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There are many types of eCommerce fraud online. These types can be used independently or together. In this section, we’ll see the major types of eCommerce fraud to help you recognize them.
Account Takeover
With Account Takeover (ATO) fraud, thieves use stolen customer credentials to log into a website to make purchases, change the shipping location, steal account information, etc.
Card Not Present Transactional Fraud
The Card-Not-Present (CNP) is a transactional fraud that takes place when a stolen card is not presented to a merchant to check visually. A merchant doesn’t have a way to inspect the card. A person can purchase without having the card, making it easy for thieves to use a stolen card.
This is common practice online since we only need to enter the card information into the fields when making a purchase online. This fraud is easy to accomplish until the card is reported as stolen and canceled. A stolen credit card can cost hundreds or thousands of dollars in damage.
Chargeback
Chargeback fraud is when someone makes a purchase with their credit card and then files a claim to dispute the charges. The bank then files a chargeback to the merchant, so the customer gets the money and the product. If a merchant gets too many chargebacks, they could be marked as a high fraud target. This will increase their payment processing fees.
This isn’t the same as an unauthorized purchase, a stolen card, or a legitimate claim such as the seller not shipping the product. In this case, the person knowingly received the product and filed a claim anyway.
Friendly Fraud
With Friendly Fraud, a chargeback is claimed when a person doesn’t recognize an authentic purchase. They believe an unauthorized purchase was made. However, they may have forgotten about the purchase, someone else in their family made the purchase, the name of the seller doesn’t match the store, etc.
There are many reasons they wouldn’t recognize the purchase. In this case, they had good intentions, but the result is still a chargeback.
Refund Fraud
With Refund Fraud, a customer makes use of the gaps between order fulfillment and shipping to get a refund without returning the product. This gap caused the company to ship the product after the order was refunded. This is also known as Return Fraud.
Fake Website
Scammers often build fake websites that appear to be a real brand or a real online store. The websites sometimes have misspelled brand names for the domain and unfinished dummy text on the detail pages. They offer a common product at a ridiculously low price. Unfortunately, the product never arrives.
This is usually coupled with a Facebook ad that shows the low prices. The scammers create multiple accounts to make comments on the ad, claiming they received their product and highly recommend ordering from them.
Card Testing
With card testing fraud, or credit card fraud, thieves steal a credit card and make a small purchase to see if the bank notices. Once the purchase is approved, they move on to larger purchases.
Hijacking Affiliate Links
Scammers use website crawlers to hijack the site’s real affiliate links and replace them with their own links.
Phishing
Phishing usually occurs through email or text. The recipient receives a fake email that’s made to look as if it came from a known website, such as Amazon, Netflix, UPS, FedEx, or many others.
The email or text claims that the recipient’s credit card was declined, someone logged into their account, thanking them for their recent purchase, their package couldn’t be delivered, or many similar tactics.
The goal is to get the recipient to click on the link to enter their information or contact them to straighten out an issue. Both of these result in the scammer getting the recipient’s bank account information.
Data Scraping
With data scraping, someone collects data from a legitimate website to sell to other scammers. The website is usually hacked, and the activity is unknown to the website owners until it’s discovered.
Spam comments on blog posts and social media posts sometimes include links to fake websites. They often include the link in their comments, but not always. For comments on blog posts, they sometimes add the link to their name when commenting. To help reduce spam, see the article Anti Spam WordPress Plugins.
Retail Arbitrage
With Retail Arbitrage, scammers use bots to purchase large amounts of products at discounted prices. The scammers then sell the products at higher prices somewhere else. While it’s not illegal to purchase something at a low price and sell it for a higher price, the use of bots is malicious, so the products are bought and sold fraudulently.
Interception Fraud
With Interception Fraud, a credit card thief purchases a product with a stolen credit card. After they’ve made the purchase, they intercept the package by either contacting customer service at the company or contacting the shipping company to reroute the package.
Triangulation Fraud
Triangulation Fraud involves a fake eCommerce store with fake products, but it’s harder to detect because the customer receives the products. The goal is to steal the credit card.
When a customer makes a purchase, the fake website gets the credit card information. The website owner uses the card to purchase the product somewhere else and send it to the customer. If the bank contacts the customer, they approve the transaction because they want to make the purchase. The website owner now has access to the credit card to make other purchases.
eCommerce Fraud Detection