Fraud is always a risk for your business, regardless of your industry. But e-commerce retailers are especially at risk for various types of fraud.
According to Experian, 80% of companies have experienced an increase in online fraud over the past year. Customers are aware of this threat and are concerned about it as well.
Experian surveyed 10,000 consumers worldwide and found that when it comes to the online experience, 70% of consumers want security above all else. In fact, the desire for security beats out convenience and personalization.
5 Common Types of E-Commerce Fraud
With this in mind, it’s good to be aware that the list of fraud threats continues to grow, and as a result, it can be hard to know where to even start. That’s why we’ve outlined the five most common types of e-commerce fraud below.
1. Credit card fraud
Credit card fraud is one of the most common types of fraud and over the past five years, 46% of Americans fell victim to it. This happens when a consumer’s credit card information is stolen and used illegally to make purchases. It hurts the consumer, but it also hurts businesses as well.
That’s because if someone comes to your site and makes a purchase using a stolen credit card, you’re automatically liable for the charges. So, the consumers will have the funds returned to them, but your business will take the financial hit.
2. Account takeover fraud
Account takeover fraud happens when a hacker gains access to another person’s online account. And it can happen anywhere that sensitive payment information is stored.
This type of fraud, even though often highlighted in the news, is prevalent because many people are very lax when it comes to online safety. They choose passwords that are easy to guess and allow hackers to gain access to their accounts.
3. Chargeback fraud
This type of fraud occurs when someone visits your site, makes a purchase, and receives the product they ordered. Then that same person will contact your business, claiming that their credit card was stolen and asking for a refund.
Chargebacks are a massive problem for businesses because they come with hefty fees. And the more chargebacks your company incurs, the higher the fees will be. Plus, you lose the revenue from the product you shipped.
4. Return fraud
Refund fraud is becoming increasingly common as many e-commerce retailers have very generous return policies. It occurs when someone purchases a product with a stolen credit card.
That person then contacts the business and asks to be reimbursed through another form of payment. This is problematic for the business because not only do they lose out on the money they refunded, but they are liable for the original fraudulent charge.
5. Card testing
Card testing happens when hackers steal a consumer’s credit card information and then “test” the card out. They’ll usually do this by making a small online purchase to see what happens.
If the first purchase goes unnoticed, the hacker will start making larger purchases. This type of fraud can result in thousands of dollars in potential chargebacks, not to mention all the fees that come with it.
Next Steps
Fortunately, there are many ways you can protect your business from the five most common types of fraud. Stay tuned for our upcoming blog post, which will address how you can fight the most common types of fraud without ruining the customer experience at your site.
To your success!
About CORE Cashless LLC
CORE Cashless LLC is a leading provider of cashless payment systems for the amusement and recreation industries. Our software and payment systems are in place at some of the largest and most profitable facilities in the world, and our innovative solutions serve a multitude of industries. CORE Cashless is headquartered in the Mid-western United States, in Overland, KS.
For more information or to request logos and high-resolution photos, please contact Brian Johnson, Dir. of Business Development, at (913) 529-8240 or email brian.johnson@corecashless.com.