A study conducted by PwC in 2022 showed that in the last two years, more than 50% of surveyed companies had experienced some kind of fraud. While the statistics are the highest to be reported in the 20 years that PwC has been carrying out the survey, it’s important to understand why industry fraud is surging and what companies can do to better protect themselves.
The ecommerce industry is especially prone to fraud, as estimates showed ecommerce firms losing approximately $41 billion to fraud globally in 2022, with the number expected to reach $48 billion in 2023. The COVID-19 pandemic also has served as a helping hand for many fraudsters as the number of ecommerce businesses has significantly grown during the years when the world experienced nationwide lockdowns.
Identity theft is the most common form of ecommerce fraud, with fraudsters using fake accounts or other people’s details and credit cards to make purchases online. Phishing and lottery scams, payment and investment frauds as well as malware are also popular types of fraud ecommerce businesses could fall victim to, but why is all this happening?
An increase in online transactions and the use of digital payments have made it significantly easier for fraudsters to target online businesses, because when no one knows who sits behind a computer screen, everything is possible. Advancements in technology also have resulted in more sophisticated fraud methods, like the use of different IP addresses to complete purchases online. Some of the top reasons why ecommerce fraud has been on the rise are simply companies lacking security measures, or finding themselves being more vulnerable to malware attacks due to lower budgets.
However, the red flags are not that hard to spot.
Unusual or high-risk behavior is one of the top tips signifying that a fraud attack may be under way, while investing in some advanced fraud detection tools and machine learning algorithms could be the easiest and best way to prevent a major disaster from happening. Verifying customer information and paying closer attention to any inconsistent behavior patterns could also help ecommerce businesses spot a fraudster in action.
I think the number one thing many ecommerce businesses forget to consider is that many employees and customers are unaware of all the aspects that may lead toward a fraud attack, so educating customers to only download documents and conduct actions on the website after verifying the URL is correct would be the first step in mitigating a potential disaster. The steps to doing so are also very easy and can be integrated on the website’s login pages.
Implementing a two-factor authentication and encryption security method, as well as blocking repeated card testing, are also some simple ways online businesses can protect themselves from falling victim to fraud attacks. Phishing can be prevented by sending customers identification codes via emails, and companies should invest in the development of a strong fraud response plan that will help them quickly detect and prevent fraud.
Something I’ve noticed is that many online businesses choose not to invest in fraud detection tools and algorithms, which represent the easiest way to spot and prevent future fraud attacks.
As recent data shows a surge in online businesses experiencing fraud attacks, it never hurts to be too careful and take an extra step in securing your ecommerce site. The red flags are easy to spot and precautionary measures even easier to activate. This will help you save both your customers and your businesses. Think of it as a flu vaccine, boosting your company’s immunity system in case a virus should attack.
Daniele Servadei is CEO and Co-founder of Sellix, a digital ecommerce platform for entrepreneurs. It allows startups to bring their products to market and accept payments without a single line of code in a matter of minutes. His vision is to pioneer a future where any entrepreneur can sell digital goods and accept payments online quickly and easily. He’s making it simple for people to turn their ideas into profitable businesses. Servadei has an inspiring entrepreneurship story. He taught himself how to code as a young teenager and launched his first global company at the age of 18. A year later, Servadei and his team survived the crypto winter. He’s about to start a computer science degree and plans to grow Sellix alongside his university studies.