The 7 types of eCommerce fraud schemes you should know about

This article was written by our director of business development for Entrepreneur.com.

As an eCommerce seller, there are multiple responsibilities juggled between you and your team — sourcing product, quality control, customer service, SEO, HR. One of the tasks that is often overlooked, until it is too late and very costly, is fraud prevention.

With the frequency of data breaches recently — 1,253 reported breaches in 2017 alone — stolen credit card data is readily available to cybercriminals. According to a recent Javelin study, $16 billion was lost to fraud last year. While the credit card companies identify and stop some of the credit card fraud that occurs, any fraudulent charge that slips through their fingers and makes its way to your website is your responsibility to stop. If you miss one, you will know about it, in the form of a fraud chargeback from your bank.

1. 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.

2. Triangulation fraud.
This type of fraud involves three parties — the fraudster, the unsuspecting legitimate shopper and the ecommerce store.

An online storefront is created by the fraudster, often on eBay or Amazon, that 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.

This type of fraud can usually be identified by the products that are targeted as well as some investigative work by locating the unsuspecting shopper who can identify the storefront where the stolen goods were purchased.

3. Interception fraud.
Fraudsters will create orders where the billing and shipping match the address linked to the card. Their goal is to intercept the package in any of the following ways:

Asking a customer service rep to change the address on the order before shipment.
Contacting the shipper to reroute the package to an address where they can retrieve the stolen goods.
In cases where the fraudster lives in close proximity to the cardholder’s billing address, physically wait near the address for the delivery to arrive and offer to sign for the package as the homeowner is not available.

4. Card testing fraud.
This is the practice of testing the validity of a credit card number, with plans to use valid credentials at another website to commit fraud. Fraudsters target websites that reveal a different response for each type of decline. For example, when a card is declined due to an incorrect expiration date, a different response is given, so they know they just need to find the expiration date. This is generally done by bots, and transaction attempts happen quickly, in rapid succession. The data on the orders will often be identical, either all the data or just a subset of data — like the shipping address.

5. Account takeover fraud.
This occurs when fraudsters get hold of a legitimate customer’s login credentials and take advantage of stored credit cards to purchase goods. An update on the shipping address will usually occur shortly before purchase so the fraudster can retrieve the stolen goods.

6. Fraud via identity theft.
In this case, the fraudsters assumes another person’s identity, creates credit cards in the victim’s name and goes on a shopping spree. This type of fraud is increasing rapidly as the number and scope of data breaches increase. It is also the most difficult to identify as the fraudsters behind identity theft are quite sophisticated.

7. Friendly fraud, also called chargeback fraud.
An online shopper will make a purchase, then issue a chargeback, claiming their card was stolen. The chargeback usually occurs after the goods are delivered. This type of fraud is traditionally not carried out by hardcore criminals but rather by consumers who are clearly aware of what they are doing. This type of fraud is difficult to detect but can often be won via chargeback representing.

How to Choose Fraud Detection Software: Features, Characteristics, Key Providers

Originally posted on Altexsoft.com

As we make more cashless payments for retail purchases, restaurants, and transportation – not to mention the increase in online shopping – wallets loaded with legal tender may become a thing of the past. According to 2018 research by BigCommerce, software vendor and Square payment processing solution provider, 51 percent of Americans think that online shopping is the best option. Last year, 1.66 billion people worldwide bought goods online. And the number of digital buyers is expected to exceed 2.14 billion.

Unfortunately, growing sales may mean not only greater revenue but also bigger losses due to fraud. For instance, 63 percent of businesses that participated in the 2018 Global Fraud and Identity Report by Experian claim to have the same or higher levels of such losses over the last year.

Read the rest of the article here.

Online Fraud Losses Will More Than Double in Five Years, Juniper Forecasts

Originally posted on Digital Transactions by Kevin Woodward.

Payments companies and retailers have a sobering forecast to ponder for online fraud. By 2023, global online fraud losses from e-commerce, airline ticketing, money transfer, and banking services will grow from $22 billion projected in 2018 to $48 billion, says Juniper Research in a new report.

Thanks to the proliferation of synthetic identities—when fragments of real identity information is used to create a new identity—and account takeovers, criminals are increasingly skirting anti-fraud measures retailers and payments companies use, Juniper says.

Read the rest of the article here.

The Shocking True Cost of Chargebacks

Originally posted by CardNotPresent.com.

How much would you guess businesses lost to chargebacks in 2017? $10 billion? Maybe even $20 billion? Generous guesses—but not generous enough. Or, maybe you keep up with statistics and you read that the total cost of chargebacks came to $31 billion in a single year. Sorry, you’re still not even close.

Uncovering the True Cost of Chargebacks
To find out what chargebacks are really costing merchants, we cannot simply look at merchants or the cost of merchandise lost. Chargebacks have a dramatic “bottom-line” impact that cuts across the entire payments ecosystem. They sap sales revenue and merchandise, they saddle businesses with a host of additional fees and administrative costs and they threaten critical relationships between merchants and institutions.

Read the full article here.

Fed Report Pegs CNP Fraud as Retailers’ Biggest Concern

Originally posted by CardNotPresent.com.

New research from the Minneapolis Fed indicates that retailers are more concerned with fraud in their online channels than any other kind of fraud. Across nearly every size business, Fighting Fraud in the E-Commerce Channel: A Merchant Study found that not only was CNP fraud considered their greatest threat, but half worry about their systems’ abilities to handle fraud as the nature of data breaches changes and attacks at the online account level increase. More than three-quarters of those polled expect increased attacks on their e-commerce channels in the next 6 to 12 months.

Read the full article here.

Chargebacks 101: What They Are & Why They Matter

Originally posted by ChargebackGurus.com.

Chargebacks are a growing concern for modern merchants. And at the rate they’re increasing, it’s no wonder why.

From 2016 to 2017, chargebacks jumped 179 percent, costing merchant’s 1.9 percent of their total annual revenue. Add in the potential threat chargebacks pose to your reputation and merchant accounts, and you’ve got a pretty serious problem on your hands – no matter what line of business you’re in.

What is a Chargeback?

Put simply, a chargeback is when a customer is credited back for a card transaction.

It occurs when the customer contacts their bank, disputes a charge on their bill or statement, and requests a refund.

Typically, consumers file chargeback disputes when they don’t recognize a transaction or are somehow dissatisfied with their purchase or the buying experience. In some cases, they may simply be trying to get their product or service for free.

Read the full article here.

The History of Ecommerce: What The Past Says About Tomorrow’s Retail Challenges

Originally posted to BigCommerce by Kaleigh Moore.

When it comes to ecommerce, a word that first comes to mind is growth.

Ecommerce expert Gary Hoover’s research shows that just in the last 14 years, the growth of ecommerce companies has skyrocketed across the board.

And some merchandise lines (like clothing and beauty products in particular) have achieved a remarkable 25% average CGR between 2000-2014.

This trend isn’t slowing down, either.

In fact, growth projections estimate that by 2022, ecommerce revenues will exceed $638 billion in the U.S. alone. Read the full article here.

3 Solutions for Ecommerce Merchants Fighting Fraud

Article written by NoFraud for Entrepreneur.

One of the lesser known challenges of running an ecommerce store is preventing fraud chargebacks. When a consumer doesn’t recognize a charge on their credit card statement they will dispute the charge with their credit card company, which will result in a fraud chargeback to the ecommerce store owner. The full transaction amount is deducted from their merchant account as well as a chargeback fee typically between $15 and $25.

Stolen credit card numbers are available on the black market for mere pennies. Businesses that sell online must stay vigilant to ensure the credit card used to make a transaction belongs to the customer receiving the goods to protect their reputation and avoid costly chargebacks. Read the article here.

Nearly 28% of consumers have been a victim of e-commerce-related fraud

Article posted by Katie Evans for Internet Retailer.

U.S. e-commerce is projected to grow nearly 16% in the third quarter, but consumers still have hesitations regarding the safety of shopping online, according to an exclusive Internet Retailer survey of 2,000 U.S. consumers conducted by Bizrate Insights.

For example, 40% of consumers said they did not complete a purchase on the web because of fears of fraud or concerns about the safety of their personal information. Additionally, 70% are concerned about fraud or their personal information when shopping online. Read the full article here.