Fraud is a problem for every ecommerce business. The most common types of ecommerce fraud are chargebacks, friendly fraud, identity theft, account takeover, and transaction laundering.
In the last decade, ecommerce fraud has grown into a $32 billion industry.
Fraudsters are always finding new ways to steal from online businesses. Here are six of the most common types of ecommerce fraud that every online store needs to know about.
Chargebacks occur when a customer disputes a charge on their credit card statement. In most cases, the customer will contact their credit card issuer to file a chargeback. The credit card issuer will then reverse the charge and refund the customer.
The customer will also receive a new credit card with a new number. Chargebacks are a major problem for ecommerce businesses. They can be very costly and time-consuming to resolve. Chargebacks can also damage your business’s reputation. If you have too many chargebacks, your merchant account could be shut down.
2. Friendly Fraud
Friendly fraud occurs when a customer knowingly files a chargeback. In most cases, the customer is trying to get a refund for an item they never received or for an item that was not as described.
Friendly fraud can be difficult to prevent. The best way to protect your business is to keep detailed records of every transaction. You should also have a clear return and refund policy.
3. Identity Theft
Identity theft occurs when a fraudster uses someone else’s personal information to make a purchase.
4. Account Takeover
Account takeover occurs when a fraudster gains access to a customer’s account. Once they have access, they can make unauthorized purchases. The best way to prevent account takeover is to keep your customer’s personal information safe by using SSL certificates, fraud prevention tools, and protected servers for your online store. If this feels like a lot of work, you can always use Shopify e-commerce platform that does this for you.
5. Transaction Laundering
Transaction laundering occurs when a fraudster uses a legitimate business to process fraudulent transactions. There is not much you can do personally.
6. Card-Not-Present Fraud
Card-not-present fraud occurs when a fraudster uses a stolen credit card to make a purchase. There are a number of software solutions available that can help you prevent fraud. Look for a tool that offers features like real-time fraud detection, Velocity checks, and IP geolocation.
How to protect your business from Ecommerce fraud?
There are a few things you can do to protect your business from ecommerce fraud:
1. Use a secure payment gateway: A secure payment gateway will encrypt your customers' credit card information, making it much more difficult for hackers to steal.
2. Use AVS and CVV verification: AVS (address verification system) and CVV (card verification value) verification can help to ensure that the person making the purchase is actually the cardholder.
3. Set up fraud alerts: You can set up fraud alerts with your payment processor or bank. This way, if there are any suspicious activity on your account, you will be notified immediately.
4. Use a reputable shipping company: Choose a shipping company that has a good reputation and is known for its security measures.
5. Keep your software up to date: Regularly update your ecommerce platform and all associated software to the latest versions. This will help to close any potential security holes that hackers could exploit.