E-Commerce and Fraud Protection Tips

This document distills practical e-commerce fraud prevention steps that help merchants recognize and act on risk signals before online payment fraud turns into chargebacks. It highlights patterns such as free email addresses, non-tangible goods, subscription services, international shipments, and high-ticket items. During peak shopping seasons, a returns surge and holiday abuse can amplify friendly fraud, first-party abuse, and unauthorized transactions. Clear policies, order quantity limits, and a consistent risk management strategy improve approval rates and conversion rates while keeping customer experience in focus.

The guidance urges layered verification: AVS and CVV2 checks, confirming bill-to and ship-to mismatches, phone confirmations on large or rushed orders, and traceable shipping with proof of delivery and proof of delivery photos. Collect device ID, IP addresses, and other data points collected to feed IP fraud scoring tools; block high-risk domains and IP ranges; and apply policies so orders can be approved or declined with transparency into decisions. Limit shipping to PO Box shipping addresses, collect compelling evidence, and use chargeback monitoring programs to reduce false positives and false declines. For services, signed acceptances create documentation that counters friendly fraud.

Security fundamentals matter. Be PCI compliant with PCI Data Security Standards by encrypting cardholder data, using a firewall between the internet and systems, antivirus software, regularly testing security systems, and enforcing a clear password policy with two-factor authentication. These measures help prevent data breaches tied to weak passwords, poor website security, SQL injection, cross-site scripting, malware attacks, and advanced persistent threats.

Identity verification, verification software, sanctions screening, global watchlist search, and customer due diligence support regulatory compliance. Tools in the e-commerce fraud detection market increasingly use machine learning and advanced machine learning for payment fraud management, authorization optimization, and faster time to value. Platform features such as Shopify Protect or a WooCommerce extension, and support for digital wallets, bank transfers, and e-gift cards, can help reduce friction.

Operationally, watch for repeated declined transactions, shipping to PO Box, and low-value transactions used for card testing fraud. Guard against account takeover fraud, account opening fraud, triangulation fraud, promotion fraud, affiliate fraud, refund fraud and refund abuse, loyalty program fraud, returns without merchandise, counterfeit goods returns, and professional refunding service schemes. Coordinate with shipping carriers and avoid relying on a financial guarantee alone.

Proposal Kit can help teams document these practices quickly. Its document assembly and extensive template library make it easy to produce clear policies, SOPs, and response playbooks; automated line-item quoting supports proposals; and the AI Writer can build supporting documents. Use cases include an e-commerce store formalizing fraud workflows, a subscription service writing refund policies, and an agency packaging client-ready risk procedures.

Expanding on the guidance, teams should assume the industrialization of fraud will continue and build playbooks that show how to identify fraud step by step. Make sure risk is calculated at order intake using IP scoring tools, device data, and velocity checks, then policy automation ensures policies are applied the same way every time. With tight integration with e-commerce platforms, including a WooCommerce extension, workflows can route risky orders for review and quickly approve or decline.

Define specific thresholds to limit order quantities, flag returns and card testing attacks, and watch for promo and loyalty abuse and refund policy abuse. Operational controls also matter: restrict employee access to dashboards and payment systems, require staff to collect proof of delivery on high-value shipments, and document who reviewed which exception so you can detect and prevent repeat patterns.

At a leadership level, portfolio monitoring helps you see which product lines, geographies, or channels drive losses versus growth, allowing smarter investment in controls without harming good customers. Document decision trees for high-risk situations and include escalation paths, training notes, and evidence requirements so reviewers can reach consistent outcomes quickly.

Proposal Kit helps organizations codify these practices by assembling clear policies, reviewer checklists, and SOPs that map data inputs to actions, outline approve-or-decline criteria, and align with your integration with ecommerce platforms. Teams can use the template library, document assembly, and AI Writer to produce fraud workflows, exception logs, and response plans that scale with the business.

To deepen the guidance, build a governance model that defines who owns fraud detection, what metrics matter, and how reviews scale. Track a simple KPI set: chargeback rate, dispute win rate with compelling evidence, manual review rate, false positives and false declines, approval rates, conversion rates, and time to value. Segment policies by risk: higher scrutiny for eGift cards, non-tangible software, and high-ticket items; lighter touch for trusted customers using digital wallets or bank transfers. For cart and checkout, limit order quantities on risky SKUs and set velocity caps that catch returns and card testing attacks without harming good buyers.

Make the risk calculation explicit. Combine device ID, IP fraud scoring tools, repeated declined transactions, and data points collected into a weighted model so policies are applied consistently through policy automation. Use verification software and identity verification sparingly to reduce friction, then route edge cases to manual review with transparency into decisions and clear approve or decline criteria.

Train teams on how to identify fraud patterns such as triangulation, affiliate abuse, promo and loyalty abuse, and refund policy abuse; require reviewers to collect proof of delivery and retain proof of delivery photos. Operational hygiene matters: restrict employee access, rotate credentials, and document handoffs.

Plan integration with e-commerce platforms upfront. Features like Shopify Protect or a WooCommerce extension can streamline workflows and authorization optimization. Build queue rules that detect and prevent account takeover and account opening fraud, while portfolio monitoring highlights losses by channel or region.

Include sanctions screening, global watchlist search, and customer due diligence checkpoints to support regulatory compliance. Strengthen security by staying PCI compliant: encrypting cardholder data, firewalls between the internet and systems, regularly testing security systems, antivirus software, and a clear password policy with two-factor authentication. These steps protect against poor website security risks like SQL injection, cross-site scripting, malware attacks, and advanced persistent threats.

Proposal Kit can accelerate this work by assembling standardized policies, reviewer checklists, and SOPs; mapping signals to actions; and documenting exception paths. Teams can use the template library, document assembly, automated line-item quoting, and the AI Writer to produce response plans, training guides, and integration notes that scale with the ecommerce store.

Writing the E-Commerce and Fraud Protection Tips document

E-Commerce Tips for Client

Use designated account for Internet orders (check with clients bank for restrictions). 90% of fraudulent orders come from free e-mail addresses. You may want to consider refusing credit card orders from customers using free e-mail or manually verify orders.

There is a higher risk for non-tangibles (software, etc). Subscription services are high risk. Verify manually if "bill to" and "ship to" are different. Use a traceable shipping method.

Use manual credit card processing with AVS verification for least risk. Inform customer who the charge on their credit card will come from when they look at their monthly statement in the HTML and e-mailed receipts. International orders are high risk.

Request phone # on back of card and manually verify. Once the product is out of the country, it’s gone. Phone the customer back on large orders, especially on 2nd day or overnight shipping.

Manually verify orders and consider getting a signed slip even by postal mail for large orders, high dollar orders and orders that fall out side the normal pattern of clients customers. Most fraud will fit a pattern that deviates from that of the average legitimate customer. If you take Internet checks, consider using the iCheck service. Be wary of breaking policies for customers on payment issues, it can be a fraudulent order (i.e. shipping to a 3rd party address that doesn’t match the credit card billing address because it is a gift) or sending a product before payment clears because it is "very urgent".

The merchant is most at risk for Internet fraud and charge backs since there is no signature. Try to get backup information. Only give free offers and bonuses upon receipt of a completed warranty card or get customer receipt confirmation another way. Resolve problems when possible in favor of your customer, it reduces the chances of negative word of mouth advertising.

Block on-line orders from high fraud domains for digitally delivered products and services. For example, do not allow orders for a download product sent to hotmail.com, yahoo.com addresses. Keep a block list of high fraud domains.

Block on-line orders from high fraud IP address blocks. Most fraudulent orders come from foreign web servers. Consider blocking all orders from known high fraud IP address blocks such as those assigned to Asian web servers in Malaysia and Indonesia, Nigeria, etc.

The fraud may not originate from those servers, they are frequently hijacked from other locations. Use a credit card processor that allows verification of the CVV2 credit card security id code which is printed in the back of most credit cards. This will not always guarantee the order is legitimate, however it will add an extra layer of protection.

Beware using shopping cart systems which do not have good security systems built in. For example, one of our partners setup a Yahoo! Shopping cart and immediately after going on-line and the store was announced, their fraud rate for digitally delivered products was 50%. Design your e-commerce system with fraud attempts in mind. You will be hit with a considerable amount of fraudulent order attempts for certain types of products, especially digitally delivered products and services.

Design your shopping cart to track orders real time with a multi-page order form and gather IP Addresses. Used in conjunction with free e-mail and IP address blocking you can spot and stop many fraud attempts real-time as they are occurring by analyzing the order information as it comes in before the payment page is submitted. If you are performing services for clients who are paying by credit card, have them sign off on the acceptance of the project in writing and include their partial credit card number on the acceptance form.

This can prevent a customer from trying to chargeback services. The credit card company will almost always side with the customer if you do not have a signature.