The likelihood of fraud is growing as more people shop online. The online retail sector expanded two to five times as quickly in 2020 as it had before the COVID outbreak, according to analyst firm McKinsey, who also noted that the US commercial market experienced an unprecedented 14.2% growth in 2021. As a result, cybercriminals changed their target and increased monthly bot attacks on shopping websites by 13% for the holiday season of 2021.
Although eCommerce fraud is nothing new, it has grown over the past few years as even more individuals have made purchases online. Cybercriminals are aware that online shopping platforms collect personally identifiable information (PII) and payment card information, and they use this simple access to PII in several ways.
E-commerce fraud is any form of illegal deception committed for monetary gain and affecting online business transactions. E-commerce fraud costs consumers and businesses money. Customers’ payment card information and identities are at risk, but their money is secure. Chargeback fees and other expenses related to fraudulent purchases fall under the purview of the merchant. The victim of payment fraud is always both the customer and the business, and that is why merchant fraud prevention integrated software solution is a must.
Despite a variety of attack techniques, e-commerce fraud mainly falls into two categories:
- Denial of inventory is utilizing malicious hoarder bots to place numerous, limited-quantity items on a shopping card without intending to make a purchase.
- Using someone else’s identity to make a purchase is identity theft.
What Enables E-commerce Fraud?
E-commerce fraud occurs as a result of criminals’ opportunistic nature. E-commerce fraud can be committed by con artists both offline and online. In either scenario, the criminals use computers or internet-connected electronic equipment, such as point-of-sale hardware or online payment systems.
Even though there are several forms of eCommerce fraud, they are all variants on the following themes:
- Phishing is the practice of tricking users into divulging their financial information by sending them threatening emails or texts.
- Installing malicious code that compromises a customer’s computer or browser is known as malware.
- Data scraping is obtaining data from websites and reselling it to other criminals.
Additionally, a lot of cybercriminals combine these techniques. For instance, during the holiday season, they might send phishing messages that direct clients to a counterfeit version of your site. The customer’s information is sent to the offender, not you, when they fill out the form or make a transaction. With such information, scammers can shop elsewhere.
Types of E-commerce Fraud: Guide For Merchant Fraud Prevention
You can better defend your company when aware of the many eCommerce fraud schemes taking place out there.
Fraud Involving Account takeover (ATO)
In an account takeover, hackers access your website using stolen client credentials. Once logged in, they can:
- Update your shipping address
- Purchase things
- Get rid of the account
- Stealing more details and data
Fraud Of Card Testing
When fraudsters take a credit card, they may use it to make a tiny, low-value transaction to see if the victim or the victim’s bank notices. Once the purchase is approved, they proceed to make expensive purchases. This is known as card testing fraud or credit card fraud.
Fraudulent Retail Arbitrage
This kind of internet fraud involves thieves using harmful bots to buy many products at a bargain and reselling them for a profit. Bot detection and blocking are getting harder as bot technology continues to advance.
Friendly Fraud
When a chargeback is the customer’s fault, it is referred to as “friendly fraud.” They contend that the purchases were fraudulent, say they changed their minds, and use another credit card again for bogus chargebacks.Chargeback detection for fraudulent payments is a vital tool for businesses to identify and prevent chargebacks resulting from fraudulent transactions. It helps minimize financial losses and protect against fraud.
Interception Fraud
The billing and delivery addresses connected to the stolen credit card are used by fraudsters when they commit interception fraud. After placing the order, customers stop the delivery, typically by contacting customer service to modify the address or the shipper to reroute the delivery.
Misuse of Loyalty Points
If you run a loyalty program, you should be cautious about the information you gather. Scammers target incentive and loyalty schemes that give credit card points. They spend the money and then sell the points for a portion of its worth.
New account opening (NAO)
Cybercriminals frequently exploit real identity info while creating new accounts to reap the benefits of deals and services. For instance, they can swiftly make and finalize huge account openings using bots.
Triangulation Fraud
Credit card details are stolen when a client buys something from scammers. The intention is to steal the customer’s payment information. The scammers set up an online store or storefront. The item is then purchased and shipped to the customer.
Merchant Fraud Prevention Software: Importance
Because anonymous fraudsters can readily avoid detection using any internet-connected device, fraud is typical in e-commerce. Scammers can more readily exploit stolen payment card information because the online business owner cannot personally confirm the customer’s identity. Additionally, fraud-supporting technologies like bots make it simpler to avoid detection.
Your revenue and consumers are protected if you have a strong fraud prevention and detection program. By serving as an automated fraud analyst, fraud prevention software can assist you in making data-driven transaction selections based on the customer’s value.
Software for preventing fraud gives an additional layer of defense against harmful bots on your e-commerce platform. Its bot prevention software uses multiple algorithms to recognize and examine visitors’ technical and behavioral characteristics. Additionally, it automatically eliminates problematic bots, allowing you to view 100% of your bot activity in real time. In less than two milliseconds, you may determine if a visitor is a person or a robot by analyzing all website requests.
The automated fraud protection technology reduces automated e-commerce fraud attacks, including account takeovers.
