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Ecommerce Fraud: 4 Myths Debunked

Discover common misconceptions about fraud prevention and learn effective strategies to protect your business and customers.

Understanding the Realities of Ecommerce Fraud


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Ecommerce Fraud: 4 Myths, Misunderstandings and Misconceptions

Ecommerce Fraud
Controlling fraud is consistently a hot topic in the digital commerce industry. Consumer behavior prompts merchants to introduce more and faster ways for consumers to pay for goods and services. Consequently, for each new payment method, there are fraudsters on the sideline devising ways to exploit it. To effectively mitigate fraud, businesses must first separate fact from fiction.

In a recent Identity Trust Pulse podcast, Parul Sharma, Senior Director of Professional Services at LexisNexis® Risk Solutions talked with host, Pratik Choudhary, to clear up four of the most common misconceptions and debunk industry myths about fraud prevention.

Myth 1: It is easier and cheaper to write off fraud than address it.

”Not true,” says Sharma. Recent studies indicate that fraud remains pervasive and persistent, so avoiding fraud in the first place is a much more cost-effective approach. According to the LexisNexis® Risk Solutions Cybercrime Report, the number of human-initiated fraud attacks increased 40% YOY from 2022 to 2023.1 Furthermore, on average, every fraudulent transaction costs merchants and retailers over three times the lost transaction value, including the cost of fees and fines along with the cost of replacing merchandise.2 All indications are that these trends will continue to increase over time – proving that simply writing off fraud is neither easy nor cheap.

While fraudsters are becoming more sophisticated, so too, are tools to prevent it. Sharma advises companies to “change the lens” and view fraud as a customer satisfaction and retention issue rather than one to be tolerated and addressed after it occurs. She suggests companies evaluate their workflow and proactively tighten up the payment process to offer a better and safer consumer experience.

Fraud can happen at different points in the payments journey. New technology solutions can help identify and thwart fraud earlier in the process resulting in happier customers, operational cost savings, and a company reputation for safe and secure purchases.

Myth 2: Fraud mitigation efforts should focus mainly on the payment stage.

A common misconception in e-commerce is that fraud mitigation should only focus on the payments stage. This view overlooks the complexity of fraud prevention, which involves multiple touchpoints within the customer journey.

While the payment stage is crucial since it is where fraudsters typically monetize, it is not the only point of vulnerability. Other critical touchpoints include account opening, logins, password resets, and checkout. Securing these interactions is essential to prevent fraudsters from gathering the information they need to exploit the payment stage.

For instance, data uncovered from the LexisNexis® Risk Solutions Cybercrime Report shows that one in every eight password resets leads to fraud3, highlighting the importance of a comprehensive approach. By protecting all aspects of the customer journey, businesses can significantly hinder fraudsters' efforts, thereby busting the myth that focusing solely on the payment stage is sufficient.

Myth 3: Frictionless workflows exist.

“I do not think frictionless workflows exist,” Sharma commented. She shared an example to help illustrate. Consider a customer wishing to transfer half her wealth from one bank to another. Would that customer be happy with a completely frictionless experience? Not likely. She would expect the bank to require definitive confirmation that she owns the account and is authorized to make the transfer. This example describes a situation where a customer may want to encounter some level of friction. However, applying the same level of friction to small transactions would be unnecessary and frustrating.

Sharma suggests that organizations build workflows that apply optimal friction by focusing on four aspects of the consumer’s digital interaction. First, evaluate the consumer’s end-to-end journey. Second, understand and address the types of fraud that can occur at each touchpoint. Third, assess the end-user’s risk appetite for each transaction type. And lastly, understand how much friction a consumer is willing to tolerate to complete a transaction.

With a well-designed workflow and today’s technology, companies can maintain safety while making most transactions feel frictionless, leading to smoother transactions and improved customer retention. Logical, client-focused workflows make it easy for the consumer and difficult for fraudsters. The old adage, “perception is reality” holds true here and it is why managing customer expectations and educating them about the importance of “appropriate” friction is essential.

Myth 4: Companies can fight fraud on their own.

Bad actors do not work alone. They work together in networks sharing stolen information across geographies and industries. Once a breach occurs at a merchant or financial institution, the damage is swift because fraudsters know they have limited time to monetize the information they’ve acquired.

That’s why it takes a network to fight a network. Combating these coordinated criminal attacks will take a collaborative effort involving all participants in the value chain. The problem is global, and it is incumbent upon companies, financial institutions and other participants to respond in-kind by collecting, validating and sharing quality data to minimize disruption. An industry-wide effort can utilize more data assets to quickly identify potential breaches before they occur.


Understanding the realities of fraud is a crucial first step in preventing it. Fraud is a widespread and persistent threat with damaging effects that impact institutions, industries, and consumers alike. Prevention requires a collective effort by industry participants to gather and share quality data and educate consumers about digital transaction safety. A well-informed consumer will be much more willing to tolerate some level of inconvenience to enjoy a secure transaction.

Innovative technologies like advanced digital identity intelligence, fraud analytics, and behavioral biometrics are effective in identifying and highlighting potential issues. A layered approach that combines accurate data analysis, robust fraud detection and prevention technology, and customer education has proven to be more effective in detecting and mitigating fraud.

Incorporating these safeguards into the entire customer journey will help strengthen a business's workflow and protect customers from risk.

Click here to listen to the Identity Trust Pulse podcast with Parul Sharma and Pratik Choudhary.


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