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Ecommerce fraud management strategies

Discover ecommerce fraud management strategies and how to protect your business from fraudsters.

Jun 20, 2023

Ecommerce fraud management strategies are the tools and processes that you can use to identify and protect your business from fraud.

Do scammers often target your business? Or are you losing money due to fraud? And do you spend sleepless nights worrying about how protected you – and your customers – are from fraudsters?

Well‚ having effective fraud management strategies will help. They can stop fraud‚ reduce costs‚ and ensure you and your customers are always protected. 

They also help you get a good night's sleep. And we all need those.

Here's the thing: fraud happens. In fact‚ data shows that businesses will lose just under €50 billion globally due to ecommerce fraud this year.

But there are some simple steps you can take to make sure you're shielding your business from fraudsters.

Here we show you how‚ sharing tips to help you create an effective ecommerce fraud management strategy. We cover these things:

  • A summary of fraud management

  • Why fraud management is important

  • Tips to create effective fraud management strategies


What is fraud management?

So, we already know that fraud management is how you identify and prevent fraud.

But what does it actually involve?

Put simply: it’s how you monitor and review transactions, customers, and accounts to discover fraudulent activities and stop them from happening. Or, in the case of chargeback fraud, how you fight disputes that you know are unjust.

If you think you have to do that alone, you don’t. In fact, many businesses team up with partners that can help them implement effective fraud management strategies to keep their business safe and profitable. These are often payment service providers (PSP).

Let’s look at one example of this: what we offer our customers here at Mollie.

As a leading European PSP, we offer Acceptance & Risk, an advanced fraud solution to help ecommerce businesses optimise conversion and stop fraud. 

It offers you machine-learning-powered fraud screening on all transactions, tools to configure your own risk controls, in-depth data and analytics, and support from a specialist team to help you fight fraud.

Why is fraud management important?

Fraud management is vital because it helps keep your business safe from fraud. It also protects your shoppers, which is essential to delivering a great customer experience. Doing both of these things is vital to being profitable and creating happy customers. 

Here are some of the other benefits of using effective ecommerce fraud prevention strategies:

Increase authorisation rates

One cause of unauthorised transactions is fraudsters using stolen card details to purchase goods.

If you have high levels of fraud that means you also likely have a high amount of unauthorised transactions. In that case, issuing banks – or the consumer’s bank that issued the card – might see your business as high risk and decline higher numbers of attempted payments. This can cost you sales and scare away honest customers.

Effective fraud management solves that problem by helping you root out fraudulent transactions, meaning issuing banks don’t activate security checks when they’re not needed. That helps build customer trust and keeps your business driving revenue.

Prevent chargebacks

Chargeback fraud happens when a consumer makes false claims to get a payment back using the chargeback process. It is also known as friendly fraud.
Chargebacks can also happen when fraudsters use stolen credit card details to purchase something illegally. This unauthorised transaction usually results in the actual cardholder filing a chargeback against you.

Effective fraud management means that you can block unauthorised transactions. And good PSPs help you prevent and fight chargebacks by providing tools like a chargeback API. They should also file objections for you to fight chargeback fraud.

Find out more about chargeback fraud and how to prevent it.

Protect your reputation

Ever had a customer complain about your business on social media and then spent hours (even days) worrying about what will happen next? 

Now imagine that happening, but with hundreds of customers taking their grievances online at the same time.

It might seem extreme, but a cyberattack can leave your company vulnerable to this.

So, effective fraud prevention measures will ensure your data – and your customers’ data – is always safe.

Avoid monitoring programs

If you have high levels of fraud or chargebacks, card schemes – such as Visa or Mastercard – might place you on a monitoring programs. There are two types of programs. These are:

  • Fraud monitoring

  • Chargeback monitoring

Being put on these programs means you need to reduce fraud or chargebacks. If you don’t, you can face penalties, including paying higher fees or fines and even being stopped from processing payments altogether. 

Ensuring you prevent and fight fraud will help you avoid being put on a program like this.

Retain payment processing capabilities

Card schemes, PSPs, and some other financial institutions keep an eye on their customers’ risk data, monitoring fraud and chargeback rates and other metrics.

They might stop working with you if you have a high risk level. That means you may no longer be able to accept payments.

So, controlling fraud will help you protect your money and ensure your business can continue selling online.

Fraud management strategies

So, now we know what fraud management strategies are and the benefits they provide. 

But what can you actually do to prevent all types of ecommerce fraud and keep your customers and business protected? 

Here are some simple ways to get started: 

Conduct a risk assessment

The best place to start is by analysing the things your business is doing well and understanding where it can improve. 

Running a risk assessment will help you identify weaknesses in your defences that fraudsters could target. And let you see how well you’re doing at identifying and fighting fraud.

Here’s how to carry out a fraud risk assessment:

  1. Identify risks: Assess your company’s internal controls, the anti-fraud controls you use, and fraud risks specific to your business and industry.

  2. Evaluate risks: Determine the types of fraud you could face and their impact on your business.

  3. Apply risk controls: Use what you have learned to decide which risk controls to implement. Prioritise these using your risk evaluation.

  4. Monitor and review your risk: Review your risk levels and controls regularly. That way, you can adapt your risk strategy to identify new problems and ensure you’re always protected.

Ensure you’re PCI DSS compliant

PCI DSS stands for Payment Card Industry Data Security Standards. They are payment security guidelines that apply to all businesses that process credit card payments.

If you accept credit card payments, you must be PCI-DSS certified to save your customers’ information legally.

An excellent way to do this is to work with a payment service provider. They will help ensure you comply with the appropriate security regulations for your markets.

Use an Address Verification Service (AVS)

An Address Verification Service checks a customer’s billing address to ensure it matches the one registered with the issuing bank. If these addresses don’t match, a payment processor will ask for further verification before authorisation. This helps to detect potentially fraudulent transactions before they can complete.

Check your site security regularly

Run regular site security checks to identify problem areas. Try these things: 

  • Scan for malware

  • Encrypt messages with customers and suppliers

  • Regularly update plugins and software

  • Back up data

  • Check and change passwords whenever possible

Train staff and set internal controls

Conduct training with your staff so they can identify fraud and areas of your business that might be at risk. Implement controls and processes to help them report it quickly and effectively.

Find the right partner

One of the best ways to fight fraud is to partner with a specialist that can help. These partners will help you monitor fraud and actively fight it to keep your business safe and profitable.

As we said above, a key partner for many ecommerce businesses is the PSP they use to process payments.

So, how can partnering with a PSP help you fight fraud? Let’s take a look.

How Mollie helps you prevent ecommerce fraud

Does dealing with fraud get you out of bed every morning? Probably not. More likely that it stops you from getting a restful night’s sleep.

We get it.

That’s why here at Mollie, we provide advanced tools to help you easily identify and prevent fraud so you don’t have to worry about being targeted by scammers. And to make sure you have time to spend on the parts of your business that you need to (and enjoy).

Want to access fraud screening for every transaction so that you’re always protected? We offer that.

And do you want to configure your risk controls (with guidance if needed) to optimise conversion? We help you do that as well.

Our payments solution also includes dynamic 3D Secure features, performance insights, and risk assessments. This helps you reduce costs and optimise conversion by stopping fraud before a payment goes through and reducing friction for your customers.

You can also easily accept payments and optimise conversion with a personalised checkout that offers your customers’ favourite payment methods, and access fast and flexible funding with Mollie Capital.

Find out more about payments with Mollie.

More updates

What is friendly fraud?

Friendly fraud can cause financial loss, admin headaches, and reputational risk. Explore different types of friendly fraud and how to prevent chargebacks.

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What is chargeback fraud and how to prevent it in 2023

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Table of contents

What is fraud management?

Why is fraud management important?

Fraud management strategies

How Mollie helps you prevent ecommerce fraud

Contact sales

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