Detecting Ecommerce Fraud from High-Risk Shipping Addresses

Fraudulent orders, where merchandise is shipped to people who have no intention of ever paying for it, form an important part of the over $5 trillion that fraud costs businesses worldwide per year. Proactively detecting and stopping these orders is an extremely high-ROI activity, given the impact a single bogus order can have on your profit margins. In this article, we will look at what you can do to help protect yourself against this all-too-common business crime.

Detecting ecommerce fraud before it starts

Some fraud triggers are obvious: for example, huge orders with rush shipping deadlines from a brand-new customer, shipments sent to a known risky country, or using potentially stolen credit cards or fake invoicing data. Unfortunately, fraudsters have grown more sophisticated over time, including employing third parties such as freight forwarders to serve as their US shipping addresses.

Here are some things businesses can do to stay ahead of this kind of fraud:

  • First, analyze the different types of risk such as outright fraud, non-payment, product loss, serial chargebacks, refunds, returns, etc. that are common to your business. Determine if there are identifiable characteristics that can be used to detect high risk orders.
  • Using these identifiable characteristics, develop business logic that highlights high-risk orders. For example, develop and maintain a list of known risky addresses that have been used in previous fraudulent orders, criteria here may include freight forwarder addresses, commercial PO boxes, specific ZIP codes prone to being used by fraudsters, or other clues such as long apartment or suite numbers.
  • Create automated rules and processes for handling these suspicious transactions, with different responses depending on your risk assessment, such as automatically canceling an order, asking for additional information from the customer (in real-time) or flagging the order for a customer service follow-up.

There might be multiple, unique “risk lists” within your business based on their use cases: for example, marketing has a list of competitors that they want to prevent from accessing free marketing materials, the ecommerce team wants to flag high-risk fraud and serial chargeback orders, and the fulfillment team might want to flag delivery risks. These lists and business processes, in turn, become a competitive advantage for reducing losses due to fraud.

Each of these lists would likely have different criteria to be on them, and unique business logic to dictate what happens when there is a match – for example, in Preventing Fraud Associated with the Freight Forwarding Industry, we discuss the issue of third-party freight forwarders and provide access to a free database of existing ones. This is just one example of the kinds of fraud criteria you may be screening your contacts for.

How we can help

While the “heavy lifting” of maintaining specific fraud criteria and risk lists is unique to your business, we can help automate this process in a few important ways:

  • First, we can validate contact or shipping addresses against continually updated USPS and international postal data, to help ensure the addresses themselves are accurate, genuine, and up-to-date. Our flagship DOTS Address Validation suite includes one of few USPS CASS-certified services for validating US addresses. Our DOTS Address Validation – International service provides coverage for over 250 countries worldwide.
  • Second, the address validation process normalizes these addresses into easily searchable formats such as barcodes, to facilitate comparisons with known risky addresses.
  • Third, we can also flag common tricks of fraudulent contacts – for example, our DOTS Email Validation tool checks for issues such as garbage, vulgar or celebrity names in email addresses, and DOTS Lead Validation cross-references contact data against over 130 data points to check for inconsistencies and fraud indicators.

Best practices such as these combine good data validation to improve match rates with your in-house “risk lists,” and prevent fraud and/or save good orders. Plus, they provide all the benefits of regular data hygiene, including ensuring deliverability, keeping your data standardized and current with changes, and helping to meet compliance standards.

For more information, check out our dedicated page on fraud prevention. And don’t forget that we are always happy to consult with you about your business’ specific situations – feel free to contact our friendly product experts anytime to discuss your own fraud prevention needs.

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