Voice of the Industry

Best practices to fight ecommerce fraud

Monday 27 February 2023 08:00 CET | Editor: Raluca Ochiana | Voice of the industry

Fraud can happen at any stage during the life of a transaction. Monica Eaton, Founder of Chargebacks911 and Fi911 discusses the prevalence of fraud in the ‘post-transaction’ stage via chargebacks and shares the best practices merchants can deploy to stay ahead of fraudsters. 


Fraud prevention should be a key concern for anyone who sells online. However, unlike other costs, fraud is preventable, and the figures show that companies can’t afford to ignore it. Three-quarters of merchants reported increases in both fraud attempts and fraud rates by revenue in 2021, with the average cost of fraud management increasing five-fold. In 2019, ecommerce merchants spent an average of 2% of their annual revenue on fraud prevention. By 2021, that share had grown to 10%, while in 2022 remained the same.

The present article aims to explore the red flags you should look out for and share some best practices, given that fraud can happen at any time during the life of the transaction and it is increasingly prevalent ‘post-transaction’, via chargebacks.

Red flags

Although there are new types of fraud being developed every day, they tend to have common features that can be used to identify a probable fraud attempt. The AI-enabled solutions that we will discuss later are designed to look for these signals and many others, but merchants can design their ecommerce solution to prevent these signs from becoming a possibility.

Some red flags to look out for include:

  • New email addresses: did a customer create a new or temporary (‘burner’) email address to make a purchase? This may be a sign that the buyer is planning to commit fraud, then disappear.

  • High-ticket value and velocity: fraudsters want to get the most value out of their efforts. To do this, they often buy high-value goods or use systems to push through large volumes of transactions or attempted transactions in bulk.

  • Expedited shipping: fraudsters tend to pick the fastest shipping option – they have an interest in shortening the time during which they can be detected and get their hands on the goods.

  • Address mismatch: the shipping address used by a fraudster will not match the billing address kept on file with the bank. While there can be good reason for this, often this is a significant warning of fraud.

  • Repeat IP addresses: although IP addresses can be hidden or spoofed, amateur fraudsters might use the same IP address for multiple transactions.

  • Chargebacks: most chargebacks you receive are originated by genuine cardholders who may be seeking a speedy way to a refund or resolution of some other complaint. You should recognise this as post-transaction fraud and tackle it with the same energy as other fraud prevention strategies.

  • Grooming your blacklist Grooming your blacklist: fraudsters often escape typical blacklist strategies, opting for similar but not identical customer details. As a result, you could suffer repeated losses from the same criminal. The best way to spot this issue is to check your blacklist against your chargeback records. Maintaining a layered approach is the best method to uncover gaps in your rules or processes.

  • Realtime feedback: Without data feedback, including refund results, any dispute prevention actions, and all chargeback data; your decision engine is operating without the most relevant information. Whether you can get access to this information in real-time or otherwise, is less important – just make sure you have access to all the data and are able to standardise relevant feedback. This will keep rules running as expected, taking action to block bad actors but not accidentally declining those who are good.

What to do about fraud?

When it comes to fraud, there are two divisions: pre-sale and post-sale. Pre-sale fraud prevention is best managed with fraud filters and strict policies, whereas post-sale or post transaction fraud (chargebacks) requires a more tactical strategy to decision each chargeback. Optimum results are achieved when a retailer employs a competent solution for both.

Deploy AI and machine learning

The most effective fraud prevention tools use artificial intelligence and machine learning to monitor, score, and make decisions about transactions. Keeping pace with the fast-evolving fraudster and learning in real time are crucial to good fraud prevention.

Look for multiple data sources

You can integrate fraud signals from other data networks apart from your own, which will help you identify trends faster and be more in-tune with developing fraud threats and tactics. A good strategy is to leverage multiple data sources that can be contributed as enrichment data from other suppliers – such as chargeback management vendors. Chargeback management companies connect to post transaction data to enrich the transaction record and transmit this information for further processing.

Authenticate buyers based on risk

Frequent shoppers with reliable and static address or geolocation data present lower risk than new customers with less reliable data, which means, in this case, friction should be introduced only when it is mandatory.

Be PCI-compliant

PCI standards are meant to ensure that you’re taking the necessary steps to protect consumers’ personal data. PCI compliance protects your customers and insulates you against fraudulent purchases made using stolen data, as well as the PR backlash following a data breach.

Train staff properly

You want your staff to be trained properly and to know the warning signs of fraudulent activity, especially when conducting manual reviews of transactions.

Keep software up to date

Outdated fraud prevention solutions may fail to intercept new threats. Keep up with all software updates and patches and deploy them as soon as possible.

Conduct regular audits

Don’t simply assume that you’re doing everything you need to protect yourself and your customers. Conduct regular audits of all internal operations and reviews of any fraud (or chargeback) losses you make to ensure you’re doing what needs to be done, learning lessons, and making changes.

Using the right tools

Fraud prevention is about employing the best tools and strategies. Fraudsters spend 100% of their time on staying on top of their game – you should select the best tools and work with the best partners for your business to keep pace with their efforts. From customer onboarding screening to chargeback management and all steps in between, it is crucial to have a strategy for each.

Defend chargeback losses and getting educated

Many businesses accept chargebacks as a cost of doing business. Having the data, tools, and expertise to properly defend incoming chargebacks and recover your revenue is critical. Whether working alone or with a specialist partner, your ability to respond and manage this growing category is imperative.

This editorial is part of The Paypers' Fraud Prevention in Ecommerce Report 2022-2023, the ultimate source of knowledge that delves into the world of fraud prevention, revealing the most effective security methods for companies to stay one step away from bad actors and secure their businesses. 

About Monica Eaton

Monica Eaton is the Founder of Chargebacks911 and Fi911. Monica has worked tirelessly to educate merchants and financial institutions about hidden threats in the rapidly changing payment fraud landscape, successfully protecting over 10 billion online transactions and recovering over USD 1 billion in chargeback fraud.



About Chargebacks911

Founded in 2011, Chargebacks911 is the first global company fully dedicated to mitigating chargebacks and eliminating chargeback fraud. As an industry-leading innovator, Chargebacks911 is credited with developing the most effective strategies for helping businesses manage disputes and reduce loss in various industries and sectors within the payments space. 

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Keywords: fraud prevention, ecommerce, chargebacks, artificial intelligence, machine learning, PCI compliance
Categories: Fraud & Financial Crime
Companies: Chargebacks911
Countries: World
This article is part of category

Fraud & Financial Crime


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