Protect Your Small Business From eCommerce Fraud

The growth of eCommerce has generally been considered a good thing for both the consumer and businesses. This is particularly true for small businesses. Shopping online provides an added level of convenience for customers that can really help a small business grow in size, while businesses can showcase more of their goods and services than they might otherwise be able to in a brick-and-mortar setting. That’s to say nothing of glowing reviews from customers whose online recommendations are available immediately and are like gold to potential new clients.

With all the perks it provides, it’s no wonder that eCommerce is exploding year after year. Case in point: Total, non-inflation adjusted eCommerce sales for the fourth quarter of 2023 were $324.8 billion, or a 19.5% increase from the third quarter of 2023[1]. Another study found that 63% of small businesses offer eCommerce, with 70% of small business owners saying that they believe customers expect to be able to complete a transaction online [2]. Sadly, when it comes to cash exchanging hands in any medium, you can count on fraudulent activity to follow. Online payments are no different. The total amount lost to eCommerce fraud in 2023 is estimated to be around $48 billion, with the average monetary loss to each eCommerce scam clocking in at around $101[3]. For small businesses in particular, where every dollar counts, every lost one can be hard to recoup. 

It's not just about loss of cash, too. Businesses that don’t pay enough attention to fraud could be missing out on customers, as well. As shoppers continue to educate themselves on eCommerce fraud, many are looking to spend their money with businesses that do everything they can to help manage it. One survey found that two-thirds of consumers said they would change service providers for better fraud protections, while 89% said organizations should be doing more to protect them against it[4].

Savvy business owners and consumers alike understand that eCommerce fraud isn’t going away. Still, there are plenty of smart moves that businesses can implement to help ward off fraud for their customers and, in the long run, save themselves from losses. Since North American eCommerce and retail companies pay approximately $3 in total cost for every dollar that’s lost to fraud[5], making those adjustments should be a top business priority.  

5 steps every business can take to protect against eCommerce fraud

So, how can you protect your business from eCommerce fraud? Here are a few things to consider. 

1. Understand how payment typically flows into your business. The more you understand how purchases and payments tend to come into your business, the more quickly you’ll be able to pick up on any orders that appear atypical and might be fraudulent. This allows you to, hopefully, reject them before the fraud even occurs. Some red flags to be on the lookout for include the use of multiple credit cards for one purchase, many separate orders that come in over a short period of time for the same customer, and unusually large orders.
2. Update your software. Technology has come a long way with regard to fraud management, but this only helps if you invest in the right areas. Shop around for the best options in antivirus and malware software and machine learning capabilities based on what companies of your same size and industry are using. Once you have the software, make sure you stay vigilant regarding any necessary updates.
3. Offer the basics. Staving off eCommerce fraud could be as simple as ensuring that you provide some of the basic preventative measures that have been around for years. Some common ones include multifactor authentication, the use of CAPTCHAs and other plugins, and payer authentication solutions, including requiring the Card Verification Value (CVV) for all online purchases.
4. Partner with an experienced company for help. It’s estimated that by 2027 the eCommerce fraud detection and prevention market could reach over $100 billion[6]. That’s because outsourcing to the experts is one of the best ways to stay vigilant with regard to fraud, and to help avoid the losses that come with eCommerce fraud, for both your business and your customers. With Old National’s fraud management services for business, for example, clients can validate incoming checks against submitted check issue files through things like account number, check number and amount. ACH Positive Pay also adds a layer of protection for all electronic transactions, while ACH Block blocks all incoming ACH entries from posting to your account and returns the item to the originator as unauthorized.
5. Perform regular audits. Fraud management isn’t a one-and-done business item. Criminals are constantly enhancing their methods, and it’s up to business owners to stay on their toes. Consider performing an annual audit (at least) of all the practices that you’ve implemented to see if there are areas that could use improvement, and keep your business safe by teaching employees how to spot fraud. Also be sure that you regularly change any relevant passwords and logins to your systems and software.   

What businesses can do if they’re the victim of eCommerce fraud

Whatever the extent of the fraud breach, the first step when this occurs is to inform the customer of what specifically happened, what data of theirs was compromised and when the breach occurred.

Customers will also want to be made aware of what you’re doing to help settle the matter. To that end, update any logins and passwords that might have been involved and report the theft to the authorities. If you’re working with a fraud management company, make sure you get them involved to understand what happened and determine how much you’re covered for.

As online shopping continues to grow eCommerce fraud is, unfortunately, something that all businesses need to be prepared to deal with. Luckily, there are some useful ways to help avoid it, as long as you continue to monitor fraud as it evolves. Old National is ready with dedicated small business banking experts to help you figure out a fraud plan, or for any of your other small business needs.