Ecommerce fraud has become a major concern for retailers. Fraudsters continuously devise new techniques to exploit vulnerabilities in online transactions, resulting in substantial financial losses across industries. As technology evolves, so do the tactics employed by these fraudsters, making it essential for retailers to stay one step ahead of ecommerce fraud trends. Implementing fraud prevention and detection best practices is paramount to protecting your retail business and maintaining customer trust.
In the ever-evolving world of ecommerce, fraud prevention and detection have become critical. The rise of online fraud poses significant financial risks and damages brand reputation. Implementing fraud prevention and detection best practices is paramount to protecting your retail business and maintaining customer trust.
What is Ecommerce Fraud?
Ecommerce fraud refers to deceptive or illegal activities that occur in online retail transactions. It involves fraudulent attempts to exploit the vulnerabilities of the ecommerce ecosystem for financial gain. These fraudulent activities can harm both businesses and customers alike.
Parcel Swap Fraud: Within this tactic, an online return is logged at a distribution center, releasing the funds for a refund that are then credited back to the customer's credit card. However, when a retail representative later opens the returned package, it unveils an unexpected object like a brick or an item that wasn't originally purchased.
10 common types of ecommerce fraud trends:
- Payment Fraud: This occurs when a fraudster uses stolen credit card information or other payment details to make unauthorized purchases online.
- Account Takeover (ATO): In ATO fraud, hackers gain unauthorized access to a customer's ecommerce account (e.g., by stealing login credentials) and make purchases using the victim's payment information.
- Identity Theft: Fraudsters may steal personal information from customers and use it to create fake accounts or make purchases under someone else's identity.
- Claims Fraud: Also known as refund fraud, appeasement fraud, item not received (INR) fraud, or order not delivered (OND) fraud, this occurs when a customer makes a purchase and then disputes the charge with the retailer, claiming they didn't receive the product or service, while they did.
- Card Testing: Fraudsters use automated bots to test stolen credit card information by making small transactions on different ecommerce sites to check if the card is valid before using it for larger purchases.
- Chargeback Fraud: This happens when a customer makes a purchase, receives the product or service, and then requests a chargeback from their bank, claiming the transaction was unauthorized.
- Gift Card Fraud: Criminals may steal or use stolen credit cards to buy gift cards, resell them at a discount, or use them for personal purchases.
- Shipping Fraud: Fraudsters may use stolen credit cards to purchase goods online and have them shipped to different addresses, making it challenging for merchants to detect fraudulent transactions.
- Tender Laundering: Scammers initiate transactions using gift credits and a minimal cash contribution. Subsequently, they return the acquired item the next day, receiving a complete cash reimbursement.
- Parcel Swap Fraud: Within this tactic, an online return is logged at a distribution center, releasing the funds for a refund that are then credited back to the customer's credit card. However, when a retail representative later opens the returned package, it unveils an unexpected object like a brick or an item that wasn't originally purchased.
Create a robust ecommerce fraud prevention strategy by integrating multiple layers of protection, employing proactive measures to detect and deter fraudulent activities ahead of time.
What is Ecommerce fraud prevention?
Ecommerce fraud prevention is the process of protecting online businesses from fraudulent transactions and activities. To combat ecommerce fraud trends effectively, developing a holistic fraud prevention strategy is essential.
Implement a comprehensive ecommerce fraud prevention strategy.
Create a robust ecommerce fraud prevention strategy by integrating multiple layers of protection, employing proactive measures to detect and deter fraudulent activities ahead of time. A holistic approach is crucial, leveraging technology, data analysis, and industry expertise to ensure comprehensive security.
- Leverage Advanced Fraud Detection Algorithms: Appriss Retail's fraud detection algorithms utilize AI, machine learning, and data analysis to identify patterns and anomalies indicative of potential fraud. By continuously monitoring transactional data in real time, these algorithms flag suspicious activities, enabling retailers to investigate and prevent fraudulent orders from being processed. Leveraging advanced technology is vital in staying ahead of ever-evolving fraud techniques.
- Employ Link Analysis: Fraudsters often use different identities across multiple platforms. Appriss Retail's linking system connects the dots by examining various data points and revealing hidden relationships between customers, orders, and associated fraud indicators. This comprehensive view enables retailers to expose complex fraud networks and take proactive measures to prevent fraudulent activities.
- Educate Employees: Awareness and education are vital in the fight against ecommerce fraud. By educating employees about standard fraud techniques and providing training on fraud prevention best practices, retailers can create a vigilant workforce capable of detecting and reporting suspicious activities.
Protecting your business from ecommerce fraud requires a proactive and multi-faceted approach. By staying vigilant, educating employees, and staying updated on emerging ecommerce fraud trends, you can safeguard your business, preserve customer trust, and thrive in the dynamic world of ecommerce.
Chris Hanks, PhD. Director, Data Sciences, Appriss Retail
Chris Hanks is the director, data sciences, at Appriss Retail and is based in the Irvine office. Chris earned his Ph.D. in political psychology from University California, Irvine, where he was a senior predictive modeler at the UCI Center for Statistical Consulting. He spent seven years as a neuroscientist before moving to retail analytics in 2011. Chris is involved with American Statistical Association where he has held a chair position.