Fraud Prevention
Systems and practices to detect and prevent fraudulent transactions.
1 min readLast updated Apr 2026
Quick Reference
CategoryLegal, Compliance & Privacy
Related Terms1
Systems and practices to detect and prevent fraudulent transactions.
Why It Matters
Ecommerce fraud costs merchants 1-2% of revenue. Fraud leads to chargebacks, lost merchandise, and potential account termination.
Practical Example
Scenario
A electronics retailer implements fraud screening for high-risk orders.
Calculation
Before: 2.1% of orders fraudulent = $21K lost annually on $1M revenue. After screening: 0.3% fraud rateResult
85% reduction in fraud losses, saving $18K annually with $200/month fraud prevention tool
Pro Tips
- 1Flag high-risk indicators: mismatched billing/shipping, high-value first orders, expedited shipping to new addresses
- 2Use AVS (Address Verification) and CVV checks on all transactions
- 3Consider 3D Secure for high-risk product categories (electronics, luxury goods)
Common Mistakes to Avoid
Over-blocking legitimate orders—declined genuine customers hurt revenue more than some fraud
Relying solely on automated systems without manual review of flagged orders
Not adapting fraud rules for international orders (different address formats, no AVS in some countries)