How to Protect Your Business from E-commerce Fraud in 2025

In an increasingly sophisticated threat landscape, e-commerce fraud protection has become a critical priority for any kind of business. As fraudsters develop new techniques to exploit vulnerabilities in e-commerce systems, robust security measures have become essential for business survival. Effective fraud protection strategies help protect not only your revenue, but also your brand reputation and customer trust.

This article explores the latest e-commerce fraud trends, outlines effective protection measures, and provides actionable insights to strengthen your security posture against emerging threats in 2025.

Key takeaways

• Nearly 2 in 3 businesses (65.2%) remain completely unprotected against even basic bot attacks, while advanced threats slip through 95% of the time.
• Multi-layered security approaches that combine automated bot detection systems with strategic monitoring are most effective for protecting your online stores.
• Implement additional security measures for high-traffic periods like flash sales and holiday seasons, when fraud attempts increase dramatically(1).
• Balance robust security with customer experience by implementing progressive friction measures only when suspicious activity is detected.

The e-commerce fraud landscape in 2025

E-commerce fraud encompasses a range of malicious activities aimed at exploiting businesses through deception, unauthorized access, or the manipulation of digital systems. With retail e-commerce sales expected to reach $8 trillion by 2027⁽²⁾, cybercriminals have developed increasingly sophisticated methods to capitalize on this growing market.

The most common types of e-commerce fraud include:

Account takeover fraud

Account takeover fraud (ATO) happens when attackers gain unauthorized access to customer accounts through stolen credentials, phishing, or credential stuffing attacks. Once inside, they can make purchases, change account details, or steal sensitive information. ATO has grown more sophisticated with the rise of automated tools that can test thousands of username/password combinations in minutes.

Payment fraud

Payment fraud involves the use of stolen credit card information to make unauthorized purchases. In 2023, online payment fraud cost businesses an estimated $48 billion, and card-not-present (CNP) fraud was projected to represent 74% of all card payment fraud losses in 2024, exceeding $10 billion.

Bot-driven attacks

Automated bots represent a significant threat vector because they can perform credential stuffing, inventory hoarding, and scraping attacks at scale. During flash sales and high-traffic periods, bot attacks increase dramatically, with DataDome observing up to 30 times more bot traffic during events like Black Friday⁽¹⁾. The United States remains the primary source of these attacks.

Friendly fraud

Also known as “chargeback fraud,” friendly fraud happens when legitimate customers dispute charges for products they actually received. This type of fraud is particularly challenging to detect and prevent, as it involves real customers abusing the chargeback system.

Synthetic identity fraud

As a step beyond identity theft, scammers combine real and fabricated personal information to create new, fictional identities that can pass verification processes. These synthetic identities are then used to open accounts, make purchases, and commit fraud that’s difficult to trace back to real individuals.

Why e-commerce fraud protection matters

The implications of online fraud extend far beyond the immediate financial losses from fraudulent transactions. Without adequate protection, businesses face several significant risks:

Financial impact: The direct costs of fraud include not only the value of stolen goods or services but also chargeback fees, payment processing penalties, and increased transaction costs as payment processors adjust rates based on fraud history. It is a growing financial burden that can significantly impact your bottom line.

Operational burden: Managing fraud manually diverts valuable resources from core business functions. Security teams become overwhelmed with false positives, genuine customers face unnecessary friction, and business growth stalls as fraud management becomes unscalable.

Customer trust erosion: Consumer confidence is fragile. Data breaches and fraud incidents can permanently damage your brand reputation and customer loyalty. Customers are increasingly selective about which businesses they trust with their payment information.

E-commerce fraud protection strategies

Implementing effective fraud prevention requires a multi-layered approach that balances security with customer experience. Here are key strategies for protecting your business:

1. Use robust authentication measures

Strong authentication forms the first line of defense against account takeover and unauthorized access:

• Multi-factor authentication (MFA): Require additional verification steps beyond passwords, especially for high-risk actions like changing account details or completing large purchases.
• Biometric verification: Consider incorporating fingerprint, facial recognition, or voice authentication for mobile transactions where possible.
• Risk-based authentication: Apply stricter verification requirements for suspicious transactions while maintaining a frictionless experience for trusted customers.

2. Invest in advanced fraud prevention tools

Modern fraud protection relies heavily on technology that can analyze patterns and identify anomalies in real-time:

• Machine learning algorithms: Use systems that continuously learn from transaction data to detect evolving fraud patterns while reducing false positives.
• Behavior analytics: Monitor user behavior for red flags that might indicate fraud, such as unusual navigation patterns, device switching, or typing rhythms.
• Device fingerprinting: Identify and track devices used for transactions to build risk profiles and detect suspicious patterns across multiple accounts.

3. Address bot vulnerabilities

Bot attacks are a significant and growing threat vector for businesses like online retailers:

• Bot detection and mitigation: Use specialized solutions that can differentiate between legitimate human traffic and malicious bot activity.
• API protection: Secure all endpoints, not just customer-facing web pages. The DataDome 2024 Global Bot Security Report found that login and cart pages had protection failure rates of 56.2% and 56.9% respectively, highlighting the importance of comprehensive coverage.
• Traffic monitoring: Establish baselines for normal traffic patterns and set up alerts for unusual spikes that might indicate bot attacks.

4. Optimize payment processing security

Payment fraud remains a primary concern for e-commerce businesses:

• Address Verification System (AVS): Verify that the billing address provided matches the one on file with the card issuer.
• Card Verification Value (CVV): Require the security code for all transactions to ensure the buyer physically possesses the card.
• 3D Secure 2.0: Implement 3D Secure 2.0 as an extra verification layer while maintaining a smoother user experience than earlier versions.
• Tokenization: Replace sensitive payment information with unique tokens that have no exploitable value if intercepted.

5. Establish clear fraud management policies

Technology alone isn’t sufficient. Businesses need clear processes and policies:

• Order screening criteria: Develop clear guidelines for which orders require manual review based on risk factors like order value, mismatches between billing and shipping addresses, or first-time customers.
• Chargeback management: Create a systematic approach for handling disputes, gathering evidence, and contesting fraudulent chargebacks.
• Fraud team training: Ensure that the employees who interact with customers understand the latest fraud tactics and company policies.

How to balance security with customer experience

One of the greatest challenges in fraud prevention is maintaining security without creating excessive friction for legitimate customers. Consider these approaches:

• Progressive friction: Start with minimal verification steps and only increase requirements when risk indicators are present.
• Customized rules: Tailor security measures based on customer history, transaction value, and other risk factors instead of applying one-size-fits-all security rule.
• Clear communication: When additional verification is required, explain why it’s happening and how it protects the customer.
• A/B testing: Continuously evaluate how security measures impact conversion rates. Adjust accordingly.

Protect your business with advanced fraud prevention

E-commerce fraud protection requires vigilance, automation, and strategy. As fraud tactics become more sophisticated, businesses must implement multi-layered defenses that can adapt to emerging threats, all while maintaining a seamless customer experience.

 
DataDome’s comprehensive fraud protection solution addresses the full spectrum of e-commerce fraud threats through:

• Bot protection: Blocks malicious automated traffic with real-time detection and mitigation capabilities.
• Account protection: Prevents account takeover and fake account creation through behavioral analysis, artificial intelligence, and machine learning.
• Advanced monitoring: Provides visibility into traffic patterns and potential threats across all digital assets, including websites, mobile apps, and APIs.

With a false positive rate of 0.00091%, DataDome is one of the few security providers that delivers effective protection without compromising the customer experience. Schedule a live product demo to understand how DataDome can help protect your business from the full spectrum of e-commerce fraud threats.

Reference

1. https://www.prnewswire.com/news-releases/datadomes-inaugural-e-commerce-holiday-bot–online-fraud-report-reveals-the-us-as-the-top-source-of-bot-attacks-301740726.html
2. https://www.globenewswire.com/news-release/2025/01/27/3015434/28124/en/B2C-E-Commerce-and-Shopper-Insights-Report-2025-2028-Retail-E-Commerce-is-Forecasted-to-Reach-Nearly-8-Trillion-by-2027-Making-Up-Over-20-of-Global-Retail-Sales.html