eCommerce is a fast-paced, competitive, and at times difficult industry. The last thing you need to be concerned about is how to implement a RiskOps or fraud prevention system. Yet, as we’ve seen time and again, every online store owner quickly recognizes that they must defend themselves from scammers. Furthermore, the COVID-19 epidemic has intensified this requirement, with fraud rates increasing by 70% during the health crisis.

eCommerce fraud encompasses any fraudulent conduct intended to abuse online stores. The most prevalent assaults include fraudulent purchases using stolen credit card details. eCommerce fraud, on the other hand, is increasingly taking the shape of account takeover or refund fraud, among other tactics.

eCommerce fraud detection and prevention encompasses all of the tools and processes that an online retailer can implement to decrease the costs and resources lost due to fraud. This includes, among other things, stopping transactions with stolen credit card data and preventing and minimizing chargebacks and friendly fraud.

This is why, in this article, we’ll go over the most typical online store attacks and provide you tips on how to identify and defend yourself.

How Can I Check the Authenticity of an eCommerce Transaction?

Of course, when we talk about eCommerce, we’re referring to business transactions made electronically over the Internet, generally via an online store. These transactions are typically carried out via desktop computers, laptop computers, tablets, and phones. When we talk about fraud, we mean unlawful deception with the goal of gaining financial or personal advantage.

Read Also: How do I Make my eCommerce Website Secure?

eCommerce fraud, then, is criminal deception committed during a commercial transaction via the Internet with the intent of gaining financial or personal gain for the fraudster while negatively impacting the merchant’s bottom line. Payment fraud is another term for eCommerce fraud.

Remember that the target of eCommerce fraud is an online merchant, and the deceit is designed to go undetected.

Internet payment fraud occurs for a variety of causes, some of which are historical, some of which are geographical, and some of which are legal.

1. Ease. 

Prior to the Internet, fraudsters had to take physical credit cards and use them to make purchases. Breaking into homes and cars, as well as robbing individuals on the street, was a dangerous business in and of itself. Occasionally, thieves were fortunate enough to get credit card slips that a business had carelessly thrown, and they used those card information to order products fraudulently over the phone.

Fraudsters have it much easier these days. They simply go to a dark web website and buy as many stolen credit cards as they require. Throughout the first half of 2019, the dark web had at least 23 million stolen credit cards for sale.

2. Anonymity. 

Money fraud is also common because it is done anonymously. The scammers do not need to enter a store, speak to anyone, or risk being caught on store cameras. They only require a computer and an Internet connection. They can operate unnoticed from any location, at any time of day.

Internet fraudsters frequently use aliases to create phony email accounts and rent post office boxes, revealing no personally identifiable information about themselves.

3. Evasion.

eCommerce fraudsters know that police departments do not make eCommerce fraud a priority. For one thing, the amounts of money involved in each fraudulent transaction are typically small relative to other types of crimes. Plus, online fraud is increasingly conducted across international borders, making it hard for the police to locate and prosecute online criminals in other countries.

How to identify these eCommerce fraud?

eCommerce fraud can be detected in a variety of ways as an online merchant. Remember that the success of eCommerce fraud is dependent on the fraudsters’ ability and ingenuity. As shops strengthen their defenses against online criminal activity, online criminals sharpen their skills and invent new ways to scam their victims. Here are some of the most typical red flags to look out for:

• Inconsistent order data: The zip code and city entered don’t match. Or the IP address of the shopper and their email address don’t match.
• Larger than average order: The order is far larger than your customer typically spends. Other red flags include multiple units of the same SKU in one order, and expedited shipping (the crook wants to receive the order before getting caught).
• Unusual location: Your customer always purchases from an IP address in North America but suddenly makes a purchase from an IP address in an unusual location (Nigeria, for example).
• Multiple shipping addresses: The buyer makes multiple purchases under one billing address but ships the products to multiple addresses.
• Many transactions in a short timeframe: The fraudster makes multiple purchases back to back—and it’s not the holiday season.
• Multiple orders from many credit cards: Someone makes multiple purchases using multiple credit cards (either in one day or over a longer period.
• Multiple declined transactions in a row: The purchaser makes not just one or two attempts (honest shoppers make mistakes, after all), but four, five, six, seven, eight or more attempts without getting the card number, expiry date, and card security code correct.
• Strings of orders from a new country: You’ve never received a single order from the Kingdom of Bhutan, and then you suddenly receive 11 orders from that country in the space of a week.

When you hear the term “eCommerce fraud,” you likely think of stolen credit cards being used by criminals to buy products from online stores. But credit card fraud is just one of the most common types of fraud. Here are the top six.

1. Credit card fraud. 

Credit card fraud is an umbrella term for all types of fraud performed with a credit or debit card. Credit card fraud is also known as card-not-present fraud and payment fraud in the context of eCommerce fraud. In online credit card fraud, the fraudster uses stolen credit card information to purchase goods or services from a web merchant.

A common scenario is a criminal visiting a dark web site that sells stolen credit cards. The perpetrator purchases the card data and then goes an online store to purchase a product or service using the stolen card number. The cardholder whose card was taken gets defrauded by this initial transaction.

But, it eventually defrauds the store owner, who is forced to refund the transaction (and sometimes pay a chargeback fee to the bank that issued the card). Businesses can also fall victim to card testing scams, in which many credit cards are used to test which are still active and can be used to make purchases. They are often tiny, low-risk orders, but they can build up to a significant impact to a merchant’s bottom line.

2. Affiliate fraud. 

Affiliate fraud is illicit behavior meant to gain affiliate commissions. Online businesses pay affiliates a percentage on sales referred by affiliates in affiliate marketing. Merchants provide affiliates with a unique, trackable web link that directs customers to the merchant’s store pages. When a customer clicks on one of these links and makes a purchase, the merchant thanks the affiliate by paying the affiliate a commission (typically a percentage of the sale price).

In affiliate fraud, fraudsters game the system and defraud the online merchant by generating commissions or increasing the quantity of commissions.

Typosquatting is a prevalent type of affiliate fraud in which a criminal registers domain names that match widely misspelled variants of an online store’s actual URL. The fraudster then redirects that domain name to the merchant’s website, but this time with an affiliate link.

3. Chargeback fraud. 

A chargeback in the realm of credit card transactions is a claim made by a credit card issuer to a shop to reimburse a fraudulent or disputed transaction.

Chargeback fraud occurs in the online commerce industry when an online shopper uses their credit card to make a purchase, receives the purchased goods or services, but then seeks a refund from the credit card company, which routes the request through the issuing bank (the bank that issued their credit card, also known as the card issuer). This sort of fraud, sometimes known as “friendly fraud,” ends in the payment processor demanding that the store reimburse the purchase amount to the issuing bank. When a bank requests a chargeback, the internet retailer must reimburse the purchase.

A common chargeback fraud scenario involves a shopper making an online transaction. After obtaining the products or services, the criminal waits weeks or months before contacting their bank and disputing the transaction as illegal or fraudulent. The fraudster thinks that the merchant does not have the time or resources to refute the claim, or that they would just give them the benefit of the doubt.

4. Phishing/account takeover. 

Most eCommerce shops offer accounts that hold personal information, financial information, and purchase history. Phishing methods are used by cybercriminals to gain access to these accounts. One of the most prevalent methods is for fraudsters to send emails to consumers in order to deceive them into disclosing personal information such as usernames and passwords.

They then access the customers’ accounts, alter their passwords, and make fraudulent purchases. Social media logins are a popular way for customers to easily register accounts on eCommerce sites, but if that information is compromised, the consequences may be disastrous. Criminals are also exploiting bots to steal confidential information, causing customers to suffer the consequences of identity theft.

5. Interception fraud.

Interception fraud occurs when criminals use stolen credit cards to make online transactions, ship the products to the address on file for the credit card at the time of checkout, and then intercept the shipment before it is delivered. For example, a thief may visit an online merchant such as Amazon and purchase an item using a stolen identity, address, and credit card. After completing the order, the criminal contacts customer care before the item is dispatched to modify the delivery address to the criminal’s preferred pickup location.

6. Triangulation fraud. 

To defraud online retailers, triangulation fraud employs three processes. In the first phase, fraudsters set up a bogus internet storefront, usually one that sells popular brand-name goods at rock-bottom costs. The site’s sole purpose is to steal names, addresses, and credit card details from unsuspecting customers.

Read Also: How to Get Into Fashion eCommerce?

The fraudsters then utilize the stolen client credentials and credit card data to visit a legitimate online business, purchase exactly what the victim purchased from the bogus store, and ship it to the customer.

The final phase is the scammers’ payout. They utilize the stolen consumer information to make additional online transactions and ship them to themselves. Because the original purchase (from the bogus site) raises no suspicions on the part of the victim, this sort of fraud generally goes undetected for a longer period of time than other types of online fraud.

What eCommerce Fraud Prevention Tools Should Merchants Deploy?

Your fraud prevention plan should contain eCommerce fraud prevention technologies like:

• Data enrichment: You can create a complete profile of your clients simply on a single data item, such as an email address or phone number. For example, you can determine whether the email address is real and whether it was created with a temporary domain service or one that raises risk (no verifications during email account opening). This is very useful when completing a manual check, such as confirming a customer’s identification before mailing a goods.
• Reverse social media lookup: Fraudsters gain access to a large number of credit card numbers as a result of data breaches and dark web markets. What they can’t do is set up whole social media profiles for each of the names on their stolen credit cards. This is an excellent opportunity to determine whether a user appears real or not based on their social presence. SEON has access to over 50 social networks.
• Device fingerprinting: This method examines how customers connect to your website. It is useful not just for detecting suspicious logins via VPNs, proxies, or emulators, but also for detecting links between accounts. Because many fraudsters reuse the same devices and IP addresses, reporting them can assist you in shutting down whole fraud networks at once.

Preventing ecommerce fraud begins with collecting as much information about clients as possible. It assists in authenticating them at login, detecting unusual information that may indicate chargeback fraud, and identifying consumers who abuse return policies.

Friendly fraud is more difficult to detect than regular payment fraud. But, fraud detection systems can assist you in obtaining precise transaction and user data, allowing you to challenge a chargeback request from a dishonest buyer.