The retailer revealed that it had been subjected to an "alarming" number of potentially fraudulent transactions when it launched its non-food online offer in July 2009. In the first month alone, almost 20% of attempted transactions were fraudulent. Six months later, this had fallen to less than 5%.
Speaking at the Retail Fraud Conference in London this week, multi-channel profit protection manager Andy Partridge said Sainsbury's had improved the way transactions were scrutinised.
Each sale was now analysed by an automated review process that determined the level of risk, he said, and high-risk sales were manually reviewed by a 10-man team of analysts before being either accepted or rejected.
This was just the beginning of the retailer's efforts to combat online fraud, he added. "When we launched we were the new kids on the block, making us an immediate target for fraudsters," he said.
"This is clearly no longer the case, but card fraud will always remain an intricate part of online business. As soon as one method is blocked, you can guarantee another loophole will be found.
"We will continue to respond to these as and when they surface."
Sainsbury's is working with risk assessment company 3rd Man, which screens up to 30 million customers a month. Partridge said the company's prior knowledge of Sainsbury's shoppers gave them a head start.
"Their analysis helped us identify attempted fraudulant transactions on lower-value homeware items as well as the more obvious high-value electricals," said Partridge. "This meant we could stop the culprit before they established a buying history with us."
3rd Man analyst Emma Sankey said the challenge was to identify customers who used a range of credit cards on different purchases. One fraudster used 63 cards in just three weeks.