NTC Ecommerce Fraud

Ecommerce Fraud: How to Protect Your Store from Online Scammers

Congratulations on transforming the brick-and-mortar store into an eCommerce store. Soon, you will witness an improved user base, sales, and profits after going online. However, the explosive growth in sales and ROI accompanied by Ecommerce frauds, that’s increasing at the same speed.   

The value of losses due to eCommerce fraud will rise this year, from $17.5 billion in 2020 to over $20 billion by 2021

During the corona crisis, small e-retailers to larger online retailers have experienced a spike in fraudulent transactions.

The current scenario requires us to get ready for the next. That’s to stay alert to answer the fraudsters before they exploit and put the business at losses. The advanced technology-packed tools are a step forward to help retail merchants combat fraud without adding any friction in the customers’ journey.

Here, we have enlisted the seven types of Ecommerce fraud and fraud prevention tricks.

Credit card fraud

This type of fraud involves using stolen credit cards or debit card information. The fraudsters purchase the card data from the dark web and then use the stolen card information for product or service purchases. Initially, the fraudsters deceptively steal money from the cardholders by making a purchase using their stolen card. Later, the merchants defrauded to refund the purchase, which badly hit the bottom line.

The solution

Regularly monitor the accounts and transactions at the E-commerce store for detecting and proactively preventing suspicious activity. The transactions are red-flagged whose IP addresses from the countries serving as a base for fraudsters are found. Also, CVV number verification for all purchases is mandatory. It ensures that the customer has the physical card in their possession.

Refund fraud

It’s an advanced form of fraud where the fraudster leverages the stolen credit cards to purchase on the eCommerce store. Later, they demand reimbursements for accidental overpayments. The request for excess money is followed by returning the amount at an alternative method because the card is closed or stolen. It puts the merchant in a critical situation as they are liable to refund the entire amount and cannot cross-check as the previous card is closed. The fraudulent activity appears to be legitimate, but the money is stolen from the business deceptively.

The solution

The anti-fraud tools are an innovative solution that reads the fraudster’s digital footprint and reveals many things, including email domains, social networks, and data breaches in real-time. It allows connecting the dots and taking the actions accordingly, which prevents refund fraudsters create damage for the business.

Account takeover fraud

The guest checkouts are comparatively low in number than the checkouts done by the registered users. The Ecommerce merchants store the personal information, purchase history, and financial data under the customer accounts umbrella. The fraudsters smartly defraud the Ecommerce store by gaining access to the users’ accounts unauthorizedly.

They put a dent in the users’ accounts using various phishing schemes or buying the security codes, stolen passwords, or personal data from the dark web. After gaining access to the users’ accounts, they manipulate the things to execute the fraudulent activity. For instance, they change the account details, withdraw the amount, make purchases, and other things.

It ruins the Ecommerce reputation and costs them losing the customers’ trust, which is implausible to gain.

The solution

Maintaining PCI DSS (Payment Card Industry Data Security Standard) compliance to ensure the cardholder information and card information is stored and processed in a secure environment is the best. The Ecommerce store needs to comply with PCI standards, where they take all the security measures, including card data encryption when stored, create a firewall between your internet connection and stored number. Not abiding with PCI regulations results in heavy penalties or falls into legal jurisdiction.

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Chargeback fraud

Chargeback is an amount that’s the retailer is bound to return to the credit card service provider when fraudulent transactions reported. It’s referred to as friendly fraud wherein the individual purchases from an online store and requests for a refund after two to three months by thinking that the merchant doesn’t have enough resources to dispute the claim. The fraudsters demand the refund by saying- product not delivered before, or order canceled quite earlier, or item returned, but refund not initiated.

The solution

 The chargeback software management tools integrate with an eCommerce store. It runs in the background automatically to manage the disputes and reduce fraud loss. With all the information on hand, they won’t allow fraudsters to defraud the merchant with chargebacks.

Interception fraud

The fraudsters intercept the Ecommerce orders before they are delivered to the intended recipient using the stolen credit card information. When the fraudsters find the user’s account with shipping address or billing address information matching with the information linked to the stolen card, they intercept the deliveries and take it for themselves.

For instance, they can directly place a call to the Ecommerce customer support to change the order before it’s shipped. It lets them receive the goods for which the original customer has already paid. Otherwise, they can connect with the shipping services to get the goods delivered at the address of their choice. Later, they accept the deliveries and then collect the package for themselves.

The solution

 During the interception fraud, the fraudsters try to avoid detection by providing an unknown location or PO box for the goods delivery. Otherwise, the police can easily catch them. The Ecommerce store says no to shipping orders to PO boxes or virtual addresses of freight forwarders. Avoiding non-physical shipping addresses could help in addressing interception fraud.

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Card testing fraud

The fraud tactic is largely used by cybercriminals to defraud Ecommerce businesses. In card testing fraud, the fraudster gains access to the stolen card through purchases on the dark web or physical theft. They get to know the card numbers, but the credit card limit and card validity are unknown, which doesn’t allow them to complete the transactions successfully.

For credit card test purposes, the frauds run the scripts or bots for quickly testing the multiple cards on the Ecommerce store. Initially, a small purchase made to check whether the card works or not. If it succeeds, they proceed with a large amount purchase. The big purchase finished with credit card testing recognized by the customers (Victim) and Ecommerce store at a later stage.  

The solution

 The best fraud detection solution to card testing fraud is creating a Blacklist. When the intelligent system notice that some customers test with multiple credit cards on the Ecommerce store, they can put them into an internal Blacklist. The customers who fall on the Blacklist are refrained from purchasing in the store. However, it’s not a complete solution, but let Ecommerce merchants flag the customers based on the previous shopping behavior.

Triangulation fraud

The fraud type involves three stakeholders- customers, the eCommerce marketplace, and fraudsters. The fraudster first creates a storefront on the eCommerce marketplace that sells popular goods at a reasonable price. The competitive rates drive a large number of customers to the storefront to gain benefits. When customers place an order, fraudsters send goods to the customers but purchase using stolen credit cards.

Here, the customers are happy as they receive goods at a low price, but two parties- the people whose credit card stole and the eCommerce store become victims.

The solution

The online retailer with a verification solution identifies the users’ unusual behavior during login and checkout, even after having the correct credentials. By tracking the differences in user behavior, the unusual interactions are flagged and reported to the system so that necessary actions taken against the fraudsters.

What’s next? Keep your Ecommerce platform up to date to prevent frauds.

Knowledge is king. The knowledge about fraud types, how they inject vulnerabilities in the online store, how to detect cybercriminals, and ways to prevent attacks before they exploit the ecommerce platform, is a power. With enough education about frauds and fraud prevention, stay alert and ensure robust security.

Himanshu Patel

Himanshu Patel is the founder & CEO of NectarBits, a fast-growing Best Mobile App Development Company & On-Demand eCommerce Development Company. The current innovation and updates in the field lure him to express his views and thoughts on certain topics.