The Seven Types of eCommerce Fraud


February 16, 2018

The February Blog Series | 2018 Trends

Issue 19: Seven Types of eCommerce Fraud

With technology advancing rapidly, it's no question eCommerce fraud is at an all-time high. Counteracting fraud starts with knowing how to spot it and implementing the right protocols for your organization. Be on the lookout for these 7 types of eCommerce fraud:

Refund fraud
If you are wondering how important this is -- don't. Refund fraud is continuously growing day by day. In situations of this nature, the fraudster is making an overpayment with a stolen credit card. Then they will contact the business to ask for a reimbursement through an alternative method because they closed the account. This puts the company in jeopardy because in most cases that original charge is not refunded, leaving the company liable for the full amount back to the original card holder.

Credit card fraud
Credit card fraud has been around for years, but the variables have definitely changed. A person committing fraud can make online purchases with the card, whether the card is in their physical possession or not. The business is responsible for ensuring the person purchasing the items as authentic. If they do not, they are liable for the full amount.

Merchant fraud
Merchant fraud is very heavy during a holiday season. The Marketplace is handling the transaction of the consumer and the seller. Someone committing fraud will sell and receive payment for items that are non-existent. How would the organization know the person was being deceitful? The business would be responsible to the person and merchant for reimbursement.

Identity Theft
Identity theft has been going on for years and is very common in fraud. An online purchase is made using a different identity where they are ordering items under a false name and address with someone else's credit card information.

Emails are sent to random people asking for their user ID, password, and credit card information under the guise of a company they may already be using. If the person is not paying attention to the email from where this was sent, they could easily type in that information thinking it was some kind of breach and they needed to provide it to the merchant or bank once again. This is growing in popularity and has cost individuals hundreds of thousands of dollars.

Card testing
This is when someone creates and tests a credit card number to see if it will work online. There are a number of websites that will reject the number but give the reason why, whether it's an incorrect expiration or the card verification value (CVV) located on the back or front of the card. This helps those fraudsters figure out what they need to get the formula correct.

Friendly fraud
This is also called chargeback fraud. An online consumer will make a purchase, and then ask for a chargeback because their card was stolen. The request usually occurs after they receive the items.

These are the seven types of eCommerce fraud that are very popular. By implementing the proper protocols in the online space, losses can be mitigated.