The rising threat of e-commerce fraud

Matthew Berzinski at Ping Identity describes how to balance security and customer experience this holiday season

 

With the 2024 holiday shopping season just around the corner, retailers are gearing up for the anticipated rush in e-commerce activity for peak days like Black Friday, Cyber Monday, and even Christmas.

 

With ever evolving loyalty schemes designed to personalise customer experiences, the potential attack surface for cyber-criminals also grows. This season, retailers face the critical challenge of balancing personalisation with the necessary security measures to prevent e-commerce fraud – without adding undue friction that could easily deter holiday shoppers.

 

Balancing customer experience with security

The holiday season is a double-edged sword for e-commerce retailers – a golden opportunity for sales and a prime target for cyber-criminals. As millions of shoppers rush to online stores, the risk of account takeover, loyalty fraud, and checkout abuse, skyrockets. Retailers must discern between securing these transactions and maintaining a smooth customer experience.

 

It’s no big secret consumers are increasingly impatient with anything that interrupts their shopping experience. Our own research found that 54% of consumers have abandoned an account due to frustrations during the login process.

 

The stakes are even higher during the holiday season, where any added friction can send customers straight to a competitor. In fact, 65% of customers want to buy from companies that offer a quick and easy shopping experience, whilst 51% are willing to accept stricter security measures if they keep data safe.

 

This is where the balance between security and convenience becomes paramount. 

 

A strong fraud prevention strategy doesn’t mean simply adding more barriers. Instead, it’s about utilising intelligent, often invisible tools that work behind the scenes to prevent fraud before it escalates, while also ensuring shoppers have a smooth, uninterrupted experience.

 

To do this effectively, retailers should focus on real-time fraud detection that works at every stage of the customer journey – from login to checkout – without creating unnecessary obstacles.

 

Tackling fraud without friction

The key to managing e-commerce fraud is in sophisticated technologies like machine learning, behavioural analytics, and biometrics. These tools enable retailers to identify suspected fraudsters early and prevent attacks before they influence the shopping experience.

 

Machine Learning: Machine Learning algorithms can analyse large volumes of transactional data in real-time, allowing retailers to spot patterns that indicate fraudulent behaviour quickly. Unlike static rules-based systems, Machine Learning is adaptive and gets smarter over time. It can differentiate between a real customer who happens to make an unusual purchase and a fraudster attempting to exploit stolen credentials. This reduces false positives, allowing genuine customers to shop without interruption.

 

Behavioural analytics: By analysing user behaviour, such as typing speed or navigation habits, behavioural analytics can detect anomalies that indicate an account takeover attempt. These technologies are passive, meaning they operate invisibly during the shopping experience, ensuring real customers aren’t burdened with extra steps.

 

Biometrics: Behaviour-based biometrics takes security a step further without adding friction. Factors like how a user holds their device, their keystroke dynamics, or even the pressure they apply when typing can all be used to confirm identity. This form of authentication operates silently in the background, helping to detect fraud while maintaining a seamless customer experience.

 

These technologies aim to provide security without making customers feel like they’re being interrogated at every step. By always monitoring behaviour and using risk-based assessments, retailers can limit additional checks to only those cases where there is genuine suspicion of fraud; maintaining a smooth shopping experience for most users.

 

Strategies for secure and smooth sales

Retailers should begin implementing fraud mitigation strategies well before the holiday season starts. Investing in machine learning-driven fraud detection, behavioural analytics, and biometrics can significantly bolster defences without compromising user experience.

 

Here are three practical steps:

 

Real-time fraud detection: Ensure your fraud detection tools are integrated into the entire shopping journey, from account creation to checkout. This real-time analysis helps flag suspicious activities early, preventing fraud without adding unnecessary steps for customers.

 

Customer education: Educate your customers on best practices for secure shopping. Simple actions like using strong passwords, enabling multi-factor authentication, and being aware of phishing attempts can help reduce the risk of account compromise.

 

Passive monitoring tools: Adopt tools that work invisibly in the background. Device fingerprinting, for instance, can identify repeat fraudsters, while behavioural biometrics can spot inconsistencies in user actions. These tools ensure genuine users experience no interruptions while potential threats are flagged for further scrutiny.

 

Secure sales with minimum friction 

As the holiday season approaches, the pressure is on for retailers. Balancing robust fraud prevention with a seamless customer experience is challenging but achievable with the right tools. Machine learning, behavioural analytics, and biometrics offer sophisticated, behind-the-scenes fraud detection that satisfies genuine customers.

 

Retailers should act now to upgrade their fraud prevention strategies, ensuring that both customers and sales targets are protected.

 

By creating a secure but frictionless shopping experience, businesses can make the most of the holiday season – turning potential risks into opportunities for building customer trust and loyalty.

 

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Matthew Berzinski is Senior Director, Product Management at Ping Identity, publishers of The ultimate guide to online fraud prevention

 

Main image courtesy of iStockPhoto.com and Kerkez