Online sales are growing faster than ever, and so are the risks that come with them. Fraud losses in payments are projected to rise from $44.3 billion in 2024 to $107 billion by 2029. For established e-commerce businesses, fraud is no longer a rare occurrence. It is a constant challenge that affects revenue, operations, and customer trust.
Strong fraud prevention strategies are now an essential part of protecting your business. By analyzing fraud patterns, detecting fraud attempts early, and putting the right internal controls in place, merchants can reduce risks while keeping the customer experience smooth.
Why Fraud Has Increased Online
The rise in e-commerce has created more opportunities for fraudsters. As online shopping becomes the default for many consumers, the sheer number of transactions gives bad actors more chances to exploit vulnerabilities. At the same time, fraud technology has become more sophisticated. Criminals now use advanced tools to test stolen credentials, automate attacks, and build fake identities.
For example, fraud rings often use bots to run thousands of stolen credit card numbers through checkout pages until one works. Account takeover attempts have also spiked, with hackers using phishing schemes to steal login details and then drain customer accounts. Even loyalty programs have become targets, as fraudsters redeem stolen points for gift cards or products.
Payment gateways and digital wallets have made checkout faster, but they also give fraudsters new entry points. Add to the growth of global commerce and cross-border sales, businesses face the challenge of verifying customers they may never interact with directly.
The result is a landscape where fraud is not only more common but also more complex. Detecting fraud requires more than basic checks. It takes layered strategies that keep pace with evolving threats.
Popular Types of E-commerce Fraud
Fraud shows up in many forms, and successful businesses need to recognize the most common ones. Each type poses its own risks to revenue and customer trust.
Phishing
Fraudsters send fake emails or texts designed to trick customers into sharing account details, passwords, or payment information. These stolen credentials are then sold or used to make unauthorized purchases.
Account Takeover Fraud
Once a criminal gains access to a customer’s account, they can change shipping addresses, redeem stored payment methods, or drain loyalty points. This often leads to frustrated customers and costly chargebacks for the business.
Payment Fraud
Stolen credit card numbers remain one of the most common tools for fraud. Fraudsters may test hundreds of cards through your site until one succeeds. This kind of fraud directly impacts both margins and operational efficiency.
Friendly Fraud
Also known as chargeback fraud, this happens when a legitimate customer makes a purchase and then disputes the charge with their bank. Whether intentional or accidental, these disputes can tie up inventory, create extra fees, and strain merchant–bank relationships.
Loyalty Program Fraud
Points and rewards are often easier to exploit than cash. Criminals hack accounts, steal points, and cash them in for gift cards or products. This hurts customer loyalty and leaves businesses covering the loss.
Social Engineering Scams
Fraudsters manipulate staff or customers into revealing private information through phone calls, chat messages, or support requests. These scams bypass technology by targeting human behavior.
Synthetic Identities
Hackers combine stolen personal details with fabricated information to create “new” digital identities. These synthetic identities are harder to detect than stolen cards and can be used to open accounts, place orders, and build fraudulent purchase histories.
Each of these fraud tactics may look different, but they share the same goal: to slip past defenses and take advantage of gaps in security. For e-commerce businesses, recognizing these risks is the first step toward stopping fraud before it damages revenue or customer relationships.
How to Prevent Fraud
Protecting your business from fraud takes both technology and process. While no system eliminates every risk, a layered approach makes it much harder for criminals to succeed.
Signals and Scores
Fraud detection systems assign risk scores to each transaction. These scores are based on signals like unusual shipping addresses, mismatched billing details, or repeated failed login attempts. Reviewing these signals helps spot suspicious activity before an order goes out.
Manual Review Playbooks
Technology catches most fraud, but not all of it. Having a clear process for manually reviewing flagged orders gives teams a way to confirm if a transaction is legitimate. This is especially valuable for high-ticket orders or international shipments.
Fulfillment Holds
Placing a hold on questionable orders before they go to your 3pl for fulfillment can protect revenue and inventory. This allows time to verify payment details, reach out to customers, or gather more information before products leave the warehouse.
The Risks of Falling Victim
When fraud slips through, the impact goes beyond the immediate chargeback. Businesses face lost revenue, added processing fees, strained relationships with payment providers, and damaged customer trust. In some cases, repeated fraud can even lead to higher processing costs or account restrictions.
Red Flags to Watch For
- Multiple orders from the same customer with different payment cards
- Shipping to high-risk locations or freight forwarders
- Large orders placed with overnight shipping requests
- Multiple failed login attempts followed by a successful one
- Customers disputing orders despite confirmed delivery.
Finding the Balance Between Protection and Customer Experience
Strong fraud prevention is essential, but too many roadblocks at checkout can drive away legitimate customers. Asking shoppers for endless verifications or adding unnecessary friction often leads to abandoned carts and lost sales. The key is striking the right balance.
Shopify Technology That Helps with Fraud Prevention
Shopify offers several fraud prevention tools that screen orders automatically. Features like risk analysis, address verification, and third-party fraud detection apps provide an extra layer of protection without slowing down the checkout process. Merchants can customize rules so that only higher-risk orders require extra steps, keeping most transactions quick and simple.
Gateway Considerations
Different payment gateways come with varying levels of fraud protection. For example, Shopify Payments integrates directly with fraud analysis tools, while options like PayPal or Stripe may offer additional layers of protection and dispute resolution. Choosing the right gateway setup depends on the types of orders, regions served, and customer expectations.
Note: above payment gateways is only a small section based on recent Google search results.
The goal is to stop fraud without frustrating the very customers you want to keep. By combining automated fraud detection, selective verification, and fulfillment safeguards, businesses can protect themselves while ensuring a smooth buying experience.
How Badger Supports Fraud Prevention
At Badger Fulfillment Group, we understand how disruptive fraud can be to growing e-commerce brands. That is why our fulfillment services are designed with fraud prevention in mind.
- Fulfillment Holds – Suspicious transactions can be placed on hold, giving you time to confirm details and avoid costly losses.
- Communication and Support – With our team located inside the warehouse, you get direct access and quick answers when fraud concerns arise.
Fraud prevention is no longer optional for established e-commerce businesses. With online fraud growing more sophisticated and losses projected to more than double by 2029, the risks are too great to ignore. The good news is that effective strategies exist.
By analyzing fraud signals, detecting suspicious activity early, and putting clear internal controls in place, businesses can stop fraud before it damages revenue or customer trust. Balancing those protections with a smooth customer experience ensures that security does not come at the expense of sales.
E-commerce will always face fraud attempts, but with the right tools and processes, you can keep your operations secure and your customers confident in every purchase.
Protect your business from fraud while keeping fulfillment seamless. Connect with Badger Fulfillment Group today to see how our team can support your growth with secure, reliable solutions.
