With eCommerce sales in Australia totaling more than $21 billion in 2018, online fraud prevention is vital. Estimated at $476 million in 2017, eCommerce fraud means fraud monitoring solutions are worth their weight in gold.
Some of the most common types of eCommerce fraud include:
In this case, a fraudster uses a stolen card and overpays for a product or service. The fraudster then claims the original card account has closed — and then asks for the refund sent to their own account.
Of course, this means you're on the hook for the original charge.
Identity Theft and Phishing
eCommerce transactions are particularly susceptible to fraudulent orders. A fraudster acquires cardholder data and places an order using the stolen information. The merchant is then liable for the chargebacks and inventory loss.
Fraudulent orders often go hand in hand with phishing. Phishing is the practice of acquiring customer data, usually through falsified websites or data forms. Once obtained, the fraudster uses the customer's data to place seemingly legitimate orders without raising red flags.
Chargebacks (also called friendly fraud) occur when a customer files a chargeback with their card provider. Chargeback fraud occurs when a customer orders a product or service, receives said product or service, and then files a chargeback. The merchant is liable for the cost — merchants lose an average of $2.4 for every $1 of fraud.
While chargeback fraud is intentional, so-called "friendly fraud" sometimes refers to unintentional chargebacks. This typically occurs due to a misunderstanding on behalf of the customer. Confusion between merchant refund and card provider chargeback is a common cause.
Card testing is the practice of testing stolen credit card information with small purchases. If the card information is still valid, the fraudster then places a larger order.
This method of online payment fraud is particularly nefarious — it can be completely automated. This makes it profitable for fraudsters to test many cards simultaneously. 2017 saw a 200 percent increase in card testing fraud, making it one of the fastest growing schemes today.
Dealing with eCommerce Fraud
The best approach to dealing with online card fraud is to adopt a proactive stance. Preventing online card fraud takes knowledge, best practices, and the services of industry experts.
Comprehensive payment solutions work to mitigate exposure to eCommerce fraud. State-of-the-art automated and real-time merchant monitoring ensure that legitimate payments process quickly. Security experts look for any payment abnormalities and work immediately to stop fraud.
Interested in exploring a full-service fraud monitoring service? Please contact our payment solution experts for advice.