E-commerce and online shopping have gained much popularity in the last few decades, and COVID-19 has caused even reluctant online shoppers to finally embrace online transactions. In fact, the global e-commerce market is expected to reach $6.07 trillion by 2024. Sadly, the increasing popularity and profitability of e-commerce have allured fraudsters to take advantage of fresh adopters, well-known e-commerce sites, and online shoppers. There has been a significant increase in e-commerce fraud throughout 2020-2022.
There are various forms of e-commerce fraud, and fighting against these threats is increasingly difficult for e-commerce businesses. Here are five common types of e-commerce fraud you should know about.
Identity theft is one of the most common types of e-commerce fraud and a major threat to online merchants, banks, and credit companies. This fraud occurs when a cybercriminal steals one’s personal data, such as ID or credit card number and uses them to make unauthorized online purchases or transactions as the legitimate owner. Fraudsters can also steal and use other identifying data such as security numbers, IP addresses, names, personal devices, or user accounts to pose as legitimate customers.
Unfortunately, with the entire underground economy on the dark web and billions of stolen passwords exposed, identity theft is a universal fraud that affects thousands of businesses and customers every day. Any e-commerce business must ensure it can detect and protect against user behaviors that lead to identity theft.
Chargeback fraud can be a mistake or intentional. The main form of a chargeback is friendly fraud, and it occurs when a customer makes an online purchase with their credit card and then contacts their bank, falsely claiming they never received the item or that it was damaged during shipping. Once approved, the bank cancels the financial transaction, and the customer gets a refund of the money they had spent. Unfortunately, when a chargeback occurs, the merchant is responsible, regardless of the measures they took to verify the transaction.
E-commerce businesses are particularly vulnerable to chargebacks, so merchants have to fight against this form of fraud to keep their revenue. One of the best ways to prevent chargebacks is by resolving complaints through customer service.
Card testing fraud is one of the biggest threats to modern e-commerce businesses. It occurs when a fraudster with stolen credit card information makes a small purchase to check whether the card is active and if it averts the merchant’s fraud detection measures. Once they confirm the card is valid, they continue making huge counterfeit purchases.
Typically, the fraudsters use scripts or bots to test credit card details and then target merchant sites that offer automated responses that provide declined information. With these details, fraudsters can alter credit card information with high chances of success.
Card testing often uses technically advanced tools and tactics, but e-commerce businesses can detect and prevent this fraud. One of the best solutions is to work with experts in payment systems and fraud detection.
Online shopping has eliminated the hassle of buying things, but its convenience has also created a unique form of online scam known as triangulation fraud. This fraud occurs when a cybercriminal acts as a furtive middleman in an online purchase by setting up a fake storefront and accepting orders. However, instead of maintaining their own store of merchandise, they use stolen card information to buy goods from a third party and then ship them to the buyer. Since the buyer receives their orders as expected, it never appears like a scam. This fraud victimizes all the parties involved, but the greatest impact for merchants is the chargebacks waiting to happen.
Cardholders can best protect their card and identity by reporting any unusual changes to their credit card company. Credit cards also come with various fraud protections, which can help you regain money if your card is used by a scammer.
Account takeover happens when someone gains access to a user’s account on an e-commerce site or store. This can be achieved through various methods such as phishing, malware scams, and spyware schemes or buying stolen passwords, personal information, or security codes from hackers. Once the fraudsters have access to your account, they can purchase items on an e-commerce site, change the account credentials, withdraw money, or even gain access to your other accounts.
Account takeover is a serious form of fraud, and it can cost you and your reputation as a retailer. To protect your e-commerce business against evolving trends, you need to implement strategies that will dissuade criminals from compromising the accounts of innocent customers.
Being in an e-commerce business comes with a set of unique challenges. It can be difficult to distinguish between a real and a fake customer, or you may face many issues that stem from unauthorized financial transactions, leading to money loss. Regardless of the industry or niche you operate in, it’s crucial to do your best to protect your e-commerce businesses and customers. However, if you find it hard to detect and protect against fraud, a cybersecurity analyst can help you reduce online fraud and protect your customers’ data.