fraud Archives - OpenBusinessCouncil Directory

5 Most Common Types of Ecommerce Fraud and How to Fight Them

Hernaldo Turrillo — Mon, 30 Aug 2021 11:18:57 +0000

If you run an ecommerce business, it’s likely that you’ve experienced some type of fraud. Scammers are creating more sophisticated ways to navigate some businesses’ fraud prevention strategies, finding out how to better imitate genuine customers. But how are they committing these acts of fraud and how can they get away with it? Here we explore five different types of fraud that ecommerce businesses encounter. Then, we’ll explore how you can combine positive customer experiences with an optimised fraud prevention strategy to protect your business.

Payment fraud, including identity theft

Would you know if someone were pretending to be you? Payment fraud is one of the most common types of ecommerce fraud. In fact, payment fraud contributes to a whopping 71% of all online payment attacks. But things have moved on beyond fraudsters stealing bank or card details. Today, fraudsters will also use email accounts, user accounts, names, addresses, IP addresses, and personal devices to complete their purchase. For fraudsters, the hope is that all these details will make them look like the real deal – like you. This, in turn, can lead to fraudulent purchases and the creation of new fake user accounts.

Friendly fraud

Despite its affectionate name, friendly fraud isn’t all that welcome for ecommerce businesses. Also known as chargeback fraud, it occurs when a consumer (or fraudster) makes an online shopping purchase with a credit card but then requests a chargeback from the issuing bank after they’ve received the goods or services. The consumer may cite damaged goods or undelivered products as grounds for a refund. The stickler is, depending on the original payment method, the merchant can be made accountable when a chargeback happens. So as an ecommerce business, you’ve lost your goods and lost your money.

However, it must be said that sometimes chargebacks are legitimate, and friendly fraud can be unintentional. Perhaps goods were actually damaged or undelivered. Or the consumer doesn’t recognize the merchant on their credit card bill or has forgotten they made the purchase. But overall, 57% of chargebacks are classified as abuse.

Affiliate fraud

Many ecommerce businesses will run an affiliate marketing program. Affiliate marketing is a method of advertisement where online publishers can make money by inserting links on their website. The links may direct customers to a product. These links can be tracked, and when a specified action takes place, such as an account registration or purchase, the affiliate who published the link will be paid a commission.

Affiliate fraud, therefore, plays a bad game in this marketing technique. By completing simple actions, fraudsters can profit from the commission of affiliate links. This may include auto-refreshing a page to imitate traffic or clicks or spamming an email from a referral link. Ultimately, the ecommerce business will believe that they have increased their onsite traffic but not see any increase in profits. In fact, they’ll be paying out to the fraudsters.

Clean fraud

It’s hard to identify a dirty transaction when they look so squeaky clean. Fraudulent transactions that appear to be legitimate are known as clean fraud, and it’s becoming an increasingly problematic type of transaction for ecommerce businesses. This is because the transaction is less likely to get flagged up or appear on a deny list for known fraud accounts. For clean fraud, fraudsters will usually use stolen credit card information to impersonate the real cardholder.

To make this fraud appear genuine, fraudsters will convince account holders to make a purchase through a fake website or by intercepting messages between transaction parties. Fraudsters can then use this data to complete a purchase.

Interception fraud

There’s no messing about when it comes to naming types of fraud. Interception fraud does what it says on the label: it intercepts your online orders. The fraudster will use a stolen credit card along with the same billing address and shipping address that is linked to the card. The next step involves intercepting the goods before they are delivered.

How is this achieved? Well, a fraudster may call a company after the order is placed and before it has shipped. Then they will ask for the delivery address to be changed. They may also contact the courier to change the route of the package to a different address of their choosing. Even simpler (and potentially riskier), they may just wait for the package to be delivered at the cardholder’s address, sign for it, and steal it from right outside your front door.

Fraudsters are just bad actors

It seems like there are many ways for outlaws to take advantage of ecommerce businesses in the Wild West of the online world. But despite more sophisticated methods of fraud becoming prevalent, ecommerce businesses shouldn’t fret too much. There is a solution and a way to fight back against these slippery scammers.

The difficulty with identifying scammers is that they’re getting very good at making themselves look like genuine customers. From stolen cards to fake user accounts, it may be difficult for a person or agency to recognize when their business is a victim of fraud.

There are ways to secure your ecommerce business. Putting more barriers in place to separate the fraudsters from genuine customers will help to prevent fraud. This may include identity verification, extra accounts and passwords, or a CAPTCHA test to dodge those pesky robots that are set up to do your business harm.

However, these extra barriers harm the customer experience of your ecommerce store. Did you know that the average online shopping cart abandonment rate is 70%? Factors such as barriers to completing transactions contribute to this. Promoting an easier sales experience, with less friction, is the best way to boost your business. Plus, there is a way to open your business up without letting fraudsters in.

In reality, fraudsters are bad actors. While they can wear the costume of stolen cards, addresses, and fake accounts well, their behaviour is a giveaway. Machine learning is becoming more and more capable of finding out when fraud is taking place, even when every other factor seems to be genuine. This takes into account things like delivery address, average consumer purchase size, historic chargebacks, buying behaviour, and the types of products a specific consumer would usually buy.

Machine learning becomes even more powerful when it is combined with a commerce protection network comprising hundreds or thousands of merchants. The network provides vision into millions of transactions and that data is vital to identifying fraudulent behaviour.

One platform, Signifyd, says that 98% of all online purchases today have been made by consumers that their platform has seen before. This means that they will understand everything there is to know about a consumer’s buying behaviour, so if they or you are a victim of fraud, it can be easily spotted and prevented. This saves genuine customers time at the checkout and can save everyone from fraud.

Ultimately, if your business is looking for growth in the accelerating age of online shopping, aligning your fraud strategy with your customer experience strategy is a recipe for success. Positive customer experiences lead to return sales, and fraud prevention and payment optimization can only benefit an ecommerce business. Being recognized as a safe and reliable business with friendly and helpful staff is essential for long term survival in a competitive online world. Identifying these types of fraud and recognizing the most effective ways to deter criminals will help you grow.

Sources

https://www.ravelin.com/blog/5-types-of-fraud-that-is-used-to-target-e-commerce-retailers

https://www.signifyd.com/solutions/abuse-prevention/

https://support.google.com/a/answer/1217728?hl=en

Hernaldo Turrillo

Hernaldo Turrillo is a writer and author specialised in innovation, AI, DLT, SMEs, trading, investing and new trends in technology and business. He has been working for ztudium group since 2017. He is the editor of openbusinesscouncil.org, tradersdna.com, hedgethink.com, and writes regularly for intelligenthq.com, socialmediacouncil.eu. Hernaldo was born in Spain and finally settled in London, United Kingdom, after a few years of personal growth. Hernaldo finished his Journalism bachelor degree in the University of Seville, Spain, and began working as reporter in the newspaper, Europa Sur, writing about Politics and Society. He also worked as community manager and marketing advisor in Los Barrios, Spain. Innovation, technology, politics and economy are his main interests, with special focus on new trends and ethical projects. He enjoys finding himself getting lost in words, explaining what he understands from the world and helping others. Besides a journalist, he is also a thinker and proactive in digital transformation strategies. Knowledge and ideas have no limits.

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Fraud Prevention: Here’s Why Your Business Needs It

Hernaldo Turrillo — Tue, 13 Jul 2021 09:26:52 +0000

As it’s reported, ecommerce fraud has caused 20 billion dollars in damages worldwide in 2021 alone. And as the virtual marketplace keeps on growing, so do the appetites of e-criminals.

Fraud Prevention — Your Company’s Shield

Fraud prevention solution is like a stone wall for your venture: it won’t let the scammers sneak in to hurt your success, reputation and, most importantly, your customers.

And if you think your company can pass on it, you’re bound to think again. FIrst of all, there are multiple threats your online brand might be exposed to right now:

Identity theft. Scammers can steal someone’s sensitive info to either pose as that person or sell it on the black market.
Card testing. There are databases, which contain credit card numbers, on the dark web. E-criminals “test” every single one of them to see if it’s possible to squeeze money out of it or buy stuff from you.
False chargebacks. The most common type, when a dishonest customer requests money back but also gets to keep your goods that you honestly delivered.
Account takeover. A customer’s account gets hacked, which may result in identity theft.
Triangulation. An elaborate scheme, in which scammers sell your goods to other people and then claim a refund from you.

And the scheme list keeps growing. The next target-to-hit might be your business.

Losses & Consequences

If fraudsters succeed at one of their shady tricks with your enterprise, it will cause some unfavorable repercussions. For instance:

Finances. If they keep on making false chargebacks, you either risk losing a lot of money — bank fees, refunds, high-risk merchant account fees — or an option to accept bank cards.
Reputation. Identity theft, account hijacking, test fraud — all of these can seriously damage your rep and scare away customers for a long time.
Time. Disputing chargebacks, doing damage control, organizing protection after getting hit — it takes time, effort and some of your nerves too.

As you can see, it’s best to take care of the security early on. And the best way to do this is by hiring trained experts.

A professional team can offer:

Compliance. Your company will act in compliance with various protocols, including Card Industry Data Security Standard (PCI DSS) — it helps to successfully dispute false chargebacks.
Detection. Thanks to Device Fingerprint know-how and Know Your Customer procedure, scammers can be detected and neutralized promptly.
Training. Your staff will receive training and guidelines to handle fraud efficiently.
Extra safety. As a major bonus, you’ll be provided with Trustchain — an environment, which filters out fake personas, bots, scammers, while also employing safety standards.

It’s not just your reputation on the line when you enter the world of ecommerce. It’s also the well-being of your customers who are seen as easy prey by the e-criminals

So, don’t hesitate and protect your business right now. In the long run, it will bring handsome dividends: loyal and grateful clientele.

Hernaldo Turrillo

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Ecommerce Fraud Soars As Consumers Increasingly Move to Online Shopping

Hernaldo Turrillo — Thu, 04 Apr 2019 11:38:45 +0000

Ecommerce Fraud Soars As Consumers Increasingly Move to Online Shopping

Figures from the annual BRC Retail Crime Survey report an exponential increase in ecommerce fraud, specifically fraudulent Card Not Present (CNP) refunds. As consumers shift away from spending on the high street and adopt a proclivity for online shopping, ecommerce fraud is growing at twice the rate of ecommerce sales. It’s expected that retailers will lose around US$130 billion in digital CNP fraud between now and 2023.

To combat this risk, online retailers have spent a staggering £8 million, adopting a reactive measure rather than a proactive one. However, by investing in fraud detection and prevention solutions that verifies a user’s identity and cross-references it against fraud data before allowing transactions, merchants can curb significant losses from fraud, according to Zac Cohen, General Manager at Trulioo.

Zac comments: “A data trail is at the heart of every transaction, even the fraudulent ones. If used effectively, data can expose malicious actors, especially when verifying identities at account creation. With the rise in ecommerce fraud, the use of specific data points can create barriers that prevent criminals from gaining access to ecommerce accounts, while simultaneously authorising legitimate customers to effortlessly access their accounts. In mere seconds, smart data can be referenced, verified and used to prevent fraudulent transactions – saving online retailers time, money, and resources – while allowing legitimate customers to easily and efficiently complete a purchase.”

And all of this is starting a trend where many online retailers are expanding into emerging markets around the world where mobile phones are proving an effective cost-efficient tool for identity verification.

“As ecommerce continues to grow, so too does the risk and cost of fraud. Fraudsters will always go for the easiest, fastest and most lucrative payoffs and that means targeting retail sites that do not implement vigilant, vigorous practices for verifying customers and detecting fraud. In the burgeoning ecommerce landscape of today, an agile and data-centric approach to combat fraud is the need of the hour,” the expert concluded.

Hernaldo Turrillo

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