As eCommerce continues to accelerate, payment fraud has become an unfortunate but extremely serious issue. With online shopping now as easy as “one-click,” it’s imperative to prove to customers that a brand is worth their repeat business and loyalty. What’s more, any form of fraudulent activity, even if customers are able have any lost money refunded, is sure to negatively impact a customer’s view of a retailer. As a result, because many merchants and brands using online payment services are small and self-funded, it’s crucial that they know how to prevent all forms of payment fraud, including eCommerce payment fraud.
Below are examples of some of the most common forms of payment fraud and a few tips on how to combat them.
Types of Payment Fraud: Account takeover
Account takeover (ATO) is one of the most common ways eCommerce businesses experience fraudulent attacks, which is unfortunate because many eCommerce businesses are unprepared for them.
Simply put, ATO is an online version of identity theft. In an ATO, an attacker illegitimately gains access to a user’s online eCommerce accounts – most commonly through the use of bots. Attackers who use ATO exploit vulnerabilities within online accounts and can then gain access to the victim’s information and funds.
A potential red flag when shopping is a small seller with little history of exchanges that suddenly has a significant transaction volume and a large payout from the marketplace. While it may be legitimate, it’s also possible that it’s a sign of a hijacked account.
A tip to combat ATOs as a consumer is making a unique password for each online retailer or merchant you are buying from and a unique password.
Types of Payment Fraud: Brushing
There are a number of ways sellers can “game the system” including the most common, brushing. Brushing scams include writing numerous fake reviews in order to increase or decrease store ratings. It also consists of generating fake orders to boost ratings on a merchant’s site. A seller can pay someone a small amount of money to place a fake order, or, using ATO, gain someone’s information and place the order themselves.
Be on the lookout for a lot of reviews with just the ratings, or really short reviews that read vaguely.
Types of Payment Fraud: Price manipulation
Another way sellers can “game the system” is through price manipulation. This is when sellers create misleading or false demands by artificially driving up their prices or by showcasing less availability of a product, they in fact have a lot of.
Think about it, if you thought a product you needed or wanted was about to sell out, you’d purchase it right away, so as to not lose out on the opportunity. Fraudulent merchants operating in price manipulation do this with products they have ample inventory of.
Types of Payment Fraud: Chargeback Fraud
Chargeback fraud is another extremely common form of fraud where a scammer places a large online order from a merchant and then cancels the payment after the products have shipped. They then keep the merchandise without paying for it. Methods vary, although its usually as easy as the attacker calling their credit card company and saying their identity was stolen.
Fraudsters can also claim the delivery never arrived, allowing them to receive a duplicate order at no cost to them.
Ways to Reduce the Risk
Fraudulent activity truly undermines the eCommerce and payment economy. Unfortunately, merchants and sellers as well as anyone who makes or receives digital payments are at risk every day and the numbers add up quickly.
Most fraudulent activity is a part of often repeating cycles and involves multiple marketplaces or digital platforms. Many marketplaces and eCommerce sites have caught numerous attackers, but it doesn’t always stop the fraud. A site may be able to shut down a fraudulent seller’s store but is unable to identify them as they don’t share their real details. As a result, they can’t stop them from opening a new store under different details or going to a different marketplace site.
As eCommerce accelerates, attackers are becoming more sophisticated; the need to have stronger measures in place to protect against payment fraud has also become more pressing.
FinTech leaders are working hard to find new ways to protect businesses from threats at every layer of a payment flow. Solutions like Payoneer’s Green Channel can implement stricter KYC procedures to prevent fraud. These include detecting unusual activity, automating payments so fraudsters are less likely to get ahold of pertinent information, and facilitating friction-free and secure in-app purchases because it has unique visibility into marketplace trends and up to date fraud patterns.
Taking advantage of a solution that has cross-border and cross-marketplace visibility allows the cycle of fraud to be broken before it starts. In turn, this helps marketplaces and small businesses avoid financial losses that could ruin their business, as well as avoid bad PR, compliance, and legal issues that easily rack up additional funds.
As the eCommerce industry accelerates and more payments are made online each day, it’s time to break the cycle of payment fraud. It’s time to stop fraudsters from simply starting over; it’s time to stop them before it’s too late.
