The online fraud wave is rising and eCommerce businesses are among the ones worst affected. To persevere, secure your bottom line, and successfully grow your eCommerce business, you need to quickly detect, identify, and stop scammers. This fraud prevention should include ad fraud and scam mitigation and deal with various types of fraud in eCommerce applications.
Covery has recently published an article on dealing with digital marketing and ad fraud. Now it’s time to cover the most dangerous fraud scenarios in eCommerce applications — and how to deal with them. Read on, these 5 minutes will be well worth your while.
How does fraud happen online?
Online fraud is a malevolent activity aimed at deceiving a merchant, customer, or both into parting with their money. Due to the ability to remain largely undetected, scammers can have their online fraud schemes going for quite some time, and merchants can attribute their losses to other causes. However, the damage dealt by fraud in eCommerce applications can become overwhelming quite fast. This is why real-time detection and fraud prevention are essential for ensuring long-term business success.
What is a common example of fraud?
The most widespread online fraud example is CNP fraud or Card Not Present fraud — where scammers use stolen credit card details to perform unauthorized purchases. This results in future chargebacks, which affect merchant chargeback ratio and can result in submitting your account into Visa/Mastercard redemption programs and closure of account if you fail to comply. Thus said, fighting CNP fraud should be a daily effort for every merchant.
However, by no means this is the only type of online fraud in eCommerce applications. Other fraud types you can encounter include the following:
- Friendly fraud
- Affiliate fraud
- Account takeover
- Fake reviews
- Bot attacks
- Ransomware
- Phishing and whaling
- and many more.
However, most of these take place outside of your web and mobile applications. Let’s now take a look at what can happen in terms of fraud in eCommerce applications.
What are the fraud types in eCommerce?
Most fraudulent attacks in eCommerce are performed by bots. While some bots are useful (like Google crawlers that index the information), but many types are bad actors used in fraudulent activities. Here are the key aspects of such attacks.
- Price monitoring. Competitors often use bots to automatically peek at your prices. Gathering this information manually on a daily basis is dull and tedious, so automation with bots is a logical solution. While not strictly a fraud, these bots can copy proprietary content, like product descriptions. To deal with it, many eCommerce companies forward bot traffic to fake pages and feed them incorrect data.
- Inventory depletion. Bots add hundreds of items to the car and never complete a purchase. This results in fake inventory depletion, so real customers can’t order from you, leading to customer churn, reputation loss and revenue drop. The solution is to forcefully return items from cart to your stock after a certain period of inactivity and to block carts after several item additions that don’t result in order.
- Promo scalping. Bots can log in and order in milliseconds to later re-sell your inventory at a higher price. This is especially notable during various promo actions, and while this too is not strictly fraudulent (as you do get your profits by selling your inventory at established prices), this can lead to reputation losses, when customers start complaining that they can’t order during promo events.
- Login page attacks. Bots try to steal customer login information, for the purpose of account takeover or ransom or fake reviews or re-selling credentials on the Dark Web. There are more than 40 million stolen account details for sale there…
- Package interception. From changing delivery destination address to stealing the package from the door — fraudsters use a variety of methods to intercept your items en route.
- Card testing. Bots test thousands of stolen credit card details with little purchases to check which are still active. Such activity must be stopped at once after detection, because otherwise they will issue fraudulent payments and you will have to deal with chargebacks.
- Fake accounts. Many customer accounts are not created to purchase something from you — but to spread fake reviews, malwar, spamming and performing bot attacks.
- DDoS attacks. As a logical outcome of the actions above, bots perform DDoS attacks using your resources, which can lead to your IPs being blacklisted.
As you can see, timely detection and fraud prevention are essential to secure eCommerce revenues.
How can eCommerce detect fraud?
Covery is an enterprise-grade risk mitigation, chargebacks management, and fraud prevention platform. Using a wide range of anti-fraud tools in our arsenal, we are able to timely detect fraudulent activities and stop scammers in their tracks. We are also able to unravel past fraud cases and ensure they can never happen again — with a supervised Machine Learning algorithms coupled with rule-based risk logic engine.
Order a free demo and see all the value Covery can deliver for your business!
FAQ
What are the fraud types in eCommerce?
Most widespread are CNP fraud, account takeover, phishing, affiliate fraud, friendly fraud, triangulation fraud, etc. In-app online fraud includes price skimming, fake inventory depletion, card testing, delivery interception, fake accounts for reviews and DDoS attacks and others.
How can eCommerce detect fraud?
Fraud can be detected through the usage of forged identities, previously identified fraudulent devices and software, risky transactions and suspicious activity behavioral analysis.
How does fraud happen online?
Due to anonymity of fraudsters, they create forged identities and fake accounts to perform a wide range of malevolent activities.
What is a common example of fraud?
Fraudsters commit CNP fraud to steal your money and products, leaving you to deal with chargebacks in their wake. Fraud is better nipped in the bud, not dealt with the aftermath.