Table of contentWhat is ecommerce fraud?Types of ecommerce fraudHow to prevent ecommerce fraud?General advice for ecommerce fraud preventionConclusionWhat is ecommerce fraud?Fraud is defined as any dishonest behavior carried out by an individual or an organization with the intent to obtain something in a way that violates the law. Every type of business can be a victim of fraud, but given the technical improvements of today, it would appear that ecommerce businesses are the most at risk.Global payment fraud has tripled, rising from $9.84 billion in 2011 to $32.39 billion in 2020. It is projected to cost $40.62 billion in 2027—25% higher than in 2020 (Merchant Savvy, 2020). That is why fraud protection is one of the highest priorities in ecommerce in 2022.Reviews are essential for operating an online store, and in most cases, if a customer makes any of the claims we will discuss later, the business owner is inclined to believe the customer rather than take a chance on a negative review that could result in future customer losses and harm to their brand. Types of ecommerce fraudCredit Card FraudCredit card fraud is defined as any misuse of credit card information with the aim of receiving goods for free. Fraudsters trying to commit credit card fraud do that by obtaining someone's credit card information. How can someone gain access to your credit card information?Your credit card doesn't have to be stolen for the fraud to succeed. There are other types of credit card fraud like phishing. Fraudsters can also use illicit sources to buy information from massive leaks.The FTC received over 270,000 claims of credit card fraud in 2019. By 2020, that figure had nearly doubled, to about 400,000.After getting the credit card info, the rest of the procedure is pretty straightforward. In most cases, the perpetrator makes a small test purchase to see if the credit card has been canceled, and after it goes through, and the credit card proves to be legitimate fraudsters proceed to use it for a larger payment.Most often, the fraud is discovered after the product has been delivered or the service has been provided. Thus, when the legitimate cardholder requests a chargeback, the complete cost is upon the ecommerce business.Chargeback FraudIn contrast to credit card fraud, chargeback fraud involves a customer who makes an intentional purchase but afterward uses their right to dispute the transaction to acquire free goods. Even when everything about their product is in order, customers can claim that the box was never delivered or that they received a defective product. This fraudulent behavior can be particularly problematic for the company because if a large number of them accumulate, they may make it more difficult for the company to complete future transactions.Given that at least 30% of goods purchased through online businesses are returned, it's easy to see how chargebacks can account for between 40% and 80% of total fraud losses.Interception/Account FraudInterception fraud occurs when a person redirects someone else's order to their own address. In most cases, this is done via customer service. The fraudster gets in touch with customer care and requests a delivery address adjustment. The majority of the time, customer care complies with the request in an effort to ensure a happy customer.The majority of online retailers provide their customers' accounts where they may view their purchase history, and in addition these accounts make future purchases more streamlined. The problem of fraud arises when someone takes control of someone's account, uses it to make multiple purchases without any issues. This is also known as account takeover fraud.In most cases, this is done via a method called phishing. Fraudsters send emails in order to trick customers into revealing their personal data so that they can use it to access their accounts.How to prevent ecommerce fraud?Shopify's Fraud Detection ToolsWith all of this being said, what are the steps you can take to ensure protection from ecommerce fraud? The leading ecommerce solution in the world, Shopify, offers ecommerce fraud analysis tools. The ecommerce fraud prevention tool from Shopify examines data from across its whole database using machine learning algorithms to determine the degree of risk associated with a certain order and the payment. After pinpointing medium and high-risk orders, merchants can decide to proceed with the order, demand additional customer authentication, or cancel it entirely to prevent fraud.What is Shopify Protect?With the help of Shopify Protect, merchants can prevent fraud when processing orders by their customers. Shopify will reimburse the order value and the chargeback fee for any Shop Pay transactions when a merchant who has enabled Shopify Protect experiences fraud. There is no paperwork for the merchant to fill out because this prevention process is automated.PCI ComplianceEvery merchant who accepts online payments is required to follow PCI protocols and maintain PCI compliance.PCI is a collection of security standards meant to ensure that all online transactions take place in a secure environment for the customers. Payment processing and credit card data storage must adhere to their criteria.These protocols significantly decrease the possibility of fraudulent behavior in your store.General advice for ecommerce fraud preventionIn general, anything out of the ordinary, such as abnormally high order amounts or suspicious-looking shipping addresses should raise a red flag and prompt the merchant to act and prevent possible fraud. Prevention can be done by sending a verification email to the customer or investigating the transaction further. Understandably, during peak shopping seasons, you may be too busy processing orders to keep your guard up in the face of all the fraudsters, but this is just the time to amp up all your security measures. ConclusionAt first, you may think that one or two chargeback orders are not too much and that it is better to invest your time in fulfilling more orders. But if not taken care of, ecommerce fraud may be an issue that causes major harm to your business and, even in some cases it may paralyze your entire business. This will not only harm you and your employees, but your other customers as well.You may think that you can’t do anything about it since in most cases it is the fault of the customer, but if you put to use some of the above-mentioned ecommerce fraud solutions—including Shopify's fraud prevention tools, Shopify Protect, PCI compliance, and general security awareness—your business will be a lot safer.