E-commerce retailers are vulnerable to fraud. E-commerce fraud occurs when a retailer’s customers attempt to make purchases with stolen credit cards or other fraudulent means. The following is a list of five types of fraud that can occur against e-retailers:
1. Account takeovers
Account takeovers are one of the most common types of fraud that affect e-commerce retailers. Account takeovers occur when a fraudster gains access to an e-commerce account and uses it for fraudulent purposes. The fraudster can gain access to an account by stealing the user’s password, or by guessing the password. They can also steal identity information such as credit card numbers and bank account information, which they use in order to gain access to other websites such as social media sites or even PayPal accounts (which many online stores use).
If you suspect that you’ve been the victim of an account takeover:
- Change all passwords immediately! Do not reuse old passwords! Use strong passwords with at least 8 characters made up of letters, numbers and symbols.* Be wary if there have been any suspicious purchases made on any platform linked with your main email address (such as Amazon).
2. Fake transactions
A fake transaction is one where a fraudulent purchase is made with stolen credit card information. These transactions are made without the cardholder’s knowledge, and they often take place online. This form of account takeover fraud can be difficult to detect because it often appears on your business’ account as legitimate activity, but it’s also relatively easy to prevent by monitoring customer accounts for suspicious activity.
It’s also important to note that there are two different types of fraudulent transactions: direct and indirect. Direct fraudulent transactions occur when an unauthorized user logs into an account, makes purchases and then logs off. Indirect fraudulent transactions occur when a hacker steals credit card information from one merchant and uses it to make purchases at another merchant.
3. Virtual terminal fraud
Virtual terminal fraud occurs when a customer uses a stolen credit card number, or one that they’ve made up, to make purchases online. The customer can do so by entering the number manually into an online form or by using a virtual terminal, which is software that emulates an actual POS (point of sale) system.
The process works like this: A criminal obtains stolen credit card data by hacking into a retailer’s database and stealing the information directly from there; the criminal then makes fake cards using these stolen numbers; finally, they use one of their fake cards at an e-commerce site so that it gets approved automatically without human intervention from any payment processor (like PayPal).
4. Card-not-present fraud
Card-not-present fraud occurs when a thief uses your card information to make purchases online. This type of fraud is not limited to e-commerce retailers, but it is more prevalent in e-commerce.
Card-not-present fraud can occur when you are making an online purchase, or when someone else uses your credit card information to make a purchase without ever seeing or possessing the physical item. For example: You order something from Amazon and pay with your Visa card; shortly thereafter, someone else orders something from Target using the same Visa and receives it at their house instead of yours!
5. Cardholder identity fraud
Cardholder identity fraud is when a criminal uses stolen card information to make unauthorized charges. This type of fraud is becoming more common as hackers become more sophisticated and retailers struggle to keep up with them.
- Cardholder identity fraud can be extremely damaging for retailers because it results in higher losses than other types of fraud, such as chargebacks or refund requests. In fact, some studies have found that cardholder identity theft accounts for nearly half of all online retail losses.
- To protect yourself from this type of scamming activity, you should implement enhanced due diligence measures when processing credit cards through your eCommerce site or mobile app (e.g., asking for additional information about the customer). You should also consider using an end-to-end encryption solution so that sensitive data stays secure throughout every step of its journey through the payment process–from point A (when it’s entered) until point B (when it lands safely in your bank account).
These are five types of fraud that e-commerce retailers should be aware of
Account takeovers. A criminal who has successfully gained access to your customer account can use it for fraudulent purchases, or even transfer ownership of the account to another person. In this case, you’ll be liable for any losses incurred by third parties using your platform as well as any costs associated with restoring the original owner’s access once they’ve been notified of an unauthorized change in control over their account.
Fake transactions. Fake transactions are those made with stolen credit cards that were never legitimately issued by anyone (e.g., card data stolen from retailers like Target). These charges may appear on a customer’s statement as “purchases” rather than “transactions,” making them harder to detect when compared against real orders placed through ecommerce platforms; however they can still be identified through careful analysis of both transaction dates/times and amounts spent compared against historical averages–and then cross-referenced against known sources of fraud such as blacklists maintained by online payment processors such as PayPal
Conclusion
We hope this article has helped you to understand the different types of fraud that can be used against e-commerce retailers. It’s important to keep in mind that these five types are just examples and there are many more methods out there. The key takeaway from all this is that no matter what type of business you’re running or how secure it may seem, there are always ways for hackers to get into your system!
