From small startups to large enterprises, e-commerce today has fueled the growth of numerous businesses across several industries. Since the global COVID-19 pandemic happened three years ago, e-commerce has come a long way.
E-commerce sales are undoubtedly on the rise, reaching a worldwide sales of $6.3 trillion in 2023. At the same time, e-commerce frauds are also increasing, with losses reaching $41 million in 2022 and predicted to exceed $48 billion in 2023.
With such risk in place, businesses and consumers must not overlook the importance of e-commerce fraud protection software in their tech stack.
What is e-commerce fraud protection software?
E-commerce fraud protection software is a specialized tool designed to detect, prevent, and mitigate fraudulent activities in online retail and e-commerce businesses. These solutions utilize advanced algorithms, machine learning, and real-time monitoring to identify challenges posed by digital transactions, including payment fraud, identity theft, account takeovers, and other malicious practices.
E-commerce fraud has consequences beyond just financial damage to businesses. It can go to the extent of destroying an organization’s reputation and compromising customer trust. The fraud protection tool protects from all of these risks by creating a secure environment for digital transactions in the dynamic landscape of e-commerce.
G2’s E-commerce Fraud Protection category is built to help businesses easily find solutions that work best for them.
But before diving into the details of the software, let's go through some common use cases of e-commerce fraud that merchants and consumers are prone to.
Common types of e-commerce frauds
E-commerce fraud has evolved over the years. From as simple as stealing credit card details to using bad bots and the dark web to conduct cyber crimes, fraud techniques have grown by leaps and bounds.
Below are some of the prominent use cases of e-commerce fraud on the internet.
- Credit card fraud: Fraudsters steal credit card details through phishing scams or data breaches while tricking customers into clicking links that expose their sensitive information, such as card details. Fraudsters also use the dark web to buy card details, which is another Card Not Present (CNP) method.
- Chargeback fraud: A chargeback fraud happens when customers intentionally initiate a chargeback against an item already received. In most cases, it’s an unethical practice by customers where a bank or credit card network refunds the amount, but ultimately, the business has to incur the loss. In cases where it isn’t intentional, it is also called a friendly fraud.
- Account takeover (ATO) fraud: Fraudsters hijack an account, i.e., log in to an e-commerce store, gain legitimate access, use it to buy things, steal credit card details to sell on the dark web, etc. According to Sift’s Q3 2023 Digital Trust & Safety Index report, ATO fraud has already surpassed $635 billion in losses by the end of 2023.
- Triangulation fraud: It occurs when fraudsters use a real customer and an e-commerce store to create the fraud. Fraudsters make a customer place an order at a meager price. The customer places the order, and the fraudster steals the credit card details to buy the item and get it shipped to the customer. Fraudsters take advantage of credit cards, and customers raise complaints to get a refund from the credit network. Ultimately, the fraudster will still receive the amount against the item sold.
- Card testing fraud: This occurs when a fraudster tests stolen credit card details from the dark web to buy small items to confirm if the credit card works before making a large volume of purchases. Customers notice unauthorized amounts credited to the brand or e-commerce store, which tarnishes the brand's reputation and leads to lost revenue.
- Refund fraud: It is a type of payment fraud where a fraudster tricks a company into paying for a refund for items they originally didn’t buy that are defective or used. Fraudsters also use stolen credit card details to buy items, return them, and ask for a refund in another mode of payment to steal the money.
- Interception fraud: In this fraud, the fraudster places orders using a stolen credit card and ships them to the cardholder’s legitimate address. Quickly after placing the order, the fraudster requests customer support to change the address or do a self-pick-up from the distribution center. This method is adopted to bypass address verification and manipulate fraud detection systems.
All of these frauds have payment fraud in common—fraudsters use credit card details to conduct the fraud.
The real intention of the fraudster is to steal money from the customer’s account. However, businesses are responsible for protecting customers and their credentials from being mishandled from their platforms.
Preventive measures to curb fraud
There are several measures a business can take to curb these above-discussed frauds.
Below are some of them that businesses and users must not overlook to fight against fraud:
- Using secure socket layer (SSL) encryption on websites
- Demanding card verification value (CVV) code of credit card
- Using address verification service (AVS)
- Achieving payment card industry (PCI) compliance
- Using strong passwords for accounts
- Conducting timely audits of the website for vulnerabilities
Although these preventive measures are important, more is needed to protect the system. Over the years, hackers and scammers have discovered multiple ways to break into a system. Businesses need a robust solution that can identify and check before the attack.
This is where e-commerce fraud protection software comes into the picture. Powered by advanced algorithms blended with AI and ML technologies, the software can monitor the business platform round the clock, report any malicious activity, and even take it down by itself.
It’s also advised that e-commerce platforms implement these solutions or work with a third-party marketplace with fraud protection guidelines.
To make it easier for businesses to find such software, G2 has an E-commerce Fraud Protection Category where software from multiple vendors coexist. Users share honest feedback with G2, which helps businesses select, compare, and shortlist desirable software for their businesses.
Let’s look at some top-performing software in this category and examine the features for which the users rate them.
Highlights from G2’s E-commerce Fraud Protection category
The e-commerce fraud protection software category represents software for all business segments. Currently, it has 233 products that have contributed to 2,044 reviews to date.
To track the performance of the software, G2 releases quarterly reports (Fall, Summer, Spring, and Winter) for all eligible categories every year.
We have analyzed the G2 score of the top five products from the Grid® Report for E-commerce Fraud Protection | Winter 2024 and compared it against the Fall, Summer, and Spring reports of the same year.
We found out that SEON. Fraud Fighters was a clear winner in the fall and summer of 2023, but ClearSale has been performing well to outplay all of them in spring and winter.
SEON. Fraud Fighters and Signifyd have the same G2 score in the winter, but the satisfaction score of the former is higher than the latter, so SEON. Fraud Fighters ranks better than Signifyd.
As per G2 methodology, the satisfaction score is used as a tiebreaker if two products have the same G2 score.
Sift ranked 9th, 8th, and 8th as per the G2 score in the Fall, Summer, and Spring reports respectively. However, its score has improved in the Winter report and it ranks 2nd in the category led by ClearSale. The satisfaction score of Sift is also the second highest among the top five products.
The G2 score of each software product is calculated using two components: the satisfaction and market presence score.
The G2 score is used to compare, rank, and feature products on the G2 Grid® for each category. The E-commerce Fraud Protection Software Grid® is a high-level overview of all the products reported in the Winter Grid® Report 2024.
Of 233 products in the category, 33 were eligible to be featured on the Grid® this winter. ClearSale is currently on the top of the Grid®, holding the leader quadrant, and ranks high.
Nofraud, IPQualityScore, Kount, Riskified, Forter, Bolt, MaxMind minFraud®, Fingerprint, and Sumsub are also in the leader quadrant competing closely with ClearSale.
The placement of the product on the Grid® doesn’t remain constant and keeps changing as per the scores received by-products in each reporting season.
G2 advocates against rising e-commerce fraud
The e-commerce fraud market is rapidly growing, with fraudsters upgrading their techniques to bypass the security checks that payment networks provide. The consequences of fraudulent activities have caused serious damage to businesses and brands over the years.
G2’s e-commerce fraud protection software category and its real user testimonials of the products present a strong opinion on how software businesses are innovating their tech to catch scams and scammers.
Businesses in need of such software can take advantage of this category, look at user testimonials, compare products, and select the best software that caters to their all-around needs.
G2 also supports users by constantly adding valuable resources encompassing strategies to protect against fraud.
Learn how brand protection software can help brands sustain the e-commerce chaos.
Edited By Jigmee Bhutia
by Gabriel Gheorghiu
