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Fraud Prevention
Fraud Analysis and Prevention
Fraud Analysis and Prevention

Learn about the types of fraud that can be used and the ways to protect your store from them.

Olga Tereshina avatar
Written by Olga Tereshina
Updated over a week ago

Every online store owner dreams of being successful and having a well-recognized brand. However, the more popular your brand is, the more likely it will become a target of online fraud.

Online fraud can be of several different types, and you need to protect yourself from each of them.

Friendly Fraud

The first one, most common, is a so-called Friendly Fraud that, in fact, is nothing but a cheating customer. A Friendly Fraud happens when a customer purchases a product with their credit card and issues a chargeback (in some cases deliberately), claiming an item was never received or that they never made the charge.

To prevent friendly fraud, make sure your credit card descriptors match your business name. Often, chargeback fraud happens because customers don’t recognize the company name on their card statements. So please check your company details’ settings once again.

Also, if you can, only use shipping with tracking provided by most carrier companies. If customers approach you asking for a refund, it’s the best evidence you can provide to prove the products were delivered to their door.

Last but not least, have clear reshipping, refunds, and return policies.

The best way to protect yourself from fraud is to avoid chargebacks at all costs and prepare for when it happens.

Clean Fraud

The next fraud type you need to protect your store from is Clean Fraud. The basic principle of clean fraud is that a stolen credit card is used to make a purchase, but the transaction is then manipulated so that fraud detection functions are circumvented.

So you better keep an eye on any suspicious orders coming your way. Being equipped with the necessary tools is vital in everyday fraud management.

Use reliable and secure payment systems with strong built-in protection from fraudsters like Kount, NoFraud, Signifyd available via the X-Payments integration.

Many payment gateways, such as PayPal powered by Braintree, come with basic fraud tools like AVS (Address Verification System) and CVV (Card Verification Value).

If using X-Payments or Braintree is not your option, use at least a built-in AntiFraud Service Connector to monitor your accounts and transactions for red flags such as inconsistent billing and shipping information, as well as the physical location of your customers. X-Cart AntiFraud allows you to track customer IP addresses and alert you to any addresses from countries known as a base for fraudsters.

In combating fraud, don’t forget to think about the customer and ensure their experience isn’t compromised. Blocking suspicious purchases without detailed evidence can lead to an increase in cart abandonment. Keep both your business and your customers safe, and reduce your chances of losing revenue and drowning in chargeback fees.

Account Takeover Fraud

The third fraud type you should be aware of is Account takeover fraud, a form of identity theft wherein a criminal gains access to a registered customer’s account and poses as that known and trusted shopper.

To prevent accounts takeover and protect your customers, use Two-factor authentication that will level up protection to user accounts by adding a necessity to confirm the username and password with a one-time SMS code to log in. Even if the Authy server is compromised, the hacker will have no usernames or passwords, as these sensitive details are NOT stored on their end.

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