India’s e-commerce industry has surged over the last seven years, increasing its estimated revenue from USD 15.53 Billion in 2017 to USD 63.17 Billion in 2023. This dramatic expansion has shepherded new opportunities for organizations in the e-commerce sector but has also exposed these organizations to increased cybersecurity risks and compliance regulations. India’s Consumer Protection (E-Commerce) Rules are among the most prominent regulatory policies for e-commerce businesses that target Indian consumers.
These e-commerce rules ensure comprehensive consumer protections covering an exhaustive assortment of consumer concerns, including product transparency, grievance redressal, unfair trade practices, and data security. While each area may become a third-party risk management (TPRM) concern depending on how closely an organization relies on third-party suppliers, safeguarding consumer data should be a primary focus for all TPRM programs.
This article explores how e-commerce organizations can calibrate their TPRM programs to protect sensitive data across their third-party ecosystem and comply with India’s Consumer Protection (E-Commerce) Rules.
Discover the #1 TPRM solution in the world: UpGuard Vendor Risk
Overview of India’s Consumer Protection (E-Commerce) Rules
The Indian government introduced the Consumer Protection (E-Commerce) Rules in 2020 to protect Indian consumers in the e-commerce industry. These rules apply to all electronic retailers that offer products or electronic services to Indian consumers, including organizations registered in India and around the world. In total, India’s e-commerce rules cover six main categories:
- Product information: India’s e-commerce rules mandate that retailers provide accurate and comprehensive product information, including the product’s country of origin and the organization’s return policies.
- Consumer grievances: The consumer protection rules require retailers to establish processes and mechanisms to receive and address consumer grievances.
- Counterfeit products: India’s rules enforce stricter punishments on retailers who sell counterfeit products.
- Unfair trade practices: Under India’s e-commerce rules, retailers are prohibited from participating in deceptive trade practices, such as running misleading advertisements or publishing fraudulent product listings.
- Market transparency: The Indian consumer protection rules require retailers to provide clear terms and conditions, including transparent return and refund policies.
- Data Protection: India’s Consumer Protection (E-Commerce) Rules emphasize safeguarding consumer data to ensure privacy and security throughout and after consumer transactions.
The last of these categories, data protection, is the hardest for organizations to comply with and manage, especially when forming relationships with third-party vendors and suppliers throughout the transaction process.
Threats to consumer data privacy in e-commerce
E-commerce retailers face a variety of data privacy threats every day. These threats increase exponentially when a retailer outsources their processes or services to third-party vendors and suppliers. The larger a retailer’s third-party network, the higher likelihood of the retailer experiencing a data leak, as each vendor introduces a new avenue for third-party risks.
Data leaks and data breaches are often the primary threats against consumer data privacy, these events are typically the result of a cyber attack conducted by cybercriminals. The most common cyber attacks leveraged against the e-commerce sector include:
- Phishing: Social engineering attacks that use deceptive emails, personal messages, or websites to trick network users into revealing passwords and other sensitive information.
- Malware: Malicious software designed to infiltrate, damage, or disrupt an institution’s computer system or network in order to gain unauthorized access to sensitive data.
- E-Skimming: Specific forms of malware that infect a retailer’s transaction pages to steal a consumer’s credit card details and personal information.
- Denial-of-service (DoS): A large amount of illegitimate network traffic that overwhelms an organization’s systems to prevent access by users.
- Adversary-in-the-middle (AitM): During an AitM attack (sometimes known as a man-in-the-middle attack), criminals position themselves between a retailer’s e-commerce site and the consumer to steal banking information and other sensitive consumer data.
- Identity breaches or stolen credentials: When attackers retrieve user credentials (whether through phishing, skimming, or AitM interception), the attacker can use those stolen credentials to make unauthorized purchases. When identified, those unauthorized purchases may result in chargebacks or other financial costs to the e-commerce organization.
Any of the aforementioned cyber attacks could result in a data breach, subjecting an e-commerce retailer to significant financial damages and compliance penalties. In 2023, the average cost of a data breach in India was $2.18 million, while organizations that fail to protect consumer data may additional financial penalties of up to 25,000 Rupees per violation (USD 300). Even if a retailer survives these financial consequences, the subsequent reputation damage may be too much for them to withstand—81% of consumers say they’d stop doing business with a retailer who experienced a data leak.
E-commerce retailers can protect consumer data and comply with India’s Consumer Protection (E-Commerce) Rules by calibrating their TPRM program to intercept and eliminate third-party data risks.
How to protect consumer data with holistic TPRM
When done well, TPRM offers a holistic process that covers all stages of the vendor lifecycle, from vendor procurement to offboarding. To mitigate data privacy risks and protect consumer data, e-commerce retailers need to develop processes that account for the following TPRM strategies:
- Vendor due diligence
- Vendor risk assessments
- Continuous security monitoring
- Reporting and continuous improvement
TPRM programs that utilize each of these strategies form a robust defense against third-party risks. With a strong TPRM program, e-commerce retailers ensure compliance with data privacy laws, including India’s Consumer Protection (E-Commerce) Rules. Keep reading to learn more about each TPRM strategy and how UpGuard can empower retailers to elevate their TPRM programs.
Vendor due diligence
Vendor due diligence is a TPRM strategy where security professionals use comprehensive security screenings to assess the status and accuracy of a third party’s security posture. Vendor risk management teams typically utilize vendor due diligence during procurement or early-stage onboarding before solidifying the partnership with a contract.
The most efficient way e-commerce retailers can conduct vendor due diligence is through security questionnaires. Strategic questions enable risk personnel to identify security risks in a vendor’s network. Using security questionnaires to evaluate a vendor's security posture, an e-commerce retailer can assess any concerns about the vendor, such as historic data breaches, negligent practices, poor threat defenses, risky attack vectors, and other significant security risks.
UpGuard’s award-winning third-party risk management solution, UpGuard Vendor Risk, can help your organization streamline its vendor due diligence process with a robust library of automated security questionnaires. This industry-leading questionnaire library empowers e-commerce organizations to gain deeper insights into their vendor’s security posture, comply with critical industry regulations, and improve their third-party risk security.
Vendor risk assessments
Vendor due diligence and risk assessments are the foundation of third-party risk management. While security teams typically conduct due diligence before forming a third-party relationship, risk personnel utilize risk assessments throughout the vendor lifecycle. Establishing a regular risk assessment cadence allows e-commerce retailers to understand the risks in a third-party vendor’s network continually.
The main TPRM challenges e-commerce retailers face when attempting to establish a proper risk assessment cadence are time and staffing restrictions. Many organizations still use time-consuming and error-prone manual risk assessments. These assessments are challenging to track across large vendor networks despite the countless staff hours retailers devote to the work. UpGuard Vendor Risk offers a powerful alternative.
UpGuard’s risk assessments empower organizations to streamline their vendor risk assessment program with automation for fast and accurate insights. Retailers can tailor UpGuard’s on-demand assessments to specific vendor relationships, compliance requirements, or common industry risks and vulnerabilities.
Learn more about UpGuard’s vendor risk assessments
Continuous security monitoring
While due diligence and risk assessments represent two powerful risk management strategies, no TPRM program is complete without continuous security monitoring (CSM). CSM is a threat intelligence strategy that automates the tracking of information security controls, vulnerabilities, and other cyber threats to mitigate third-party risks and improve data security and privacy.
E-commerce retailers seeking to incorporate continuous security monitoring into their TPRM program can rely on a comprehensive cybersecurity solution like UpGuard Vendor Risk.
UpGuard Vendor Risk automatically scans vendors within a user’s vendor portfolio daily. These scans help risk personnel identify the following security risks:
- Publicly accessible ports
- Susceptibility to adversary-in-the-middle attacks
- Poor email security
- Hijacked domains
- Software vulnerabilities
- Leaked user credentials
- False domains generated by typosquatting
- Changes in a vendor’s security posture
Each of these security risks can represent the beginning of a data privacy concern. To adequately protect consumer data, e-commerce retailers must rely on all third-party risk management phases.
When thought of holistically, TPRM and data security are ongoing processes composed of several interconnected strategies: due diligence empowers security teams to prevent risky vendors from entering their network, risk assessments empower personnel to identify and manage risks throughout the vendor lifecycle, continuous security monitoring provides daily visibility into a vendor’s security posture, and reporting and continuous improvement allow retailers to improve and tweak their TPRM program as they inherit new risks and form new third-party relationships.
TPRM reporting and continuous improvement
While TPRM reporting is not currently a requirement of India’s Consumer Protection (E-Commerce) Rules, it may become one soon. Many other data privacy laws, including the UK’s General Data Protection Regulation and California Consumer Privacy Act, already impose TPRM reporting requirements on e-commerce retailers targeting consumers in England and the USA.
In addition to being a common requirement across industries, TPRM reporting is also essential because it’s the best way retailers can monitor the health of their TPRM program and gain the evidence to implement constructive data security improvements. Developing comprehensive TPRM reports is also an excellent way for risk personnel to communicate the status and need for data security controls to senior management and their board of directors.
UpGuard’s reporting templates offer customized reports for different stakeholders. All these reports can be accessed and modified in one centralized location for added convenience.
Learn more about UpGuard’s report templates
The #1 TPRM solution in the world: UpGuard Vendor Risk
In Winter 2024, UpGuard earned the title of #1 Third-Party & Supplier Risk Management Software from G2. G2 is the world’s most trusted peer-to-peer review site for SaaS software. For six consecutive quarters, the site has named UpGuard a Market Leader in TPRM software across the Americas, APAC, and EMEA.
Retailers and other organizations within the e-commerce sector can rely on UpGuard to help develop their comprehensive third-party risk management framework.
