to make sure your business has business insurance.

When it comes to purchasing business insurance, the key to success is making sure you have the right policy in place, and that could include multiple different policies. If your e-commerce site sells products but also offers select services, you’re definitely going to want a policy that protects you on the services part of your business.

An errors and omissions policy provides great coverage in that instance and so does professional liability, but it all depends on the type of business you have that will determine the best policy for your business. But either way, you look at it, your business will need some type of protection in place just for the high risk of potential damages you can incur from fraud.

Make Sure Your Site is Compliant With All Payment Processes

 If you’re going to be processing payments on your site, you need to make sure that your business is protected from online fraud by way of being compliant with the Payment Card Industry Security Standards Council (PCISSC).

PCISSC is a set of best practices to protect customer data with the major credit card brands like Visa, Mastercard, and American Express.

In order to sell anything on your e-commerce site, complying with these standards is an absolute requirement. The way you can stay in compliance and protect your customers is to put the right tools and processes in place.

  • Enforce Stricter Password Requirements: Long gone are the days of accepting “abcd1234” passwords. Hackers have programs so sophisticated that they can run through several variations of what your password could be with just a few letters. It’s standard now for passwords to be at least:
  • Eight characters long
    • One capitalized letter
    • One special character
    • One number
  • Use Address Verification System: This is a system that compares the numbers of the billing address linked to the credit card to the address that the actual credit card company has on file for a customer.
  • Require Card Verification Value: This is the three-digit number you see on the back of credit cards. The way that this is helpful against fraud is that PCI will not allow you to store the security number along with the credit card number and customer name.

The only way a fraudster could get the three-digit code on the back of someone’s credit card is if they physically stole it from that customer.

  • Set Purchase Limits: Essentially, you want to sell as much merchandise from your e-commerce site as you possibly can but sometimes customers being able to make such large purchases can be a sign of fraudulent activity.

To prevent that from happening, you might want to set a limit on how many items your customers can purchase. You don’t want to set it so low that you’ll lose money from customers not being able to buy right then but you do want to make it reasonable enough that you won’t lose money through theft.

Make Sure to Continually Update Your Site as It Needs It

If your site isn’t updated, it will be an easy target for hackers and web crawlers alike. Keep your site and software updated with the latest in security patches. Just imagine the damage you could prevent by simply keeping your site updated.

While there is no way to remove 100% of risk in business, the above steps will help you maximize safety while reducing the risks you can control.


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