Fraud Detection in E-Commerce: Tools That Stop Fake Orders and Chargebacks

In the digital age, convenience comes with risk. While e-commerce continues to boom, so does online fraud. From fake orders to stolen credit card use, and friendly fraud (chargebacks), these threats not only cause financial loss, but also erode trust and damage brand reputation.

In 2024, e-commerce platforms must adopt advanced fraud detection tools and proactive strategies to protect both their profits and their customers. This article dives into the types of fraud you need to watch out for, signs you’re under attack, and the top tools designed to stop fraud in its tracks.

Common Types of E-Commerce Fraud

1. Carding (Stolen Credit Cards)

Fraudsters use bots or scripts to test stolen card numbers through small purchases on your store.

2. Chargeback (Friendly) Fraud

Customers order products, receive them, then falsely claim the transaction was unauthorized.

3. Account Takeover (ATO)

Hackers gain access to legitimate customer accounts using leaked credentials and place unauthorized orders.

4. Fake Reviews and Return Abuse

Fraudulent buyers leave misleading reviews or abuse return policies to get refunds without returning the product.

5. Coupon or Loyalty Point Abuse

Using unauthorized promo codes, or generating fake accounts to hoard rewards.

How Fraud Impacts Your E-Commerce Business

• Revenue Loss from stolen goods and reversed payments
• Customer Trust Damage due to compromised accounts or incorrect charges
• Operational Costs spent on fraud resolution, return handling, and shipping
• Chargeback Ratios that can trigger penalties from payment processors

Top Fraud Detection Tools for E-Commerce in 2024

Here are the most reliable and popular fraud protection platforms available to online stores in 2024:

1. Signifyd

Best For: Large-scale retailers using Shopify, Magento, or BigCommerce

• Uses AI and machine learning to approve or decline risky orders
• Covers merchants with a financial guarantee on approved orders
• Detects ATO, promo abuse, and chargebacks

🔗 https://www.signifyd.com

2. SEON

Best For: Real-time fraud detection across industries

• Offers device fingerprinting, IP analysis, and velocity rules
• Integrates with custom platforms and third-party APIs
• Great for SaaS, travel, and marketplaces

🔗 https://seon.io

3. Kount (from Equifax)

Best For: Enterprises needing layered fraud prevention

• Advanced AI model to detect account takeover and high-risk orders
• Excellent chargeback management and identity trust scoring
• Offers customizable rules engine

🔗 https://kount.com

4. NoFraud

Best For: Small to mid-size e-commerce businesses

• Real-time transaction screening and human fraud analysts
• Integrates with Shopify, WooCommerce, Magento, BigCommerce
• Covers chargeback protection on approved orders

🔗 https://www.nofraud.com

5. Riskified

Best For: Global e-commerce merchants

• Specializes in stopping false declines while catching real fraud
• Covers fraud liability for approved transactions
• Helps improve conversion rates and order acceptance

🔗 https://www.riskified.com

How to Know If You’re Being Targeted

Watch for these red flags in your order logs or analytics:

• Orders with different billing and shipping addresses
• Multiple transactions from the same IP address or device
• Unusual purchasing activity from high-risk countries
• Surge in chargebacks or disbputes
• Customers complaining of unauthorized activity

Best Practices to Prevent E-Commerce Fraud

Alongside using fraud tools, here are practical steps to strengthen your store’s defenses:

Use 3D Secure 2.0

This adds an authentication step during checkout, reducing chargeback risk.

Implement CAPTCHA on Login & Checkout

Stops bots from executing carding attacks or credential stuffing.

Limit Failed Payment Attempts

Prevent card testing by flagging or blocking users after 2–3 failed tries.

Monitor for Rapid Account Creation

Spikes in new accounts may indicate promo or referral abuse.

Keep Systems Updated

Always patch software and plugins to avoid known vulnerabilities.

Real Stats (2024 Outlook)

• Global e-commerce fraud losses are expected to hit $48 billion in 2024 (Statista)
• Chargebacks increased by 22% year-over-year due to friendly fraud (Chargebacks911)
• 60% of merchants plan to invest more in AI-driven fraud detection tools in 2024 (Juniper Research)

Conclusion

E-commerce fraud is not a question of “if” but “when.” As your store grows, so does the attention it receives from cybercriminals. The good news? With powerful fraud detection tools and best practices, you can block fake orders, prevent chargebacks, and protect your hard-earned revenue.

In 2024, protecting your digital storefront is just as important as promoting it. Be proactive, be secure, and choose tools that scale with your growth.