Be Aware of the Current E-Commerce Fraud

Be Aware of the Current E-Commerce Fraud

As eCommerce has become more and more popular, online payment fraud has been constantly increasing without a sign of stopping. In 2016 alone, internet fraud jumped 33% and it can possibly causing more financial losses. On the other hand, online merchants are also losing money to incorrectly declined transactions, resulting to revenue loss in the long run. One point that we need to be aware is that internet fraud is not exclusive only to credit card payments. Criminals are becoming more sophisticated in their use of malware to command online banking logins via phones, tablets and computers, using the stolen bank account details to make fraudulent payments.

If you sell products online, you need to understand how you might be at risk and how you can take steps to start preventing fraud. It’s important to understand the different types of online fraud that exist nowadays:

Friendly Fraud
Also called as chargeback fraud. This is when a customer knowingly makes a purchase, but then disputes the charge with their bank, claiming their card was stolen. The chargeback usually occurs after the goods are delivered. Customers are reimbursed, but they keep the goods or services. This will cause eCommerce store owner to pay a chargeback fee typically between $15 and $25. To prevent this, online merchants need to set up some basic fraud prevention rules via their respective payment gateway to block or flag transactions that may be fraudulent. They can also engage third party company to leverage various sophisticated fraud prevention technologies such as IP Proxy Piercing, Geolocation, Device ID and Global Fraud Blacklists to reduce or eliminate fraud liability.

Classic Fraud
This type of fraud is generally committed by unsophisticated fraudsters. Stolen credit card credentials are purchased on the dark web, and goods are sent to reshippers in an attempt to retrieve the stolen merchandise. Often, internet proxies are used to mask the international IP where a majority of this type of fraud originates.

Identity Theft
It is one of the most common types of fraud. The criminals’ goal is to carry out transactions using a different identity. They target personal information, such as names, addresses and email addresses, as well as credit card or account information to make online purchases or by debiting another person’s account. You can avoid this to happen by signing up for purchase notifications through your bank or credit card company to flag when your card is used to make a purchase and consider changing your passwords to passphrases, which are typically more complex and harder for hackers to crack.

Triangulation Fraud
This type of fraud involves three parties — the fraudster, the unsuspecting legitimate shopper and the eCommerce store. The fraudster created a fake online storefront, which offers high-demand goods at extremely low prices. The store collects payment for the goods it sells. The fraudster then uses other stolen credit card data and the names collected in orders on his online storefront to purchase goods from a legitimate website and ships them to the customers that purchased on his new online storefront.

Protection against eCommerce fraud
1. Online retailers should use established secured payment card platform to protect customers payment card data as well as own store reputation and business revenue.

2. Require a zip or postal code for all purchases to avoid a large portion of fraudulent purchase attempt.

3. Require security code to be entered for every credit card purchase to detect any suspicious online transaction.

4. Require delivered packages to be signed for. This is to prevent criminals from receiving fraudulent packages and it’s typically difficult to get a customer’s signature.

5. Screen suspicious activity such as multiple orders to the same account using different credit cards, multiple purchases to a single credit card in a short time frame, phone numbers that don’t match a billing address’s area code, unusually large orders that pay for expedited shipping, or sudden, unusual changes to a customer’s shipping address.

6. Online merchants should keep record of sales tracking numbers which track down customer’s shipping address, notice of delivery and respective bank details. Establish clear anti-fraud policy to help prepare retailer and his employees in responding to any possible fraud.

It is undoubtedly crucial to operate and cultivate a financially healthy business in today’s digital age. Stay secure and build trust with your potential customers in the long run.

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