How to Avoid Fraud in Your Online Business? A Guide to eCommerce Security

Ways to Prevent eCommerce Fraud

Last updated - April 13, 2023

It is not a secret that e-commerce is one of the fastest-growing industries in the world and has been for a while, even before the big boost it got because of the COVID-19 pandemic. People have access to everything they need online without ever leaving their homes. Naturally, with this level of convenience comes great risk—the risk of fraud and other malicious activities by hackers.

According to Statista, the estimated loss in e-commerce transactions in 2022 was 41 billion US dollars. The figure is expected to grow to 48 billion in the next year. In order to avoid such issues, it is imperative that you take the necessary measures to protect your website and your customer’s data, keeping them and yourself safe from potential threats.

While there are many ways to do just that, the first step is to understand how fraud works.

What is eCommerce Fraud and How Does it Work?

What is eCommerce Fraud?

E-commerce fraud is a form of online crime where hackers target online shopping websites and use them for their own gain. This type of fraud is usually carried out by cybercriminals who have created automated bots that spoof the identity of legitimate users (through stolen credit card numbers), which allows them to make purchases without paying for it. This is one of the simplest ways to steal from various businesses without getting caught.

The process can look like this (but it is not the only way): A customer visits a retailer’s website and places an order, but the cybercriminal uses their bot to place a fake order for more items than the customer actually bought. The retailer ships out the additional items and charges them for them but does not receive payment from the cybercriminal. You might be wondering how to avoid this and other fraud attempts. Here are a few suggestions on how you can manage to do just that.

Secure the Payment Gateway

How to prevent eCommerce fraud? - Secure the Payment Gateway

It is important to use a secure payment gateway that encrypts all customer data and provides two-factor authentication. This is important because it ensures that your customer’s data is safe and that the payment gateway cannot be hacked. It also protects you from any potential lawsuits that may result from a breach of security. You can use a trusted third-party payment processor, such as PayPal or Stripe, which will encrypt all of the customer’s data before sending it to your website.

Secure Your Network

Ensure that all systems are protected by a firewall and virus protection software, as well as regular updates of those programs when new threats emerge in the cyber world.

Store your company’s data securely. Back up all of the credit card information and personal details you collect from customers so that if something happens to your systems, you can recover without losing any important info.

Secure Your Website

Use SSL certificates on all websites and make sure data collection forms are encrypted to avoid interception by third parties. Avoid using old software versions that have been unsupported by their vendors or developers for a long time.

Encrypt sensitive information stored on your computer hard drive or in databases (like usernames, passwords, and credit card numbers). Limit access to your network. Restrict access to sensitive data and payment information to only those employees who need it for their jobs.


This is the most basic security measure you can take. It’s also a good idea to use SSL certificates, which encrypt data between your site and visitors’ browsers and provide an extra layer of protection from attackers who might be intercepting traffic on public networks or attempting to gain access via other means.

Utilize Identity Verification Services

You can spot and stop fraudsters in their tracks with identity verification software. It takes minimal effort on your part, it often minimizes customer onboarding costs and most importantly it increases the volume of quality customers by preventing fraudulent accounts.

Use trusted payment methods and addresses

If you accept payments online in any form, make sure they’re being made through a secure gateway with proper authorization checks in place; this includes credit card numbers as well as PayPal accounts (which are not immune from fraud).

Encrypt Data During Transmission

How to prevent eCommerce fraud? - Encrypt Data During Transmission

Encrypting data during transmission is the most common and effective way to protect your e-commerce site from fraud. Encrypting data means encoding it so that only those with special access can read it, like the NSA or FBI. There are several encryption methods; AES (Advanced Encryption Standard) is the most popular because it is fast and reliable. RSA and SHA are also used for encryption purposes but are less common than AES due to their slower performance on mobile devices. 

Encrypting data during transmission makes it more difficult for hackers to steal your e-commerce site’s customer information. If they can not read the data, they can not use it. This is especially important if you store credit card information on your server; if someone breaks in and steals that info, they will be able to make fraudulent purchases with it.

Use a Secure Storage Device

You should always use a secure storage device to store your files and backups, or at least encrypt them when you do. A good example of this would be an external hard drive that has its own encryption software built in. If you already own storage devices that do not have the encryption software built-in you can achieve the same results by using software like VeraCrypt or Bitlocker.

The more precautions taken now will save big headaches later on down the line if something goes wrong–and trust me when I say there is nothing worse than having all your personal info dumped onto public servers because someone could not bother encrypting their stuff.

Backup Files in a Secure Location

This one might be self-explanatory but still worth mentioning. If you are backing up your files on an external hard drive, ensure that it is kept in a locked cabinet or room with limited access so that only those who need access can get into it. If you are backing up on a cloud storage service like Dropbox, ensure that your account has a good strong password and that it is protected by two-factor authentication.


The e-commerce industry is growing at a rapid pace, and with it comes the risk of fraud. It is extremely important to stay vigilant about security measures so that you can protect your customers and your business from fraud. It is also important to keep up with the latest trends, as well as new security measures. Try your best to stay on top of the game when it comes to e-commerce fraud prevention and protection; otherwise, you could end up with a lot more headaches than you bargained for.

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