With the massive growth of the online retail industry, cybercriminals have focused their attention on ecommerce sites. Though ecommerce fraud is nothing new, it has dramatically increased over the last few years. Cybercriminals are well aware that online retailers collect payment card data and PII from their clients. They can easily take advantage of this easy access in many ways. Therefore, having Ecommerce fraud prevention software has become unavoidable for online retailers to address issues of cyber crime.
What is Ecommerce Fraud?
It is any type of criminal deception for financial gain that impacts commercial transactions conducted via the Internet. The customer and the merchant are both the victims of payment fraud. The former have their payment card data or identities stolen, while the merchants are required to pay for costs associated with the fraudulent purchases. To avoid these costs, many online retailers today are turning towards ecommerce fraud prevention software.
E-commerce frauds fall into two categories. The first is inventory denial, which involves placing large numbers of a limited-quantity item in a shopping card through malicious hoarder bots without the intent to purchase. The second is identity theft, in which the cybercriminal uses another person’s identity to make a purchase.
Why are Frauds Common in Ecommerce?
A major reason for fraud being common in ecommerce is that fraudsters can easily evade detection using any device. Online retailers cannot verify the customer’s identity in person. Hence, scammers can easily use stolen payment card data. They also make use of various technologies to perpetrate fraud, like bots that make it easier for them to go undetected.
How Does Ecommerce Fraud Occur?
Ecommerce fraud can occur through one of the following methods:
- Malware: This includes installing malicious software on a customer’s computer that comprises the device or its browser.
- Phishing: This refers to sending malicious emails or text messages to users that allow them to access payment information.
- Data scraping: This is the act of collecting information from a website and selling it to other criminals.
Cybercriminals may also use a combination of these methods.
What are the Different Types of Fraud in Ecommerce?
There are different types of e-commerce fraud. These include phishing, interception fraud, card testing fraud, account takeover, retail arbitrage fraud, online payment, promotion fraud, triangulation fraud, chargeback or refund abuse fraud, eGift card fraud, loyalty abuse fraud, new account opening, and affiliate fraud.
How to Identify Fraudulent E-commerce Transactions?
- New email addresses: Keep in mind that customers do not usually change the email they use for buying things. So, if you see a new email address in your ecommerce platform, it may indicate that cybercriminals may have stolen an old email address to perpetrate crime.
- Higher or lower than average purchases: Online retailers should know that cybercriminals do not purchase the same way legitimate customers do. They will try to spend as much money as possible before they get caught. Hence, they will try to make a low-value purchase to stay under the radar.
- Expedited shipping: In order to evade manual review and detection, cybercriminals often check off expedited shipping. They want it as soon as possible, especially if they plan to resell items. They don’t care if it’s more expensive since they are not paying for the shipping.
- Unusual shipping location: It is suggested that you check the customer’s contact information before processing a shipment since cybercriminals often use fake names and addresses.
- Multiple shipping addresses: Cybercriminals may use multiple shipping addresses to make it harder for law enforcement to track down stolen goods. They may send the items to various locations, such as a relative’s home, a friend’s house, or even a post office box.
- Addresses don’t match IP addresses: since customers often make online purchases to send gifts, the shipping address isn’t the only thing you should monitor. It could also be a fraud if you find that the device used to make the purchase and the user’s geographic location don’t match.
- Multiple cards from a single IP address: This is another factor that could indicate fraud. If you notice a customer trying to buy multiple items from your store using different credit cards, it is recommended that you investigate whether there are any suspicious patterns. Also, check your payment gateway logs as customers try to trick your system by creating fake accounts.
What is Ecommerce Fraud Detection?
It includes all the tools and processes online retailers can use to detect high-risk transactions to mitigate risk, decrease resource loss, and reduce costs. Some examples of fraud prevention activities include blocking transactions, documenting transaction details, preventing credit card chargebacks, using fraud prevention software, data mining, and detecting fraud patterns with AI or machine learning.
The Bottom Line
Investing in a robust fraud detection and prevention program or software will protect your revenue and customers. The software can help you make data-driven transaction decisions based on customer value, thus acting as an authorized fraud analyst.
