Top 4 Types of Fraud Affecting the E-Commerce Sector

Fraud remains a significant threat to the e-commerce ecosystem as we know it today. Criminals tend to come up with new methods to defraud vendors and retailers every year. Right now, there are a few threats that are quite prominent all over the world. Some of these new trends are hardly surprising, whereas a lot of retailers have never heard of any of the other dangers. Come 2017 and beyond, merchants have their work cut out for them that much is certain.

#4 Identity Theft

Criminals get very crafty when it comes to impersonating someone else. It is the most common form of fraud to date, leading phishing and account theft. Credit cards, as well as other payment vehicles are of great value to criminals in this regard. Traditional identity theft would see criminals carry out transactions and commit fraud on a large scale. However, things are changing quickly in this “area of expertise.”

A new form of identity theft is called pharming and sends customers to fraudulent websites. Since most e-commerce platforms store customer payment information in their databases, it is rather easy to take over control of the account. Do not be mistaken in thinking this only applies to customers, though, as criminals will try to send store owners to a dummy backend as well. When a criminal has full control of the online shop, things go from zero to a hundred real quick.

#3 Clean Fraud

Unlike what the name suggests, clean fraud has nothing to do with not causing financial harm. Criminals who obtained stolen payment card information will make a purchase, yet manipulate the transaction to avoid fraud detection. In most cases, criminals resort to a careful analysis of their target’s fraud detection systems, combined with information about the original owner of the credit card. By entering valid cardholder information, the chances of transactions being flagged for fraudulent activity diminishes.

#2 Triangulation Fraud

As the name suggests, this type of fraud requires three key “pillars” to execute properly. First of all, criminals will create a fake online storefront, where they claim to sell high-target items at low prices. The saying “if an offer is too good to be true, it usually is” comes into play here. A lot of consumers will still fall for these attractive offers, allowing criminals to collect payment and address information.

Secondly, the stolen credit card information and personal information collected during this process will be used to order items online and have them shipped to the original card owner. This is when things get interesting, as criminals then use the information to make additional purchases. Since these transactions occur shortly after a legitimate purchase, the fraud will usually remain undetected for weeks, if not months.

#1 Chargeback Fraud

Ordering goods online and committing a chargeback is a very real threat to e-commerce operators today. In most cases, the “victims” will claim their items were stolen off their porch, allowing them to get reimbursed. However, they will keep the goods or services, as the chargeback only occurs after items were shipped in the first place. This type of fraud is traditionally not carried out by hardcore criminals, but rather by consumers who are all too aware of what they are doing.

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