With the rise of online businesses, eCommerce fraud has become an increasingly complex concern for sellers.
From billing tricks to account takeovers and deceptive scams, these malicious acts come in many forms.
To defend against such tactics, let’s walk you through some of the most common types of eCommerce fraud that every seller should be aware of.
The Most Common Types Of eCommerce Fraud And How To Prevent Them
1. Billing fraud
Billing fraud is one form of deceit that’s all too common in eCommerce and forms a significant slice of the $48 billion annual impact of online payment scams. It occurs when a fraudster uses stolen credit card information to make online purchases.
However, there’s a twist here that makes it particularly hard to detect. Rather than having the goods shipped to their own address (which would raise red flags), they have it sent to the registered address associated with the card.
The legitimate cardholder isn’t expecting this package and might not recognize or question the charge on their statement immediately, treating it as an error rather than potential fraud.
This type of ‘ghost order’ billing fraud thus becomes quite challenging for e-commerce sellers and merchants to identify promptly, resulting in considerable losses before intervention can take place.
2. Account takeovers
An account takeover is akin to a hostile invasion within the realm of cybersecurity trends. In this scenario, cybercriminals gain unauthorized access by hacking into sellers’ accounts by exploiting weak or stolen login credentials.
Once they’ve infiltrated, these unscrupulous characters can manipulate product listings, siphon funds from sales transactions, and even tarnish the seller’s reputation by negative customer interaction under their brand’s name.
Moreover, it may be quite some time before you become aware that your account has been compromised. The detection usually happens when discrepancies occur in financial reconciliation or an unexpected spike in customer complaints mounts up, all wreaking havoc on unsuspecting merchants who need to clean up after such damaging repercussions.
3. Friendly fraud
Friendly fraud, despite its benign name, presents a significant threat to eCommerce businesses. This scheme takes place when a customer places an order with good intentions but later disputes the credit card charge once they receive their merchandise or service. They might claim that the goods were never delivered, didn’t arrive as described, or were not what they expected.
While this can occur due to genuine errors or confusion on occasion, most times, it’s an intentional act to get something for free by exploiting consumer protection policies and payment systems’ regulations.
Sometimes, it becomes very difficult for sellers to prove the delivery or authenticity of their products against these fraudulent claims. And with so many threats facing eCommerce operators, being wise to this one is a must.
4. Chargeback fraud
Another form of eCommerce fraud that causes significant headaches for sellers is chargeback fraud. This occurs when a customer disputes a credit card transaction, leading to the return of funds to the buyer and leaving the seller out of pocket.
Often, this type of scam happens long after the goods or services have been delivered. The motivation is obtaining high-priced items without having to pay for them.
Thankfully, using payment solutions designed with advanced security measures can assist in protecting merchants from fraud by tracking purchases and verifying customers’ identities diligently before approving transactions.
These systems are capable enough not only to flag suspicious activity promptly but also to ensure a safer environment, minimizing your exposure to chargeback risks.
5. Affiliate fraud
Affiliate fraud is a sophisticated scheme that targets the marketing efforts of eCommerce sellers. In this case, individuals or companies deceitfully gain profit from affiliate programs by generating bogus transactions or leads.
They accomplish these through tactics like click spamming, false advertising, cookie stuffing, or even creating phantom customers using stolen identities. The intent here is to cash in on commissions without contributing any real business value.
As eCommerce merchants have to pay for each lead or sale generated under their affiliate program, such fraudulent activities can result in massive financial losses while obscuring the extent to which their marketing is having an impact.
6. Phishing attacks
In phishing attacks, tricksters reel in unsuspecting eCommerce sellers by impersonating trustworthy entities.
The common ploy is sending emails that appear to be from a legitimate organization, such as your bank, payment gateway provider, or even government tax agencies. These fraudulent messages usually contain urgent requests for sensitive business information, including credit card numbers, login details, or other personal data, and attempt to create a false sense of urgency that prompts quick action without properly scrutinizing the content.
A successful deception can result in unauthorized access to financial accounts, identity theft, and significant monetary losses. Be sure to vet every request meticulously before clicking any link or providing any kind of information via email, as this can defend against phishing in all its forms.
Conclusion
Knowing what strategies scammers might use against you is the best way to begin shielding your eCommerce selling activities from malicious third parties. Use these common fraud examples as a starting point as you prepare to prevent successful attacks against your site.
