The eCommerce industry is growing rapidly, but so are the risks and instances of eCommerce fraud. Scammers are constantly inventing new, more effective ways to take advantage of weaknesses in online transactions, much so now than ever before. In this article, we'll explore how eCommerce fraud has evolved and why it's important to use a combination of human and technological checks to prevent it.
Why Ecommerce Fraud is a Concern
Ecommerce fraud is proving to be an exponentially growing challenge in online retail. Victims of fraudsters making dishonest or unlawful transactions to procure goods and services illegally suffer damages to their financial health and a massive hit to their reputation.
As the eCommerce industry continues to expand, with a projected $5.9 trillion total sales by 2023, scammers are becoming more opportunistic in their attempts to defraud online marketplaces. Thus, businesses need to remain vigilant and cautious of unauthorized methods scammers use to steal money.
How to Identify Ecommerce Fraud
Here are some prevalent frauds to look out for:
- Account Takeover (ATO) Fraud: An account takeover involves a criminal accessing a genuine customer’s account without permission to execute unauthorized purchases or withdrawals. This type of fraud has seen an alarming 131% increase in 2022, affecting millions of eCommerce users worldwide.
- Synthetic Identity Fraud: In a synthetic identity scam, a criminal creates entirely fake identities, often with a mix of real and fabricated data, to bypass the verification process of online platforms. They will use these fake identities to deceive businesses into approving fraudulent transactions.
- Phishing and Social Engineering Fraud: Phishing and social engineering schemes trick customers into revealing their personal or financial information through deceptive emails or fake websites. In fact, phishing was the second most frequent cause of data breaches in 2022, accounting for 16% of incidents and costing affected companies a combined $4.91 million.
- Card-Not-Present (CNP) Fraud: CNP fraud occurs when a criminal utilizes stolen credit or debit card information to transact in online platforms that do not require a physical card. Unauthorized purchases involving stolen card data can result in financial losses to the business and the customer.
- Chargeback Fraud: In a chargeback fraud, a criminal requests a refund from their card issuer even after receiving their goods or services from an online platform. The business owner must either spend resources to disputing the chargeback claim or stomach both merchandise and financial losses.
Human + Tech in Ecommerce Fraud Prevention
Technology has made it possible to reduce eCommerce fraud for online businesses. Artificial intelligence (AI) and machine learning (ML) can quickly and accurately detect fraudulent activities from vast amounts of data quickly, effectively, and with increased accuracy. Such is the potential of AI/ML that analysts expect the global AI in fraud management market to be worth $10.4 million in 2023 and expand at a CAGR of 18% to $57 million by 2033.
Blockchain technology is also providing online business owners with the transparency and immutability needed to monitor online transactions. The blockchain’s decentralized ledgers record every transaction in a secure environment that cannot be altered by any single fraudster, providing an extra layer of security against scams.
While rapidly evolving technologies are crucial in detecting ecommerce fraud, skilled professionals remain indispensable. The|]y bring a uniquely human understanding and adaptability that machines can not replicate. Professionals can detect unusual data patterns and understand complex nuances, subtleties, and situations that even the most advanced automated tools cannot. They are also responsible for providing AI/ML models with curated training data to improve eCommerce fraud detection and adapt to new types of online scams.
Business owners benefit from professionals who not only reduce financial fraud risks and improve customer experience through personal interactions with a human touch.
The fight for eCommerce fraud prevention calls for a balanced and comprehensive approach that combines technological prowess and human intelligence. While high-tech tools are already adept at handling large data sets and detecting fraudulent trends, human insight and adaptability will bring these technological capabilities to a higher level:
Improved Accuracy
Human analysts can fine-tune AI/ML algorithms to reduce cases of false positives, cutting down costs and preventing legitimate eCommerce transactions from being flagged.
Real-time Fraud Prevention
Automated systems and human supervision can work together to detect and stop eCommerce fraud attempts as they happen.
Continuous Upgrades
Professionals can regularly update fraud prevention management tools to keep ahead of new scam trends and methods.
Customer Trust
By utilizing a hybrid human-machine approach in eCommerce fraud detection, businesses demonstrate their commitment to protecting their customer base from fraudsters.
Fight Ecommerce Fraud with Us
TaskUs has established itself as a trusted provider of comprehensive fraud detection services and risk management solutions, with over 150 of the world’s biggest and most disruptive brands choosing TaskUs to protect them. Choose our human + technology financial eCommerce outsourcing offerings and let Us help you deploy advanced fraud detection prevention technologies, monitor transactions, and combat eCommerce fraud, 24/7.
Recognized by the Everest Group as a Major Contender in Everest Group's Banking Operations - Service PEAK Matrix® Assessment 2023 and PEAK Matrix® for Financial Crime and Compliance (FCC) Operations in 2022, TaskUs today stands as a leading provider of outsourced services, including online eCommerce fraud detection. Recently rated as a Leader and Star Performer in the 2023 Trust and Safety PEAK assessment by Everest, we help your brand enhance your eCommerce fraud monitoring measures, streamline processes, and protect your customers’ sensitive financial information.
Partner with Us and gain access to state-of-the-art technologies, teammates equipped with the latest fraud-prevention strategies and tools, and a proactive and innovation-driven model for combatting eCommerce fraud.
