Minimize eCommerce Fraud with These Tips

Minimize eCommerce Fraud with These Tips

Just as eCommerce purchases surged during the pandemic, so did online fraud. And now companies must contend with a significant increase in criminal transactions. Online merchants need to be vigilant to help keep their companies safe and healthy.

3 Types of Online Fraud

For merchants, there are three main types of fraud to watch out for if a business plans to sell goods and services online.

1. Transaction Fraud

A stolen credit card number can sell for as much as $150 if it comes with the cardholder’s CVV, address, and security information like their mother’s maiden name. Once a fraudster has purchased it, they need to turn that information into money, and one of the safest ways to do this is to buy products online and sell them.

The cardholder will get their money back quickly once they initiate a chargeback, but the merchant will be stung three times over: they will have to refund the payment in full, accept the loss of their item, and pay an admin fee to the card network. Too many chargebacks and a card provider might put a merchant in a ‘high fraud target’ category, increasing the fee on each transaction. Chargebacks can be disputed but minimizing them is key to keeping a business safe.

2. Chargeback Fraud

Chargeback fraud is any knowing or unknowing attempt to get money back for items that were delivered. It won’t be carried out by professional criminals as it requires access to a real bank account to result in a profit, but it is becoming increasingly common.

So-called ‘friendly fraud’ falls into this category. This is where a customer mistakenly initiates a chargeback because they believe a charge on their card was fraudulent. Chargebacks can also be intentional: a customer can initiate a chargeback out of buyer’s remorse on a large purchase or just because they don’t want to go through the returns process. However, the result is the same: money must be refunded, and merchants must pay chargeback fees.

3. Triangulation Fraud

This new type of fraud is proving difficult to prevent or detect. A fraudster will put up an eBay listing for an in-demand item, usually at a significant discount, and when it is purchased, the fraudster will use a stolen credit card to purchase the item at full price from elsewhere, shipping it to the eBay buyer. The owner of the credit card will initiate a chargeback, harming the eCommerce business that the fraudster purchased the item from, but will have gotten away with the money from the eBay sale.

Ways to Minimize eCommerce Fraud

The key to stopping eCommerce fraud is to prevent fraud before it can occur. Just as fraud is always evolving, so is fraud prevention, particularly when AI and machine learning is leveraged to spot patterns and identify red flags. Before merchants accept that fraud is part of conducting business, do some research into what is available in terms of anti-fraud measures.

Learn More About Infintech’s eCommerce Payment Solutions:

Contact us online or call 1-800-621-8931.

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