By leveraging advanced technologies and exploiting vulnerabilities, these fraudsters are redefining the threat landscape for online businesses. For e-commerce enterprises, ensuring the safety of their platforms and customer data is now more critical than ever.

E-commerce fraud encompasses a broad range of cybercrimes targeting online shopping platforms. With more than 19% of global retail purchases occurring online in 2023 - a figure projected to exceed 22% by 2027 - the potential for fraud is growing in tandem with ecommerce’s expansion.

From identity theft to account takeovers, the stakes are escalating rapidly, compelling businesses to adopt robust fraud prevention strategies. 

The two most prevalent forms of identity-related e-commerce fraud are account takeover (ATO) and new account fraud (NAF). In ATO attacks, cybercriminals gain unauthorised access to user accounts by compromising credentials, while NAF involves creating fake accounts using stolen or fabricated identity data.

Both methods allow fraudsters to conduct unauthorised transactions, leading to significant financial and reputational damage for businesses.

Factors fuelling ecommerce fraud

There are a number of key factors that are stimulating the process – and success – of e-commerce fraud. They include:

• Accelerated digital adoption: The rapid shift to online platforms for daily activities, from shopping to banking, has created a fertile ground for cybercriminals. Increased internet traffic translates to more opportunities for fraudulent activities, making it imperative for businesses to fortify their defences.
• Advanced fraud techniques: Modern fraudsters employ cutting-edge tools such as artificial intelligence, machine learning, and bots to perpetrate large-scale scams. These technologies enable them to bypass traditional security measures and execute attacks with unprecedented precision and speed.

• The dual-edged sword of globalisation: While globalisation has unlocked new markets for e-commerce businesses, it has also widened the operational scope for fraudsters. Cybercriminals can now operate across borders, using infrastructure in one country to target victims in another, complicating detection and enforcement efforts. 

Strategies for Effective Fraud Prevention

Thankfully, there are a number of effective strategies that can help retailers combat the threat posed by e-commerce fraudsters. These include:

1.     Biometrics and behaviour analysis:
Biometric authentication - using fingerprints, facial recognition, or voice identification - offers a secure alternative to traditional passwords. Complementing this, behavioural analysis examines user actions, such as typing patterns and transaction behaviours, to detect anomalies indicative of fraud.

2.     Machine learning:
Machine learning algorithms can analyse vast amounts of data to identify unusual patterns, enabling real-time fraud detection. By continuously adapting to new threats, these systems enhance their effectiveness over time.

3.     IP tracking and geolocation:
By monitoring IP addresses and physical locations, businesses can flag suspicious activities, such as multiple accounts accessing a site from the same IP or logins from unexpected regions.

4.     Device tracking and Reputation:
Software development kits (SDKs) help establish unique device fingerprints, tracking hardware and software attributes to detect unauthorised access. Such systems prevent fraudsters from exploiting unfamiliar devices.

5.     Velocity checks:
Velocity checks identify bursts of rapid activity, such as multiple transactions within a short time, which often signal fraudulent behaviour.

6.     Multi-factor authentication (MFA):
MFA adds an extra layer of security by requiring multiple forms of verification. For example, authenticator apps generate one-time passwords, ensuring that unauthorised users cannot access accounts without the associated device.

7.     Moving beyond passwords:
With 83% of data breaches linked to stolen credentials, password-less authentication methods like biometrics, and FIDO2 standards are gaining traction as more secure alternatives.

8.     Employee and customer education:
Training employees to recognise fraud indicators and educating customers on secure online practices are essential for a comprehensive fraud prevention strategy. Topics such as password security, phishing awareness, and safe browsing habits can significantly reduce vulnerabilities.

9.     Layered protection:
The most effective fraud prevention strategies integrate multiple tools and signals, evaluating user activity from account creation through checkout. By layering protections, businesses can mitigate risks more effectively.

The road ahead

As fraudsters increasingly leverage AI to enhance their attacks, e-commerce businesses must adopt similar technologies to stay ahead.

AI-powered systems can identify and counter sophisticated threats, such as generative AI-driven phishing attempts and bots mimicking legitimate user interactions. This arms race underscores the need for continuous innovation in fraud prevention.

To address the evolving threat landscape, e-commerce businesses must adopt a holistic approach to fraud prevention. Collaboration among fraud prevention, digital experience, and identity teams will be crucial in creating seamless yet secure user journeys.

By investing in cutting-edge technologies and fostering a culture of vigilance, businesses can safeguard their platforms and customers, ensuring a resilient future for ecommerce.

As 2025 unfolds, the message is clear: fraud prevention is not a one-time initiative but an ongoing commitment. In this high-stakes battle, proactive measures and adaptive strategies will determine who thrives in the ever-expanding digital marketplace.