What Exactly Is E-Commerce Fraud?
E-commerce fraud involves frauds that are intended to harm the e-commerce business and exploit the online stores completely. E-commerce fraud is increasing daily at the same speed as the e-commerce business is developing. E-commerce fraud usually occurs with stolen credit card numbers, account take-overs, account hacking, and many other ways. However, with every bad, there is a good. The same is the case with e-commerce fraud. As e-commerce fraud is prevalent in society, many sophisticated tools and software solutions are highly secure and end-to-end encrypted, such as Foodnerd POS for restaurants and Howmuch POS for the retail industry. These point-of-sale software solutions retain the ability to quickly detect e-commerce fraud and immediately take quick action to block the attempt in order to prevent the fraud.
What Are The Five Types of E-Commerce Fraud That Affect Businesses?
The e-commerce industry is continuously thriving currently as compared to the past. However, despite the remarkable progress of the e-commerce industry, e-commerce businesses are experiencing severe losses due to fraud. Below, we have highlighted the most significant types of fraud in the e-commerce industry that you must know about in order to protect your business.
Transaction fraud is the most common type of e-commerce fraud that usually impacts businesses. This fraud occurs by the fraudster when they make transactions from the stolen card number. And this is known as credit card fraud. Similarly, nowadays, there is a system of online payment, and different platforms such as Easy Paisa, Stripe, Jazz Cash, etc., offer online transactions. Often, there are hackers present in the gateway that nobody knows about. They stole the credit card information of customers from the business owners and, from there, they made fraudulent transactions. Undoubtedly, these platforms promise secure transactions, but fraudsters still commit fraud online. At the same time, the responsibility always falls on the online stores, which affects their business to a great extent.
Account Takeover Fraud
Account takeover fraud is the identity theft that customers usually experience. The most common type of e-commerce fraud is included in the fraudster's tactic. In account takeover fraud, the fraudster tracks the customer's account details by hacking the account, stealing customer information from the web, stealing customer security codes and passwords, and through different phishing schemes. Once they gather all the details of a customer account, they hold full authority to use it the way they want. And then, they usually change the account details first, make massive purchases, withdraw different funds, and then access different other user accounts. Hence, it is the worst type of e-commerce fraud that exists, and it wrecks the customer’s trust, making them hesitant to do online shopping in the future.
Another common type of e-commerce fraud tactic is refund fraud, in which the fraudster makes a purchase with the stolen card and then informs the merchant to refund it to their new credit card because the old card has been stolen and is now closed. Refund fraud is a strict fraud for merchants because it is very complicated to deal with, as merchants cannot identify which claims are legitimate in contrast to which ones are fraudulent, thus leaving the merchant in severe confusion. Most merchants avoid refunds, destroying their brand reputation.
Friendly fraud is also one of the most underrated types of fraud. Not every time the thieves conduct the fraud; sometimes, customers also amicably commit fraud. However, these types of customers are more likely to be fraudsters than regular customers. Friendly fraud occurs with excellent planning in which the customer first makes a lot of purchases, pays the amount due, and then claims that they haven’t received the product on delivery, or sometimes they claim that the product they have received is damaged. Ultimately, the merchant has to refund the amount or issue a coupon as compensation. This type of e-commerce fraud severely affects the merchant financially and threatens the brand's reputation.
Triangulation fraud is also the most prominent e-commerce fraud to which many merchants become victims. In this type of e-commerce fraud, the fraudster made a replica website and enticed the buyers with cheap rates. They also run marketing and promotion campaigns and attract customers. They do not actually exist, but they are using the brand name and reputation. The customers make purchases and transactions, but they do not receive any goods. In return, customers launch complaints to various platforms, which jeopardize the reputation of legitimate websites or brands.