10 Common Types of eCommerce Fraud & How to Fight Them

Online shopping is convenient and straightforward, but it may also be a target for fraudsters. Fraud can manifest itself in a variety of ways, including bogus purchases and credit card theft. If you run an online store, you must be aware of the most prevalent types of eCommerce fraud so that you can safeguard your company from them. Here are ten of the most typical forms of eCommerce fraud, as well as suggestions on how to combat them.

Credit Card Fraud

eCommerce credit card fraud occurs when a thief uses your personal credit card information to make unauthorized purchases online. This type of fraud can be especially costly and difficult to recover from, as it can often go undetected until you receive your credit card statement at the end of the month. Fortunately, you can take a few simple steps to protect yourself from eCommerce credit card fraud.

•   First, always check the URL of any website you are entering your credit card information into. If the URL is not https://, then the site is not secure, and your information may be at risk.
•   Second, make secure passwords for all of your online accounts and avoid using the same password twice.
•   Finally, keep an eye on your credit card statements and immediately report any suspicious activity to your bank.

Return Fraud

eCommerce return fraudsters buy items from online stores, keep the merchandise they ordered, and then request a refund. And because the store never receives the returned product, they unknowingly grant the thief their money back. While difficult to detect, this type of crime costs businesses millions annually. To protect your business from eCommerce return fraud:

•   First, make sure that you keep track of all of your orders and returns. This will help you to spot any suspicious activity.
•   Second, be sure to inspect all items that are returned to you. If something looks like it has been tampered with, or if the packaging is damaged, it may be best to refuse the return.
•   Finally, consider implementing a return policy that requires customers to show identification when returning items. This can help to deter fraudulent activity.

Product Substitution

Have you ever gone online to buy a product, only to find that it’s out of stock? And then, instead of ordering the product you originally wanted, you find yourself substituting it for a different product that is similar. If so, then you’ve been the victim of eCommerce product substitution.

Product substitution occurs when an online store runs out of the product you’ve chosen to purchase and instead sends you a similar product as a replacement. In some cases, the substitution may be made without your consent or knowledge. And in other cases, you may be given the option to accept the substitution. But either way, it can be frustrating to receive a different product than the one you intended to purchase.

So how can you protect yourself from eCommerce product substitution? The best way is to do your research before making a purchase. Read reviews of the product you’re interested in, and pay attention to any mention of substitutions.

Also, be sure to check the return policy of the store before making your purchase. That way, if you do end up receiving a substitution, you can easily return it for a full refund.

Shipping and Handling Fraud

Ecommerce shipping and handling fraud occurs when a fraudulent order is placed with the intent to receive the merchandise without paying for it. This type of fraud can be perpetrated in a number of ways but typically involves using a stolen or fake credit card to place the order and then providing a false or invalid shipping address. As a result, the merchandise is never received by the person who placed the order, and the merchant is left footing the bill.

There are a few things that you can do to protect yourself from ecommerce shipping and handling fraud.

•   First, be sure to verify the billing and shipping information for all orders before processing them. If something looks suspicious, contact the customer directly to confirm their information.
•   Additionally, consider requiring a signature upon delivery for all orders over a certain amount. This will help ensure that the person who placed the order receives the merchandise.
•   Finally, remain vigilant and report any suspicious activity to your ecommerce platform or law enforcement authorities.

Fake Reviews

eCommerce fake reviews are a big problem. They can mislead shoppers and make them purchase decisions they wouldn’t have otherwise made. But how can you tell if a review is fake? And what can you do to protect yourself from falling victim to fake eCommerce reviews?

There are a few telltale signs of a fake review.

•   First, take a look at the language used in the review. If it seems overly positive or glowing, that’s a red flag.
•   Second, check to see if the reviewer has purchased other items from the same seller. If they have, that’s another potential sign that the review may be fake.
•   Finally, take a look at the reviewer’s profile. If they don’t have many friends or followers, or if their profile picture is generic or doesn’t seem to match the account, those are also potential signs of a fake review.

Coupon Fraud

A type of fraud that has grown in recent years is eCommerce coupon fraud. Someone uses a counterfeit or stolen code to make an online buy. Even though it may not look like a huge deal, businesses and people can suffer seriously from this crime. Businesses might have less revenue and earnings because of it; consumers could experience identity theft or money problems. The great news is that both groups can take steps to stop this kind of fraudulent activity before it happens!

Businesses should carefully vet all coupon codes before making them available to the public. Consumers, meanwhile, should only use trusted sources for coupons, not try to find people online to purchase coupons from, and never provide personal information to anyone in exchange for a discount.

Account Takeover

eCommerce account takeover (ATO) is a type of online fraud in which criminals gain access to a victim’s online account and use it to make unauthorized purchases or transfer funds. ATO can happen to anyone who uses online banking, shopping, or other services. The best way to protect yourself from ATO is to choose strong passwords and be vigilant about keeping them safe.

Never use the same password for multiple accounts; never share your passwords with anyone. It’s also important to enable two-factor authentication (2FA) whenever possible. 2FA adds an extra layer of security by requiring you to enter a code from your mobile phone in addition to your password when logging into an account.

Affiliate Fraud

Ecommerce affiliate fraud occurs when an affiliate or publisher promotes a merchant’s product or service on their website or blog but uses illegal or deceptive methods to do so. This can include everything from creating fake reviews to using stolen credit card numbers to make purchases. While ecommerce affiliate fraud is not a new problem, it has become more prevalent in recent years as the popularity of online shopping has grown.

There are a few things that you can do to protect yourself from ecommerce affiliate fraud, including being aware of the signs of fraud and verifying the identity of the affiliates that you work with.

Merchant Fraud

Merchant fraud is a type of fraud that occurs when an online retailer is tricked into accepting a payment from a fraudulent source. There are many different ways that eCommerce merchant fraud can occur, but the most common type is chargeback fraud. This occurs when a customer uses a stolen credit card to make a purchase and then requests a chargeback from the credit card company after receiving the goods. Chargeback fraud can be very costly for retailers, as they not only lose the value of the goods purchased but also incur fees from the credit card company.

There are several steps that retailers can take to protect themselves from eCommerce merchant fraud.

•   Firstly, they should always verify the customer’s identity before accepting a payment.
•   Secondly, they should keep track of all orders and payments so that they can spot any suspicious activity quickly.
•   Finally, they should use a secure payment gateway that encrypts all sensitive information to prevent fraudsters from intercepting it.

Payment Gateway Fraud

It’s basically when someone uses a stolen or fake credit card to make an online purchase. There are a few different ways that this can happen. For example, someone might use a stolen credit card to buy something from your website. Or, they might use a fake credit card that hasn’t been activated yet. Either way, you’re out the money for the purchase.

So how can you protect yourself from eCommerce payment gateway fraud?

•   First, make sure that you’re using a secure payment gateway. This will help to encrypt your customers’ credit card information and keep it safe.
•   Second, keep an eye out for suspicious activity. If you see an order come in that you know is too good to be true, it probably is.
•   Finally, don’t hesitate to contact your customers if something seems fishy. A quick call or email can often get to the bottom of things.

Conclusion

eCommerce fraud is a real problem that can seriously impact your business. However, there are steps that you can take to protect yourself. By being aware of the different types of eCommerce fraud and taking measures to prevent it, you can help to keep your business and yourself safe.