By 2023, eCommerce is expected to account for 22% of all retail sales — a 7.9% jump from 2019.
At first glance, this may not seem like a dramatic increase. However, when you look at the year-over-year trends since 2015, you’ll notice that following the pandemic, eCommerce sales are expected to continue to thrive significantly.
That’s the beauty of eCommerce platforms. Despite times of crisis, businesses can still thrive.
At the same time, this increase in eCommerce transactions brings another problem: eCommerce fraud.
There are five common types of fraud that retailers should be on the lookout for:: card testing, account takeover, interception, chargebacks, and refund fraud.
How eCommerce Fraud Affects Businesses
While this term ‘eCommerce fraud’ is fairly self-explanatory, the reality is that it covers a wide range of tactics used by fraudsters to target eCommerce merchants.
Generally, brick-and-mortar stores are not strangers to fraud. But eCommerce platforms have created a whole new world of opportunities for fraudsters to take advantage of.
Stores and merchants also offer accounts to customers for a wide variety of reasons — ranging from rewards programs to the convenience of saving payment information. These accounts are another avenue for fraudsters to take advantage of, should they gain access to honest customers’ account information.
eCommerce Fraud Types
As previously mentioned, the nature of eCommerce transactions presents many opportunities for fraudsters to target eCommerce vendors and merchants. Here are some of the most common ways fraudsters tend to target eCommerce vendors and merchants.
Card Testing Fraud
With card testing fraud, the fraudster illegally obtains one or more credit card numbers. Typically, fraudsters will obtain these numbers by stealing them directly or purchasing them from certain parts of the internet.
Card testing fraud starts out smaller: The fraudster will attempt smaller purchases with each card number to figure out which ones are valid without drawing too much attention to themselves. Smaller purchases also help determine the limits on each of the credit cards.
After initial testing, fraudsters can begin making larger purchases. By the time many merchants discover that they’ve been the target of card testing fraud, the fraudster has likely had the time to make several large purchases.
Account Takeover Fraud
Fraudsters have a variety of methods they can use to gain access to customer accounts. Purchasing stolen passwords and security codes, obtaining customer info from the web, and implementing phishing schemes are just some of the tactics at a fraudster’s disposal.
Once the account has been taken over, fraudsters have free reign to do whatever they want, including:
- Changing account details
- Making purchases
- Withdrawing funds (if this functionality is present)
- Accessing other accounts owned by the user.
Make no mistake. Account takeover fraud is a form of identity theft. Customers who have been the victim of account takeover fraud may never trust the provider again, and any customer relationship will be tarnished if not destroyed. This makes account takeover fraud one of the most detrimental forms of eCommerce fraud that exists.
With interception fraud, the fraudster purchases goods from your eCommerce website using a stolen credit card but avoids certain checks by providing legitimate, matching shipping and billing addresses. Upon placing the order, the goal is to intercept the package before it gets to the address provided.
There are three common tactics that fraudsters can use to do this:
- If they know the victim and live close by, they can simply steal the package from the drop off location
- Contacting a customer service representative from your company to change the shipping address before the item is ready to be shipped
- Contacting the shipping company themselves to reroute the package to a destination of their choice
Chargeback fraud is when a customer purchases a product or service before contacting their credit card company to void the purchase, resulting in a “chargeback.”
Chargeback fraud is an interesting case because it could result from a legitimate purchase not being recognized by the customer. This particular case is often called “friendly fraud.” Friendly fraud is no less detrimental to eCommerce merchants, though. It can still have a negative impact on both the business and the customer relationship.
Some fraudsters intentionally commit chargeback fraud by abusing company policies to get items for free, knowing the purchase will be refunded to their credit card.
Chargebacks cost companies big in multiple ways, including:
- Chargeback fees
- Lost merchandise
- Shipping costs
- Penalties and administrative costs
- Banking fines
With refund fraud, a fraudster purchases a product or service using a stolen credit card and then has it refunded onto their credit card. One of the most common tactics used is informing the merchant that the refund will need to be processed on a new credit card because the old one has been closed.
Refund fraud is stressful for eCommerce merchants to deal with. It can be difficult to decipher which claims are legitimate and which ones are fraudulent — leaving your relationship with your customers in jeopardy.
Preventing eCommerce Fraud With an eCommerce Fraud Protection Service
However, the most reliable way to protect your business is with an eCommerce fraud protection service.
Forter’s Trust Platform provides a fraud prevention solution that is tailored to your business. With a single platform, you’ll be able to secure the entire purchasing journey from start to finish. All of Forter’s fraud protection services allow you to approve more legitimate transactions, avoid false declines, and protect your business from all different types of eCommerce fraud using an automated platform.
There Are Many eCommerce Fraud Types — All Of Them Negatively Impact Your Business
ECommerce platforms provide your customers with the luxury of convenience. It has become increasingly clear that there will always be value in being able to purchase goods and services from the comfort of your home instead of having to leave the house.
This also means that companies need to be aware of the different eCommerce fraud types.
Unfortunately, eCommerce merchants tend to be more vulnerable than brick-and-mortar stores. But by staying informed (and implementing a fraud protection solution), you can keep fraudsters from targeting your business and ensure that your bottom line is always protected.
Forter is the Trust Platform for digital commerce. We make accurate, instant assessments of trustworthiness across every step of the buying journey. Our ability to isolate fraud and protect consumers is why Nordstrom, Sephora, Instacart, Adobe, Priceline, and other leaders across industries have trusted us to process more than $500 billion in transactions. Click here to learn more.