In a recent poll, Riskified, a fraud-protection and eCommerce enablement business, found that one in five US customers were victims of online retail fraud last year.
Although many merchants believe they have all the internal tools they need to prevent Card-Not-Present (CNP) fraud and safeguard their customers’ accounts from the increasingly sophisticated activities of fraudsters, this is not always the case.
How does fraud affect an eCommerce business?
A recent analysis found that between 5 and 10% of eCommerce sales were lost to fraud in 2020. This issue is compounded by certain fraud protection solutions, which produce friction between shops and customers, resulting in increased expenses. Most merchants predict fraud efforts to continue growing in 2021.
How exposing fraud can affect customer loyalty
Customer retention is a major goal for eCommerce retailers, and when you tell your clients that their data isn’t as safe as they assume, you risk losing their loyalty.
As Christian Espinosa, a leading entrepreneur in the field, explains: “Loyalty programmes and other customer account incentives are one method eCommerce players have developed to boost retention. Customers respect store accounts for more than simply benefits. They also value the possibility of securely keeping personal data for future transactions.”
Common types of e-commerce fraud to watch out for
- Card Testing Fraud
When someone steals or buys credit card data on the dark web, and uses it to test fraud. Ultimately, the tiny purchase testing strategy remains unnoticed. Merchants and customers only notice when larger transactions are made. By then, credit card information has already been stolen.
- Friendly Fraud/Chargeback
This is when a fraudster buys an item or service online and subsequently files a refund from the payment processor. To avoid this, employ chargeback management software to cut losses and handle disputes.
- Refund Fraud
When someone makes a purchase on an eCommerce site using a stolen credit card. The fraudster then calls the eCommerce company and asks for a refund for an overpayment that was made by mistake. Upon asking for a refund, they also mention that their credit card has been closed, thus the money will be sent to another account.
- Account Takeover Fraud
When a user’s account on an eCommerce site is compromised through buying stolen passwords, security codes, or personal information on the dark web, or phishing an individual consumer. Account takeover fraud damages both the victim and the retailer’s reputation.
- Interception Fraud
Fraudsters make orders on your eCommerce website using stolen credit card information. Once the order is made, they intercept the shipment and steal the products.
- Triangulation Fraud
In this fraud, an online store is a third player. Online markets like Amazon, Shopify and eBay are flooded with fake shops. Fake companies draw honest customers looking for a bargain. They then use stolen credit card details to purchase actual goods from your eCommerce site and mail them to their victims.
Preventing fraud saves your customers and your business
Ecommerce fraud is a challenging issue. Fraudsters are smart and may think beyond the box. Whether you work for a small or big eCommerce business, you should choose to take measures for fraud detection and management to protect your business and customers, as it may cost their loyalty and your reputation.
Chrisrian Espinosa is the author of The Smartest Person in the Room.