E-Commerce Fraud Protection Tips to Use Right Now

A comprehensive e-commerce fraud protection strategy is a must for any business that operates online. If you handle card-not-present transactions (every e-commerce business does), there’s a chance that criminals will find ways to steal from you as well as your customers without ever being caught and charged.

The aim of e-commerce fraud protection is to prevent fraud without blocking too many false positives—i.e., losing legitimate sales because they don’t exactly fit the mould. A customer whose transaction has been blocked isn’t likely to order from you again.

Your goal is to develop an e-commerce fraud prevention strategy that protects you and your customers without turning away too many legitimate sales. The following are effective measures to apply in your business right now.

1. Make Sure Your Gateway Is PCI Compliant

Follow the PCI-DSS security standards. These standards are the first step in any credit card fraud prevention plan, requiring measures such as point-to-point encryption and restricting access to customer data. If you use a merchant service provider that handles your global payment gateway for you, no credit card information should be stored on your site at all. Stay up-to-date with any new European regulations, including the Payment Services Regulation (PSR-2024) and PSD2’s Strong Customer Authentication requirements.

2. Buy an SSL Certificate for Your Website

A Secure Sockets Layer (SSL) certificate is essential for e-commerce fraud prevention efforts. This certificate establishes an encrypted connection between your website and the customer’s computer, ensuring that customer data can’t be intercepted and stolen by cybercriminals during transmission. Most e-commerce platforms (Shopify, BigCommerce, etc.) provide SSL certificates as part of their service. If your store’s URL begins with “HTTPS,” your site is already secure.

3. Get Trust Badges for Your Website

An important part of fraud management is customer education. You can teach your customers what your legitimate website looks like (and how they know they can trust it) by displaying trust badges, legitimate customer reviews, and a “how you know this is a legitimate site of [brand]” banner when users open your site. Trust badges are usually obtained when you sign up for a fraud protection program, merchant verification service, SSL certificate, and so on.

4. Ask for the Card Verification Value (CVV)

A simple way to make sure the card is actually there is to ask for the card verification value (CVV) that is displayed on the back of the card. While this won’t prevent people from using stolen credit cards, it may dissuade fraudsters who have simply purchased a credit card number online.

5. Use Device Fingerprinting and Behavioural Biometrics

Device fingerprinting and behavioural biometrics are used to track and identify both suspicious devices (fingerprinting) and abnormal online behaviour. Together, these are effective fraud prevention tools able to detect bots, automated scripts, and suspicious login attempts.

6. Use an Address Verification Service (AVS)

Address verification service (AVS) checks whether the customer’s billing address matches the one on file with the issuing bank. Mismatches may cause the transaction to be declined or flagged as suspicious. AVS primarily operates in the US, Canada, the UK, Australia, and New Zealand. For increased accuracy, some pair AVS with IP-geolocation and velocity rules. Although it doesn’t verify the full address, it remains a useful tool for reducing e-commerce fraud.

7. Use Multi-Factor Authentication (MFA)

Multi-factor authentication adds another layer of security by requiring the customer to approve a transaction through two or more verification methods. These include a password, a one-time code sent via phone or email, or fingerprint and facial ID recognition. Using various identity verification factors significantly reduces the risk of unauthorised access.

8. Only Collect the Information You Need

When signing up new customers on your site, keep yourself and your customers safe by collecting only the necessary information. You will need the person’s name, card number, billing address, and shipping address. You don’t usually need their date of birth or social security number. By collecting only a minimum of information, you help to protect your customers from identity theft.

9. Know Your Customers and Watch Behavioural Patterns

Getting to know your customers helps with e-commerce fraud protection. After a transaction goes through, or even after a suspicious activity, place a friendly call to thank the customer for their purchase and to check that it was really them. This human touch is sure to be appreciated by customers and is likely to increase their loyalty as well. Make use of AI and customer profiling to detect any other unusual behaviour and keep track.

10. Know Your Affiliate Marketers

Getting to know your affiliate marketers is also a good idea if you want to prevent affiliate fraud. Websites like Amazon don’t require your individual permission to make affiliate sales. However, merchants that aren’t on Amazon can develop a more comprehensive affiliate program with an approval process and individual tracking codes. A periodic review of your affiliate payments, influencer codes, and referral campaigns also helps you detect fraud.

11. Offer a Straightforward Returns Policy

Friendly fraud often happens when return policies are hard to find, unclear, or when refunds are delayed. Reduce chargebacks by keeping your returns policy clear, visible, and easy to complete—and by issuing refunds promptly. Requiring a delivery signature provides proof of receipt, while adding delivery photos or barcode scans further protects against refund abuse and fraudulent chargebacks.

12. Use Customisable Fraud Prevention Tools

Online retailers need 24/7 fraud protection software that adapts to evolving threats, keeping them and their customers safe. Modern fraud prevention solutions use machine learning to identify suspicious behaviour, either flagging or declining these transactions. For example, fraud prevention software could be set either to flag or decline:

• Multiple, repeated transactions
• Multiple transactions using different credit cards
• Multiple transactions with the same card and different shipping addresses
• Transactions with an unusually large ticket size
• Transactions from high-risk and unexpected locations
• Mismatched billing and IP address

In some cases, suspicious transactions may come from legitimate customers. That’s why it’s important to have customisable fraud rules allowing you to accept transactions from customers who are traveling or have placed an unusually large order.

13. Apply AI and Machine Learning Fraud Detection Tools

Modern eCommerce fraud prevention is not complete without AI/ML fraud detection tools. These sophisticated tools are designed to analyse data in real-time, detecting anomalies and allowing you to respond before they impact your business.

Benefits of AI/ML fraud detection:

• Real-time monitoring: instantly flags suspicious activity and transactions
• Behavioural analysis: identifies abnormal and unusual behaviour and purchases
• Scalability: handles large transactions efficiently and without affecting checkout
• Adaptive risk scoring: automatically adjusts risk thresholds based on trends

Coupled with customisable fraud prevention software to create a multi-layered protection, these tools reduce fraud and provide a safe and seamless experience for your customers.

14. Use Chargeback Protection Tools

In addition to customisable fraud filters, the best merchant services also protect your merchant account from chargebacks with advanced tools that are designed to prevent issues before they occur. Early chargeback alerts allow you to contact the customer quickly and work to resolve the issue directly before it impacts your chargeback score. Integrating a chargeback management API into your system will allow instant notifications and enable you to resolve issues quickly and efficiently.

Credit card processors take chargebacks very seriously, sometimes blacklisting high-risk merchants. It is far better to focus on chargeback prevention than to suffer the consequences later on.

15. Make Sure your Mobile and Social Channels are Secure

According to one report, mobile commerce accounts for 59 percent of global e-commerce sales. If your business sells online via apps or integrates social media shopping tools, these integrations must benefit from the same level of security as your website.

Types of E-Commerce Fraud

The following are the most common types of e-commerce fraud. Understanding them will help you prevent them more effectively in your business.

Payment Fraud

E-commerce payment fraud occurs when a non-authorised holder of a credit or debit card uses that card to make purchases online. In the short term, the customer loses money when the funds disappear from their card. In the longer term, the merchant loses the money when the customer issues a chargeback.

Who Commits Payment Fraud?

In some cases, it might be a family member of the cardholder who is using the card without permission, such as the teenage child of parents who regularly let their children use their card or spouses who share a card.

In most cases, however, payment fraud occurs when criminals buy stolen credit card information on the dark web and use this information to make fraudulent transactions. Many stolen credentials today are obtained through phishing, data breaches, and AI-driven bots that test thousands of cards automatically.

New Account Fraud

Using stolen credit cards, fraudsters can open a new account and place purchases under the name of the cardholder. This kind of fraud is especially hard to detect because you have no prior purchase history from which to compare and detect the fraudulent activity. Today, AI-generated synthetic identities using real and fake data make fraud detection even more difficult.

Identity Theft

Identity theft is like payment fraud, but has the potential for more damage to the customer. After obtaining customer data—name, date of birth, address, social security number, password, and card information—the criminal hacks the customer’s e-commerce (and bank) accounts and makes purchases. With AI, creating fake identities, fake documents, and deepfake selfies is much easier, meaning companies must adapt their verification tools to address these trends.

Account Takeover Fraud

Identity theft is sometimes coupled with account takeover fraud. The fraudster obtains the customer’s username and password information through phishing emails, logs in as the customer, and makes fraudulent transactions. AI-based bot detection is crucial in this area as account takeover (ATO) attacks use bots that test thousands of logins per minute.

Interception Fraud

After fraudulent orders are made—especially after an account takeover—the fraudster calls the e-commerce businesses to change the address to which the package will be mailed so that it is posted to the fraudster instead of to the legitimate customer. In this way, they intercept the package to make sure it goes to them.

Triangulation Fraud

In triangulation fraud, the fraudster creates a fake store that mimics your company. Then, they use the site to collect customer data when the customers make “purchases” on their lookalike site. Although a sophisticated and concerning type of fraud, triangulation is declining in lieu of other bot-driven attack types.

AI-Powered and Real-Time-Payment Fraud

There has been a sharp rise in AI-driven and real-time payment (RTP) fraud since 2023. Fraudsters create fake websites, chatbots, and all sorts of other digital impersonations using generative AI, convincing customers to pay or divulge sensitive information. With the increase in use of instant payment methods, these scams have become faster, more sophisticated, and significantly more effective.

Affiliate Fraud

In affiliate fraud, the fraudster uses tracking links illegally to generate or increase commissions. A common type of affiliate fraud is called “typosquatting.” This method involves registering a domain name that mimics your brand’s URL and redirects customers using an affiliate tracking link. Today, affiliate fraud also includes referral bonuses and influencer code abuse.

Friendly Fraud

Unlike the kinds of fraud mentioned above, friendly fraud is committed by legitimate customers. After ordering and paying for goods or services, the customer complains, maliciously forcing a chargeback (while continuing to enjoy the goods). This can be through returns policies or claiming non-delivery to obtain free products.

E-Commerce Fraud Prevention Is Possible

With e-commerce sales increasing each year, you can’t afford to take a lax approach to fraud prevention. A recent study by Finteck suggests that fraud losses will rise by more than 40% between 2023 and 2028, costing tens of billions per year.

However, it’s not just about the money involved. E-commerce fraud also damages customer trust and brand image. It may also lead to being blacklisted by your credit card company or merchant bank.

With so many different kinds of e-commerce fraud to think about, preventing fraud from occurring in the first place may seem something of a daunting task. By utilising all the tools above and leveraging AI-enabled fraud detection tools, you can prevent most types of fraud most of the time.

Fraud prevention is not a one-time task. It requires constant monitoring and adapting to ever-evolving threats. An effective e-commerce fraud prevention strategy will help you win the trust of your loyal customers and give them the confidence to keep coming back.

Published: April 5, 2022
Last updated: December 22, 2025