How E-Commerce Businesses Can Avoid Fraud

While advancements in consumer and merchant fraud protection are constantly improving, the nature of e-commerce makes it more difficult for retailers to avoid fraud. These “card not present” transactions are a bigger risk to merchants, and often times the bank will hold the e-commerce merchant liable for chargebacks. Fortunately, there are many steps you can take as an e-commerce business to prevent losses due to fraud.

How Fraud Affects the Merchant

A chargeback is a request to cancel a credit card transaction, which happens as soon as a customer disputes a charge with its card issuer. The card provider will then begin a transaction dispute process, in order to determine to what degree the merchant is responsible for the fraud. The merchant may be debited for the total cost, plus additional fees.

Why are E-Commerce Businesses Especially at Risk?

EMV chip cards have enhanced security for in-store purchases by making it more difficult for fraudsters to replicate consumer data and create counterfeit cards. The recent EMV liability shift protects merchants, because they will not be responsible for fraudulent purchases made with EMV cards. However, this type of protection is not available with online purchases, which has actually pushed fraudsters online and e-commerce retailers have suffered as a consequence.


Data breaches are one of the leading causes of online fraud, which means that having proper security measures in place is the best way to prevent fraud. Using a firewall, changing factory default passwords, and encrypting data are a few of many techniques that will secure online transactions and help you to maintain PCI compliance. Plus, taking steps to confirm customer identity such as using Address Verification Service (AVS), requiring customers to enter the card’s CVV, and requiring signature upon delivery will deter fraudsters.

There are a variety of software options available that can help you maintain PCI compliance, prevent fraudulent purchases, and even provide complete chargeback protection. FraudWatch is an innovative software that scans all incoming orders for indicators of fraud, and provides a simple Yes or No answer. It has the highest automated approval ratio of any fraud protection program, which will prevent an unnecessary drop in sales. Plus, Fraudwatch guarantees a 100% chargeback protection, meaning that if an order is approved but turns out to be fraudulent, the merchant is not at all responsible.

As online fraud continues to thrive and evolve, it remains necessary for e-commerce merchants to educate themselves and retain a high level of security. Implementing the right tactics and software programs can vastly reduce, and even eliminate, the damage that fraud can pose to your business.