eCommerce has taken a fundamental role in societies across the world that depend on the internet for communications. The virtual world of commerce is ideal for consumers and businesses alike. For businesses, having an eCommerce presence means access to a range of opportunities – direct contact to customers, entry to foreign markets, etc. For consumers, engaging in eCommerce means hassle-free shopping from home, timely deliveries, etc.
Top eCommerce vendors optimize their website to offer customers convenient service and 24×7 customer support. However, the lucrative world of eCommerce has also attracted cybercriminals and scammers who use all types of hacking tools scams to steal user data and rob eCommerce, vendors.
Fraud in the eCommerce World – An Unstoppable Cancer
Even though all eCommerce sellers, customers, and even major financial institutions are aware of the increasing instances of eCommerce fraud, stopping these crimes continues to be a problem.
In 2018, the FTC (Federal Trade Commission) reported 1.4 million instances of eCommerce fraud– a significant increase from 2017. Compare these figures to the number of eCommerce fraud attempts in 2010 – there’s a 104% increase in fraud reports.
In 2018 alone, $1.48 billion was lost due to eCommerce fraud. These numbers keep increasing. Online vendors and shoppers need to know the cybersecurity threats that face them.Of all the 1.4 million instances of eCommerce fraud, the most common ones involved –
- Compromising the business e-mail compromise of online vendors who make wire transfer payments.
- Sensitive and confidential information of users being stolen from eCommerce databases.
- Disrupting an online shopper’s payment processes to redirect orders or steal digital currency
- Sending malware to the computer systems of online vendors and shoppers to damage, breach, or deactivate them
- Using phishing and ransomware to steal valuable data from online shoppers and vendors.
What these Fraud Attempts Lead To
These fraud attempts have shockingly high success rates. Once any of the aforementioned scamming methods are successful, the cybercriminals –
- Take Over User Accounts – Cybercriminals gain access to valuable user data (contact information, shopping history, financial background, etc.) to make unauthorized purchases on eCommerce platforms. Both the eCommerce vendor and the customers suffer.
- Identity theft – Hackers steal customers’ credit card details or login credentials of third-party-payment platforms to steal the money, make unauthorized purchases, etc.
- Triangulation Fraud – Cybercriminals set up fraudulent accounts on eCommerce platforms. Here, they offer top products at suspiciously low prices. After receiving the credit card payments, they disable the account. While carrying out these types of frauds, scammers often impersonate top vendors. Three parties are involved in these elaborate fraud attempts – the actual seller, the fake seller, and the eCommerce shopper. Hence, they are called ‘triangulation’ fraud.
- Chargeback Fraud – Chargeback fraud is often referred to as ‘friendly fraud.’ That’s because customers often do it unknowingly. They’ll order an item on an eCommerce platform by mistake. After making the payment, they cancel the order for some reason (e.g., the product wasn’t delivered on time). Hence, the vendors are compelled to return the money.
Scammers have taken chargeback frauds to another level. They steal customer data to make illegitimate purchases. After receiving the product, they disappear, leaving the customer desperate to file for a chargeback. The vendors who have to reimburse the ‘stolen’ money suffer the most as they lose their product and the order value.
For every $1 chargeback, eCommerce vendors lose $3.94. Plus, 40% of eCommerce shoppers who file chargebacks are likely to repeat this behavior after two months.
The average customer may not even realize how much harm they’re doing to vendors every time they file a chargeback (that’s why it’s called ‘friendly fraud’). The scammers who use chargebacks to commit crimes knowingly make life even worse for eCommerce sellers.
What Should eCommerce Vendors Do?
To guarantee all transactions are fair and legitimate, vendors must –
- Maintain Compliance – Whether an online vendor has to abide by the Payment Card Industry Security Standard Council (PCI) or European Union’s PSD2 (Payment Services Directive) – not being compliant with these government-mandated guidelines regarding online transactions puts every vendor at risk.
- Monitoring all Transactions – For top vendors, this type of mass-scale monitoring can only be achieved using special cybersecurity software tools to track the shoppers’ IP addresses and behavior on the eCommerce platforms.
- Limited Acceptance – Avoid accepting large sums from the same account. These limitations can be on an hourly, monthly, or daily basis.
- Investing in E-commerce Fraud Prevention Tools – Vendors must use the best eCommerce fraud prevention software tools that can detect online fraud threats and make the seller’s security system stronger with every fraud attempt.
- Customer Education – Vendors must educate their customers about the risks they may face while engaging in online payments.
Inconsistencies in the shipping address and the billing address, strangely large orders, multiple orders of the same products, orders from international locations, etc. are all clear signs of fraud. Since these signs of fraud are so varied and ever-evolving, they highlight the challenges of fighting fraud. Only high-quality eCommerce security tools can match the efforts of these persistent cybercriminals.