Many businesses embraced omni-channels or have gone completely digital because of the pandemic. Unfortunately, going digital also has its hidden dangers–online fraud.
But cybercriminals don’t just target customers. As more and more merchants shift to online channels, they also become unwilling targets of e-commerce fraud.
What is e-commerce fraud?
E-commerce fraud is an illegal transaction made online by a cybercriminal using another person’s account or identity. It is also called purchase fraud.
Types of e-commerce fraud
Identity theft
One of the most common forms of fraud—offline or e-commerce—is identity theft.
When a fraudster obtains a person’s sensitive information (such as their complete name, bank details, birth date, or debit or credit card details) and uses them to complete a transaction, that’s identity theft.
This affects both the victim and the merchant, since the victim can legally request for a refund from the merchant.
Identity fraud can also occur through an account takeover when a fraudster hacks into a user’s account and purchases items using the stolen account. An account takeover can be done through hacking, phishing, or pharming.
Customers of e-commerce sites whose accounts were compromised may lose their trust on the merchant, leading to a dip in sales.
Clean fraud
Clean fraud takes place when a physical credit card is stolen and used to make an online transaction. Since all the details are authentic, the transaction appears like a legitimate activity made by actual customers.
This is where two-factor authentication is essential. With a two-factor authentication system, users are required an additional piece of information on top of simply providing their username and password. This is commonly a 4 to 6 digit code sent to either via SMS or email which users need to enter to gain access to their account. a two-factor authentication systems adds an extra layer of protection, making it more difficult for cybercriminals to gain access to accounts.
Phishing
Cybercriminals often get their victim’s username, password, debit or credit card details, and other pertinent information through SMS or email phishing. They use these details to make online purchases without the victim’s knowledge.
How to detect e-commerce fraud
E-commerce fraud can hurt a business. That's why it’s important to look out for the following signs to stop fraud in its tracks before it’s too late.
- First-time customers who suddenly make a large transaction
- Customers who order large quantities of products
- Old customers shipping to a new and unusual location
- Multiple credit cards used by the same IP address
- Multiple transactions in a small window of time
How to prevent e-commerce fraud
Falling prey to e-commerce fraud can cost your business money. You can lose sales and damage your reputation, which takes years to rebuild.
Here are some fraud prevention methods you can implement:
- Use the latest software for your online stores.
- Use a reliable third-party payment processor.
- Always use an Address Verification System (AVS) and Credit Code Verification (for CVV and CVC).
- Invest in fraud detection and management software.
Going digital is an essential step in adapting to these challenging times. Keep in mind that it’s not only your customers who are waiting to get in contact with you–cybercriminals are as well.
Stay on top of the latest online fraud news and learn how to best protect yourself with tips from Metrobank.