As e-commerce fraud continues to soar, fraud prevention for online firms is increasingly becoming crucial. With millions of personal credentials widely available on the dark web, the digitalization era has offered fraudsters a great opportunity to exploit vulnerabilities. As a result, effective fraud prevention measures are essential to thwart fraudsters who may now hide behind false details and mask their traces more quickly.
And e-commerce fraud is showing no signs of subsiding. According to a new Experian report, e-commerce fraud assaults increased by 30% in 2017 compared to 2016.
Furthermore, "there were 16.7 million documented victims of identity fraud the same year, proving to be another record year for the number of fraud victims," the research said.
What Exactly is E-Commerce Fraud?
When criminals intercept a business transaction on an e-commerce store to gain a personal or financial advantage, this is referred to as e-commerce fraud. It's criminal conduct in which scammers take money from either the client, the business, or both. It's also known as payment fraud.
With e-commerce sales expected to surpass $5.55 trillion by 2022, criminals have many opportunities to steal client data and perpetrate fraud.
5 Common Types of E-Commerce Fraud
Although the most typical kinds of e-commerce fraud include stealing bank cards and account information to make purchases, hackers are notoriously creative.
1. Payment Fraud– Also referred to as Identity Theft
Payment fraud, often referred to as identity theft, poses a significant challenge in e-commerce. This prevalent form of fraud accounts for 71% of all assaults on online transactions. Moreover, fraud prevention becomes even more crucial as identity theft is a key component of most cybercriminals' strategies, whether as the ultimate goal or as a precursor to other illicit activities
However, this fraud does not always require stolen credit card information. Fraudsters will also utilize email accounts, user accounts, names, addresses, IP addresses, and personal devices to impersonate a genuine client. This can result in fraudulent transactions, the establishment of phony accounts, and traffic manipulation.
2. Friendly Fraud
Friendly fraud occurs when a client purchases something from your e-commerce website and then files a chargeback with their bank. Shoppers falsely claim that their product was not delivered, that it differed from what they bought, or that they canceled their transaction shortly after making it. A complaint to their bank triggers an inquiry, resulting in a chargeback on 2.9% of corporate firms' online orders.
This chargeback fraud is common in Australia and Canada, even though friendly fraud accounts for 39% of all global fraud assaults.
3. Affiliate Fraud
Malicious actors can influence traffic and sign-ups to make a business believe they are obtaining customer attention that does not exist. For example, many companies participate in or manage an affiliate marketing program that produces revenue by sharing links and content. Unfortunately, affiliate fraud may be as easy as repeatedly refreshing a webpage or sending spam emails and popups to give the illusion of significant traffic. Companies must be careful about fraud prevention against malicious actors.
4. Clean Fraud
The term "clean fraud" refers to deceptive transactions that look to be legal. This fraud is becoming increasingly problematic for merchants because the transaction is frequently not identified or denied by deny listed fraud accounts. This entails impersonating the cardholder using stolen credit card information.
Fraudsters can obtain these data by enticing account holders to purchase on a bogus website, intercepting conversations between transaction participants, or even buying them on the dark web, which is only accessible through specific browsers.
According to Chargebacks911, clean fraud is one of the most rapidly rising and dangerous concerns businesses confront.
5. Triangulation Fraud
This fraud occurs when internet fraudsters publish a false or replica website and attract consumers with low-cost items. These fraudulent websites may appear in advertisements or be sent to a user's email, sending them to the website via a phishing attempt.
The catch is that these items either do not exist or are never supplied. If the website is a forgery, the existing legitimate business's image also suffers.
Consumers' bank information may be compromised when they pay for something they do not receive. Obtaining credit card credentials in this manner and utilizing them to make fraudulent purchases is referred to as triangulation fraud. The name refers to the three-step process of luring consumers, collecting their information, and employing them in a larger plan.
E-Commerce Fraud Red Flags
We can't prevent e-commerce fraud if we don't know that it will happen. The success of e-commerce fraud is determined by the fraudster's ability to mislead your system.
However, how well you can protect against hackers is determined by how fast you can detect fraud efforts. In short, you must be aware of the "tells" or red flags to look for, and the following are some of the most common:
- Several orders from multiple credit cards: When an account (or various accounts with similar signatures, such as the same IP address) makes multiple credit card transactions, it's an unmistakable red signal for fraud, particularly card testing fraud.
- Anomalies in data: Look for any inconsistencies, even if they are minor, such as when the city and zip code entered does not match. Another instance is when a Singaporean IP address shopper purchases a credit card with a US billing address.
- Unusual shopping behavior: If the credit card holder isn't a first-time buyer, you may go into their purchase history for any questionable activity. For instance, the account suddenly places an order substantially over what the consumer typically spends.
- Fast, back-to-back transactions: While several purchases from a single client may be feasible, it is also possible that a fraudster card is experimenting on your site.
- Unusual location: If the customer has previously purchased from your company, look for unusual activity elsewhere. For example, suppose a consumer always buys from an IP address in Japan but then purchases from an IP address in Portugal. Of course, it's conceivable that the account owner is merely on vacation, but it's always better to be cautious than sorry.
- Repeated shipping addresses: Another red signal is when a consumer makes multiple transactions using the same credit card (with the same billing address) but sends the merchandise to various addresses. In general, you should be skeptical if a customer requests that the items be shipped to a location other than the billing address on the card.
How to Prevent E-Commerce Fraud
E-commerce fraud prevention can be a difficult and time-consuming endeavor, but there are several actions you can take to safeguard your company against fraudulent behavior. Here are a few pointers:
- Use safe payment gateways: Use payment gateways that are both secure and well-known. This will prevent criminals from stealing important client information such as credit card details, enhancing your fraud prevention efforts.
- Implement fraud detection tools: Several tools and software solutions are available to assist you in detecting and preventing fraud. These technologies can detect suspicious behavior and assist you in making better-informed judgments about which transactions to accept or refuse.
- Verify customer information: Verifying the information consumers supply while making a transaction is one technique to avoid fraud. One example is verifying their billing and shipping addresses, as well as other
- Keep track of your transactions: It's critical to keep track of your transactions, including the customer's name, the date and time of the transaction, and the amount of money involved. This can assist you in identifying patterns and trends that may suggest fraudulent behavior, contributing to effective fraud prevention.
Overall, avoiding e-commerce fraud requires a mix of various techniques and tactics. However, following the advice given above may help safeguard your company and its consumers against fraudulent conduct.
