TL;DR:eCommerce fraud involves unauthorized transactions using stolen financial details.
Types include credit card fraud, chargeback fraud, account takeover, affiliate fraud, and porch piracy.
Losses from global eCommerce fraud were projected to exceed $48 billion in 2023.
Prevention involves spotting signs like unusual order sizes and mismatched information and employing fraud prevention solutions.
eCommerce can be incredibly profitable for businesses of all sizes. In 2022 alone, it was estimated that eCommerce generated an estimated$10,877,092.85 every minute.
The ability to shop online is convenient for businesses and consumers alike. However, it’s not without its drawbacks.
One growing problem is eCommerce fraud. Costly credit card chargebacks and stolen packages can add up to drain your business thousands of dollars. Understanding the scope and impact of this issue is crucial for any business venturing into the digital marketplace, where every transaction holds the potential for risk as much as reward.
eCommerce Fraud 101
At its core, eCommerce fraud involves the unauthorized and/or deceptive use of someone’s personal information or financial details to carry out transactions on the Internet. This can happen in various ways, from using stolen credit card information to creating fake buyer accounts or manipulating transaction processes.
According to recent eCommerce fraud statistics, globaleCommerce fraud is increasing. Losses were predicted to exceed $48 billion in 2023 with North America having the largest fraudulent transaction value of any regional market.
eCommerce Fraud Trends
There are a few different ways bad actors carry out fraud for eCommerce. Some are as straightforward as stealing packages, while other methods are riskier.
Here are a handful of current eCommerce fraud trends to be on the lookout for:
Credit Card Fraud
Credit card fraudis perhaps the most straightforward type of eCommerce fraud. A fraudster uses stolen credit card details to make unauthorized purchases online. This form of identity theft can be difficult for eCommerce merchants to spot on their own.
Friendly Fraud (Chargeback Fraud)
This is when a consumer makes an online purchase with their own credit card, receives the product or service, and then requests a chargeback from the issuing bank, falsely claiming that they either didn't authorize the purchase or didn't receive what they bought. Chargebacks can be costly for businesses.
Account Takeover Fraud
In this type of fraud, a criminal gains access to a customer’s account details and uses them to make unauthorized transactions. This often happens after phishing attacks or exploiting weak passwords.
Affiliate Fraud
Affiliate fraud involvesexploiting affiliate marketing programsto earn illegitimate commissions. An affiliate themselves may make purchases through this link with stolen credentials or their own credit card to later charge back. Regardless, they will receive affiliate commissions.
These commissions are usually paid out much faster than credit card chargebacks can be processed, allowing the fraudster to profit before the fraud is detected.
Porch Piracy
A less technological but increasingly common type of eCommerce fraud is "porch piracy,” otherwise known as interception fraud.
This happens when someone orders items using a stolen card or through other fraudulent means and has them delivered to an address where they know no one will be home during delivery hours. The fraudster or an accomplice then physically steals the package from the porch.
Even with security cameras, this is a common problem. An estimated 36% of Americans have, at least once,had a package stolen from outsideof their house, according to ADT. This is not only frustrating for consumers but also costs businesses money from having to replace stolen inventory.
eCommerce Fraud Prevention Best Practices
The first step in preventing eCommerce fraud is to be able to spot the signs of this malicious activity. eCommerce fraud can be stealthy, but here are some red flags to look out for:
Unusual Order Size or Frequency: If a customer suddenly places an unusually large order or multiple orders in a short period.
Multiple Orders to the Same Address with Different Cards: Multiple transactions being made to the same shipping address but using different credit card accounts.
Rapid Changes to Account Information: If an account shows recent changes to crucial details like the linked email address or shipping address shortly after placing an order.
High-Risk Shipping Locations: Orders that request shipping to addresses known for high fraud rates or logistic shipping hubs.
Mismatched Information: Discrepancies such as different billing and shipping addresses or mismatched names on cards and delivery details.
Suspicious IP Address: Orders placed from IP addresses in different countries than the billing address, or from anonymizing services that mask the user's true IP.
The most effective method of preventing credit card fraud on your site is to use a fraud prevention solution. Anura identifies not only fraudulent activity but also where it came from so you can cut eCommerce fraud off at the source.
Richard Kahn
