Are you wondering how to protect your eCommerce store from fraud? Online businesses have gained dominance in the global market thanks to the COVID-19 pandemic. However, this has resulted in more fraudulent activities as malicious individuals develop sophisticated strategies to access personal information. Read on for four common types of e-commerce fraud and how you can protect your business from them.
1. Refund Fraud
Refund fraud occurs when a fraudster purchases via a stolen credit card. They then contact you requesting reimbursement due to an alleged overpayment. However, the scammer will require you to wire the refund to an alternative credit card as the original one is closed. This means that you will be responsible for the total amount to the legit card owner since the initial card is not refunded. Create a policy that demands all refunds be returned to the primary card the payment was made from to combat refund fraud.
2. Chargeback fraud
Chargeback fraud is one of the most common and costly types of fraud for e-commerce businesses. It occurs when a cardholder makes a legit purchase but then reports the transaction as a fraud to the credit card companies, necessitating a reversal. This leads to losing the value of the product and the shipping cost if you had already delivered the goods.
A chargeback is different from a refund, as the cardholder does not contact you. Instead, they go straight to the issuer, the credit card company. To prevent chargeback fraud, you should:
- Invest in secure and reliable credit card verification tools
- Send confirmation emails to show that an order has been made. This does not only provide a paper trail. It also makes it challenging for a client to deny a purchase
- Monitor orders to identify suspicious purchases, including small purchases within a short period or different shipping and billing locations
- Invest in e-commerce prevention software to secure all website transactions and payments
Click here to learn more about chargeback fraud and how to prevent it.
3. Account takeover fraud
Account takeover fraud occurs when hackers gain access to a legitimate client’s account. It could also happen when a scammer takes over a business or employee account to access confidential information about clients while posing as an honest official account.
Committing account takeover fraud is relatively easy as most people use low-security passwords that hackers can quickly figure out by going through the readily available personal information, including birth dates and pet names. Some users will even use the same password for multiple accounts. Be sure to request additional authentication from new or suspicious customers before allowing access and block numerous login attempts to prevent account takeover fraud.
4. Credit card testing
This type of fraud occurs when someone uses your online store to test whether one or multiple credit cards they have purchased on the dark web or stolen is valid. Even though the fraudster has the credit card information, they are unsure of the credit card limit and whether or not it can be used to complete a transaction.
The cybercriminals will visit your store and make small, insignificant purchases to avoid notifying you or the card owner of the transaction. Once the criminals establish that credit cards are working, they will buy more expensive products. Protect your e-commerce store by investing in velocity-checking systems that monitor multiple purchases from the same IP or device.
Endnote
Cybercriminals will always find new and intelligent ways to access sensitive business information. The best way to protect your company is by familiarizing yourself with common fraud e-commerce types, how they happen, and the best strategies to prevent them.
