Thursday, December 1 2022
Since the pandemic, digitalization has dominated businesses in all sectors, giving them competitive advantage and market security. Because much of the world has been locked down and restricted in recent years, digital platforms have been a boon. E-commerce websites have become essential survival tools in this situation. The online marketplace is a popular place to buy everything from necessities and medicine to clothing and other supplies. According to IBEF, the Indian e-commerce market is poised to reach $111.40 billion by 2025. While many factors are contributing to the growth of the industry, e-commerce fraud and delays in cash on delivery are two obstacles to its expansion.

In contrast, new age technologies such as artificial intelligence are rapidly gaining ground as a solution to online fraud and are making significant progress. Moreover, the adoption of technology by the e-commerce industry is driving the growth of online retailers in the competitive market.

E-commerce fraud

According to an RBI report, digital fraud increased by 30% in 2021, along with digital commerce transactions. Expert research has also highlighted the fact that consumers are now more fearful of being deceived due to the increase in online transactions.

Frauds have always existed and played a role in the market. If we talk about deception in e-commerce, it is an unauthorized action or transaction that takes place in an online store. To perform such transactions, fleeing scammers use spam messages along with credit card information that has been compromised due to theft or fraud. This implies that the seller will not receive legitimate payment for the goods he has sold. Therefore, the store will have to resort to charging the compromised customer the money.

COD (cash on delivery) and prepaid orders are both vulnerable to e-commerce fraud. Today, e-commerce fraud takes many forms, as can be seen. Common e-commerce frauds include false COD orders, false delivery attempts, misuse of promotional codes, and a variety of frauds such as creation, card validity testing, chargebacks, etc., just to name a few! However, as technology advances, online crimes have become increasingly common. Moreover, due to the growing demand, online retailers have to handle an increasing number of orders every day. As a result, they need to adopt advanced technologies, such as artificial intelligence (AI), which enable fraud prevention systems to break through the glass ceiling of the precarious environment.

The solution to e-commerce fraud

In this scenario, new era technologies such as AI and ML can be used to address all concerns as they allow organizations to validate their performance and adapt to a changing reality with the click of a button. In addition, it is able to help redesign business strategies and predict fraud attempts. Artificial intelligence (AI) analyzes hundreds of data points from millions of online transactions to identify patterns that could lead to fraud. As ML analyzes the transaction and assigns a threat score between 0 and 1, this score is then ranked against a predetermined threshold to determine whether the transaction is fraudulent or not. The main idea behind this data is that fraudulent transactions differ greatly from legitimate transactions. These patterns can be recognized by ML algorithms to detect fake COD orders from fraudsters.

As a result, AI solutions allow businesses to reduce fraud, RTO percentage, billing backlog, and manual reviews. This reduction results in a better customer experience, reduced operational costs and a significant increase in revenue. Online retailers have to manage massive data sets in the e-commerce industry. Therefore, ML algorithms and models are essential for their proper functioning. These algorithms can instantly evaluate a large number of transactions and are constantly evaluating and processing new sets of data. Since the industry is completely dependent on internet connectivity and banking services for online purchases, it is extremely vulnerable to fraud or deception. With large datasets, the machine learning model becomes more accurate and efficient because it can distinguish and simplify multiple behaviors.

The benefits of using AI in e-commerce

Real-time data processing by finding hidden threats: Traditional fraud detection systems can only detect certain types of fraud once they have already occurred. Advanced AI algorithms, on the other hand, can immediately take changes into account and prevent fraud attempts by acting in real time. An AI solution excels at detecting hidden connections that humans cannot see. In a nutshell, it allows the company to reduce fraud and provide a better customer experience.

Consistent business analysis results: Unlike humans, ML algorithms are always correct and never make mistakes. Machine learning algorithms track typical customer behavior. This algorithm instantly evaluates a large number of transactions and constantly evaluates and processes new sets of data. Because of this, they can easily detect any anomaly or suspicious behavior.

Fast and Accurate Verifications: Automated checkout shortens the entire shopping process for customers and follows pre-determined rules, eliminating human error.


Deferred cash on delivery


The e-commerce market has long been dominated by cash on delivery (COD). According to an expert report, almost 83% of shoppers in India prefer COD as their preferred method to pay for their online purchases. Although many e-commerce platforms offer the COD option, a great way to expand the customer base and grow the business, it has serious drawbacks, such as disrupted cash flow and working capital. Without adequate cash flow, an e-commerce merchant’s profit margin and overall operations can be hit hard. Therefore, to solve this problem, companies must partner with a logistics partner who can balance their COD rebate by releasing COD payments in a timely manner. The interruption of cash flow further helps improve working capital to keep things running smoothly.

Technology paves the way for the future

Due to the very dynamics of the business environment and the need for technology to prevent large losses caused by fraud, businesses should consider investing in an AI-powered e-commerce fraud detection system. This can help detect fraudulent transactions and may even help prevent them from happening in the future.

(The author is co-founder and CEO, Post)

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