Description: Find out how technology can help businesses in eCommerce industry to protect their assets! Learn how Machine Learning could be a potential solution for security challenges in such industries as Banking, Retail, and Finance.
Introduction to eCommerce fraud prevention
What a fascinating and yet a challenging time we live right now! Humanity never saw a pandemic like this, which paralyzed the global economy for months. Still, no one knows when it will end and what the final consequences will be. The pressure is on online services now to deliver the best experience possible, for the people around the globe. But as the money came into industries that are selling via the internet, the importance of fraud detection increased more than ever before.
Retailers, bankers, and seemingly anyone right now are moving their businesses online, as criminals also became smarter and follow them in the digital realms. Today, eCommerce fraud prevention processes are aimed to deal with highly-skilled and well-organized hackers. Criminals now are using the latest technology to obtain money in the most sophisticated ways.
eCommerce fraud, a.k.a. purchase fraud is basically a subtype of computer fraud. According to the definition, a criminal tries to get access to the system with the intention of illegal financial transactions. The most notable cases of eCommerce fraud from the past few years are:
A famous ransomware attack which could be not as much impactful, if companies would make a decision to use a certain security patch in time
Similar to Wannacry, but much more complex. Being also known by the names NotPetya, Nyetya, and Goldeneye, this ransomware focused on payment systems
A team of skilled hackers managed to make a series of attacks on commercial OS’s like Windows to get access to the information
A number of clients of Icici Bank in India were fooled and revealed their permanent passwords to the criminals
According to Cybersource report, among almost 500 respondents in the US and Canada, here are the average fraud consequences divided by order channels:
Of course, there are numerous ways to fight it, even more than that – many top businesses already found a way to leverage fraud prevention successfully. If the forecasts by Worldpay are correct, we should expect the rise of the US eCommerce market up to 10%, peaking at well over a trillion U.S. dollars! Do you think the criminal will miss such an opportunity? Definitely not. That’s why your business must be on the cutting edge of security technologies. This article is dedicated to top challenges of eCommerce fraud detection, the best tools to deal with the dangers, and approached based on Machine Learning to build your winning strategy. Let’s start with the types of fraud.
Top 5 challenges for eCommerce Fraud Prevention solutions
Luckily, all fraud prevention services or the experts doing this manually, have a limited amount of threats to deal with. Basically, they are a few types of scenarios, but the real art is to deal with them better than the latest innovation by criminals. So, the good news is – the experts know what they are fighting with. The question is “What measures should be taken to prevent this?”.
This challenge is quite complicated, as criminal in someway obtains control over the account of the real customer and tries to make financial transactions to steal the client’s money. Any financial organization with a personal account system is in danger of this type of fraud, especially retailers. Now, when payment processes tend to be simplified, this problem is even more relevant and causes losses in billions of dollars for eCommerce industry.
Criminals can also steal the identity of the merchant and use it for chargeback fraud. The private data of eCommerce merchants must also be protected rigorously, as transactions are typically covered by the retailer.
Credit Card Fraud
One of the most common and problematic types of fraud and a major challenge for fraud detection services. The physical credit card of the client could be stolen and the are measures to block the account entirely. But criminals now don’t even need to aim for the actual card. They could steal information like card number, password, or CW2 – and have full access to make any payments they want. Advanced protection methods using Artificial Intelligence and Machine Learning could be really beneficial here because a timely tracking of suspicious activity of a client and making the decision to block a card will help in this case.
Hackers could be a thing from the movies or global news, but they become very real when they will try to break into your business operations. In 2020 any gadget with an internet connection could be an Achilles’ heel of your company. Proactive eCommerce fraud detection could be provided, once again, by Machine Learning algorithms trained to detect anomalies in real-time.
The expansion of an idea of hacking, this sophisticated scheme involves creating a fake online store, selling an item on behalf of a real online store, and collect all the money and private information from the buyer. The client can easily fall for this if he will not pay enough attention to the URL of an online store – a suspicious-looking address is an obvious sign of this!
The best eCommerce fraud prevention tools in 2020
Now let’s talk about the measures you can take to prevent all of those threats. You can see here the most effective eCommerce fraud prevention tools available at the moment, according to the survey by the aforementioned Cybersource:
This is the list of eCommerce fraud prevention software you can use right now to safeguard your business:
Over two dozens tools for fraud detection in one package for the specific list of platforms. More than a hundred of risk factors could be analyzed by algorithms of this eCommerce fraud prevention software.
It only supports Magneto and Shopify platforms but the list of services is quite impressive. Riskfiled provides a definitive evaluation of each transaction.
Supports a big number of platforms and has in its arsenal nearly 50 rules for efficient fraud monitoring. It has free functionality, but a paid account is a must for the sake of security.
Supports all eCommerce platforms, very simple to install, and starting up securing each transaction individually.
Concluding the list of tools is Kount. This one is exclusive to Magneto but this allows vendors to fine-tune this software form maximum results. It leverages Artificial Intelligence to a full force.
The benefits of Machine Learning-based Fraud Detection services over traditional methods
But what when available tools and traditional fraud prevention services are not enough for you? Because of the nature of the problem, you realize that you need a custom solution? Honesty, this is the best way to go! Best AI and ML companies have proven solutions to make businesses secure from fraudulent actions.
Why Machine Learning? Combined with a custom approach it can do wonders in the fraud prevention area. Machine Learning algorithms allow detecting fraud automatically and find hidden correlations in data. Definitely, less amount of time is required comparing to traditional methods, and of course, fraud detection will happen in real-time.
The process of implementing an ML solution in your business is similar to other software development steps. It starts with the Prototype and PoC, then moves to Development, and after the Release requires Maintenance and Support. During the last phase, additional adjustment is required to fine-tune the ML model for maximum results. Compared to typical software solutions, ML algorithms require the constant attention of Data Scientists for flawless performance.
The price for custom Machine Learning solutions for Fraud Detection in eCommerce may vary because every case is unique. The biggest challenge for merchants is finding the right team of experts who can develop and support the solution from an initial idea to the release phase. SPD Group has proving expertise in developing custom Fraud Detection and Prevention solutions for eCommerce companies powered by Machine Learning technology. You can get a free consultation from them on how to implement a custom solution in your particular business use case at any time.
The future of eCommerce Fraud Prevention
“E-commerce as a term will become obsolete in five or six years.”
– Neil Blumenthal, Warby Parker
No one knows what the future will bring. Maybe Neil is right, and the whole term will vanish very soon. However, as of 2020, eCommerce is at its peak. Sadly, fraudulent activity is too – a quarter of in-store mobile payments will be lost this year (which is over $31 billion) according to Business Insider. How to lower this number next year? What if Machine Learning technology is the answer? Considering its efficiency in the various business use cases, eCommerce Fraud could vanish well before the industry definition will become obsolete!