Like every other business that suffers from the ceaseless onslaught of fraud, the eCommerce business also falls prey to occasional frauds that ruins the business rhythm and incurs losses to the owners.
In this post, we are going to discuss how eCommerce store owners can protect themselves from the common types of eCommerce frauds and what more they need to know about it.
Types of eCommerce frauds
Broadly there are 5 types of eCommerce fraud. They include:
- Online identity theft
- Payment fraud
- Clean Fraud
- Triangulation fraud
- Chargeback fraud
Online identity theft
Cyber criminals have a cunning way of replicating or recreating someone’s online identity. Think of fake identities as clones of real personal accounts which can be used to steal one’s personal records including access to banking credentials and online payment portals.
Online identity theft is targeted not only at customers, but also at eCommerce store owners. Criminals who can gain access to owner profiles can easily break into the database and make away with financial information, including credit card information details of registered customers. Once lost, the cost of damage would fall on the store owner.
Payment fraud is not a single mechanism, but a group of activities each with its own way of working. One is the most technical performed by expert hackers who deploy malware and phishing mails that force customers to part with their sensitive information.
In others, customers are made to pay in advance for offers which are never realized. In other cases the merchant’s identity is replicated thus taking away all payments and information of customers in a misleading manner.
Quite contrary to the name, clean fraud is like implanting fraudulent or malicious transactions into a person’s account. The transaction is hidden in the account summary of the customer in a craftful manner that the victim does not even realize that their identity has been compromised or utilized for fraud. However, this kind of fraudulent transactions happen only when the hackers have access to the valid credit card information of the user.
Have you heard of this old age proverb?
“If something is too good to be true, it probably is not true.”
The same goes with the triangulation fraud. In this method of eCommerce, fraudsters create fake storefronts that look and behave like real ones. They push great offers for best selling products at cheap costs which lure customers invariably.
However, instead of providing the goods, the fraudsters will steal the credit card information provided by the naive customers. This credit card information is then used to purchase the product as ordered by the customer. The hackers then proceed to use the same credit card to buy other products at the expense of the customer. It will be quite a long time before the innocent customer would become aware of the purchases made on his account.
eCommerce fraud is staged not only by hackers but also by customers. A common fraud staged by customers include the chargeback fraud. In this mechanism, the customers will play victims to products not being delivered thus claiming a chargeback from the company.
Otherwise, they will return duplicate or damaged goods delivered to them in place of original goods bought from the store. As a result, the eCommerce store undergoes grave losses. Unless it has a strong return verification process, the store will have to bear the burden of the chargeback fraud.
eCommerce frauds mitigation – Ensuring safety for merchants and customers
Along with the mushrooming growth of frauds, security provisions to beat cybersecurity attacks and frauds have also grown in the eCommerce industry.
Let’s take a look at some such security features and how they can be used to mitigate frauds.
HTTPS encryption is the best way to prevent scammers from duplicating or replicating the original website. EV SSL certificate shows that the website is indeed owned and operated by the owner and no one else. That way, customers are assured that they are transacting with the legitimate business website where their payment and personal information will be safe.
Tighten return processes
The chargeback fraud which is often staged by malicious customers can be prevented by tightening the return process. In this, customers will have to prove with evidence that the product that they are returning is indeed the same received from the store and is being returned for valid reasons.
Copy of the invoice, photos of the product on receipt, warranty cards, etc. can be collected to prevent customers from committing chargeback frauds. Secondly, a process of crediting the chargeback to the customer’s account only after physical verification of the returned product will also help prevent chargeback frauds.
Two-factor authentication is a great way to prevent online identity thefts. In two-factor authentication, the customer uses two passwords – i) the default username and passwords, ii) a secondary one time password received as a text message or as email.
Two-factor authentication ensures that no one other than the user with the right to access the account is able to access it. This keeps away hackers who impersonate users to steal their login credentials.
Automated notifications for order confirmation, successful payment and order dispatch help keep customers in the loop of the transaction. The customer gets an intimation as soon as any transaction is made without their approval. Thus eCommerce fraud types like clean fraud can be prevented easily.
Bringing it all together
eCommerce is like a dangerous maze where both store owners and customers can get trapped in frauds. Staying safe and transacting business requires a great deal of security provisions. HTTPS encryption, automated notifications, stronger return policies, etc. makes eCommerce less riskier to frauds.
Hopefully, with this article you are aware of the most common types of eCommerce frauds and how they can be mitigated. With the right blend of these security provisions you stay immune to frauds and its consequential losses.
Is there anything more you think can be added to reduce the risk of fraud in eCommerce stores? Let us know.
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