E-commerce Fraud Prevention: A Guide For Retailers In Nigeria

E-commerce Fraud Prevention: A Guide For Retailers In Nigeria

The ease of use and accessibility of e-commerce has made it more popular in recent years, revolutionizing the way many businesses run. The COVID-19 pandemic and the global lockdown that followed in 2020 played a significant role in the development and adoption of e-commerce, opening up new avenues for small businesses and entrepreneurs to access international markets and customers that were previously exclusive to large corporations.

Today, people are more inclined to shop on various e-commerce platforms, increasing the number of online retailers. But as many businesses are leveraging the potential of e-commerce, it has also become a hotbed of fraudulent activities by malicious entities to cause financial loss to unsuspecting users. Hence, there is a need to understand e-commerce fraud and how to prevent it in Nigeria.

What Is E-commerce Fraud?

E-commerce fraud is the event of a criminal using stolen bank account details or payment information to make transactions without the knowledge or authorization of the owner. This fraud can be phishing, triangulation fraud, interception fraud, credit card fraud, affiliate fraud, and chargeback fraud.

Phishing and credit card fraud are often associated with the stealing of payment information to make transactions. But chargeback fraud is insidious payment fraud in which a customer buys a product online with a credit card and requests a chargeback from the issuing bank after receiving the purchased product.

How To Prevent E-commerce Fraud In Nigeria

1. Use Fraud Detection Software

Machine learning algorithms are used by fraud detection software solutions to assess transaction data and search for gaps that could allow fraudulent activity to occur. These tools can track fraudulent activities that might go undetected by the naked eye by analyzing details like device information, IP address, location, transaction history, and buyer behavior.

Furthermore, you can determine the possibility of fraud by utilizing fraud detection software to analyze the risk score associated with each transaction. With that, you can reduce the risk of financial loss by setting up rules to approve or reject transactions automatically.

2. Integrate Multi-Factor Authentication

Multi-factor authentication (MFA) requires users to provide two or more forms of authentication to complete a transaction, effectively preventing fraudulent transactions. Some of its examples are passwords, one-time codes sent by email or SMS, and biometric identifiers like fingerprints and facial recognition.

It is simple to integrate MFA into the authentication procedures used by your business. MFA is a built-in feature of most digital platforms and software programmes. For instance, completing a transaction on many online banking platforms requires users to enter a one-time code (OTP) emailed or texted to their mobile device.

In a similar vein, a lot of e-commerce sites require users to verify their purchases by entering a code sent to their mobile phones. Therefore, retailers must consider the kinds of transactions their business handles and the level of risk involved in each transaction when integrating MFA into their authentication process. For instance, more rigorous authentication procedures might be needed for sensitive data transactions or high-value transactions than for low-value transactions.

3. Adopt KYC Procedure

Financial losses are not the only consequence of fraudulent transactions, as they can damage the business’s reputation. However, using Know Your Customer (KYC) procedures is one practical method for preventing such headaches.

KYC is the process of confirming a client’s or customer’s identity. Usually, they are used by financial institutions to stop financial crimes like theft or money laundering. On the other hand, e-commerce businesses can also utilize KYC procedures to prevent fraud. Some ways retailers can adopt KYC are customer identity verification, customer behavior monitoring, etc.

4. Monitor Transactions

Monitoring transactions as they happen is another crucial precaution to ensure fraudsters don’t use their hard-earned money to support their lavish lifestyle. Transaction data monitoring allows you to identify red flags quickly and take corrective action to prevent fraud from happening again.

You can monitor transactions by tracking transactions in real-time, analyzing trends, reviewing orders manually, and evaluating the geographic locations of your customers.

5. Educate Your Customers

Although it may require additional effort, educating your customers about fraud trends and patterns they should avoid is an essential strategy to prevent them from becoming victims of fraudulent activities that could hamper your business. This will also facilitate the development of a brand community, an additional benefit. Therefore, ensure that your customers know the risks associated with fraud and the safety measures available.

Some crucial preventive measures they can take include using secure payment gateways for transactions, avoiding public Wi-Fi when making transactions, keeping their passwords or codes private, and checking their bank or credit card statements regularly for unauthorized transactions.

Conclusion

It is not far from the truth that no strategy will be compelling enough to eliminate the risk of e-commerce fraud in Nigeria. But, applying the steps highlighted in this article can be an excellent measure to reduce the possibility of fraud in business.