eCommerce fraud is a problem for consumers and businesses, as many payments are never authorized or go through without the buyer’s knowledge.
This can be very costly for online stores, as they lose revenue from the sale and often must refund the customer. Fortunately, there are several steps eCommerce vendors can take to prevent fraudulent transactions from occurring in the first place.
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What is an eCommerce Fraud?
E-commerce fraud is a term for criminal activity related to Internet transactions. In many ways, eCommerce fraud is similar to traditional forms of consumer theft such as shoplifting or credit card fraud, but those involved in the crime often use technology to execute schemes that make them harder to catch.
Online buyers can be impacted by these crimes in several ways, including through identity theft and unauthorized purchases.
Online shopping has become increasingly popular because it offers convenience and allows shoppers access to products they might not find locally. However, there are also disadvantages, including the risk of becoming a victim of online scams or other types of fraudulent activity perpetrated on websites like eBay and Amazon.
Since consumers cannot physically inspect items before making a purchase, they are more vulnerable to eCommerce fraud.
Are You Aware of the Types of eCommerce Fraud?
The online world can be a dangerous place. Not only can it be hard to know whether or not you’re dealing with legitimate companies, but internet security has become an important issue over the past several years.
With more and more people shopping online, hackers constantly find new ways to steal personal information, identities, and money. When shopping online, there are several types of eCommerce fraud that consumers should avoid to stay safe when browsing the web.
Types of eCommerce Fraud
Phishing
Phishing is one form of eCommerce fraud. Someone poses as a reputable company to steal personal information like credit card numbers and social security numbers. Phishers will typically send emails asking for personal information, such as passwords and credit card numbers, which they will then use to steal money.
These types of emails often look completely legitimate at first glance, with minor spelling or grammatical errors. They might even have logos from the companies they are impersonating.
Identity Theft
Identity theft is another type of eCommerce fraud that consumers should be aware of when shopping online. Hackers typically steal someone’s identity to purchase products under their name. When browsing online stores looking for deals, consumers should ensure that they are using secure websites that have HTTPS:// in the URL instead of just HTTP:// to provide more security on their sites.
Shoulder Surfing
Shoulder surfing is one last form of eCommerce fraud to keep an eye out for when shopping online. This type of fraud works by someone looking over your shoulder when you are typing in your credit card number to make sure that they see all the numbers. They may also take a photograph or video of you typing it in if you are not careful enough.
What is eCommerce Fraud Protection?
Ecommerce fraud protection is the protection of businesses from any fraudulent activity that may occur online. This can include counterfeit items or do not match their description and stolen credit card purchases.
A Closer Look at eCommerce Fraud Protection
The main types of eCommerce fraud protection are image recognition software and machine learning technology to identify suspicious transactions before they happen and risk management systems to monitor high-risk transactions even after they have gone through.
Some companies employ single-use credit cards to make it harder for thieves to access many people’s accounts using one stolen card number.
Other methods used by various eCommerce stores include requiring multiple forms of identification when checking out. This proves that the buyer is really in control of their card and storing information about users’ cards with a third party instead of on their website, making it harder for hackers to gain access to a business’s systems.
The Pros and Cons of eCommerce Fraud Protection
eCommerce businesses need to use some form of anti-fraud protection, as they are losing an average of over $2 billion from credit card theft each year.
There are downsides, though; using these tools can mean holding off on transactions until everything clears, slowing down the process when people want to check out fast. In addition, this intelligence isn’t perfect, and there have been occasions where false alarms have made legitimate transactions fail.
Even with the downsides, companies are still strongly encouraged to protect their stores with eCommerce fraud prevention.
Different Kinds of Ecommerce Fraud Protection
First, it’s essential to understand what constitutes an eCommerce transaction. The simplest example would be credit card or PayPal payments, though electronic payments aren’t the only way online sales happen. Other payment methods include checks and money orders.
Another form of eCommerce fraud could occur when goods change hands via drop shipping, where a merchant sells goods without holding any inventory. When these factors are considered, it becomes clear that eCommerce fraud can occur across the board – regardless of the payment method or delivery method.
Address Verification Service
Fortunately, there are some steps eCommerce merchants can take to prevent fraudulent transactions. For example, using tools like Address Verification Service (AVS) and CSC ensures that a person has access to a billing address associated with their credit card.
Furthermore, one-time passwords from services such as Verified by Visa and Mastercard SecureCode double check that the person making a transaction is both in possession of the card and physically at the computer they’re transacting from.
These safeguards aren’t perfect – an enterprising thief could always steal someone’s card – but they go a long way toward reducing fraud.
Accurate Information Verification
Another critical step is making sure the user is providing accurate information. If a user’s name, address, phone number, and date of birth are misspelled during an online transaction, it could be a red flag that they’re trying to defraud the eCommerce merchant.
The more information an eCommerce vendor can get from consumers, the greater degree of assurance they have that fraudsters aren’t targeting them.
For this reason, many vendors ask for the same information every time someone places an order – having all of the consumers’ details on file reduces mistakes. Merchants should also keep their terms of service updated – if customers are engaging in fraudulent activity under your name or brand, you may be held responsible.
Finally, it’s important to note that some eCommerce fraud cannot be prevented. Online stores should always save all information about their customers, whether they order via credit card or check in the mail.
Tracking fraudulent activity is often the only way merchants can recover revenue that has disappeared into criminals’ pockets. With these steps taken, most eCommerce vendors will encounter far less fraud than the average business.