7 Types Of Ecommerce Frauds & How You Can Prevent Them

7 Types Of Ecommerce Frauds & How You Can Prevent Them

Types Of Ecommerce Frauds

Any kind of online fraud that is undertaken against an e-commerce company, store, or platform is referred to as “e-commerce fraud” and can take many different forms.

Over the past 20 years, e-commerce and online transactions in general have become more and more popular, but COVID-19 has finally convinced even hesitant online customers to use e-commerce. In fact, it’s predicted that global e-commerce sales will keep rising and will hit $6.4 trillion by 2024. 

Unfortunately, cybercriminals have been drawn to prey on new users, online customers, and well-known e-commerce platforms by the growing popularity (and profitability) of e-commerce. There have been significant rises in e-commerce fraud between 2020 and 2022. 

E-commerce fraud comes in a variety of forms, including card testing, account takeover (ATO), triangulation fraud, and others. And for e-commerce companies, protecting against the many kinds of attacks is getting more and harder. 

This guide will share all you need to know about stopping online fraud attacks, including:

What is e-commerce fraud?

The subgroup of online fraud that targets e-commerce platforms exclusively is known as e-commerce fraud. 

E-commerce fraud occurs, for instance, when a cybercriminal uses credit card information that has been stolen (together with a stolen identity) to make a purchase from your online store. Regretfully, in these situations, the e-commerce company bears the expense of the fraud, which has an impact on sales.

Online card fraud, which involves credit card information that has been stolen, is distinct in that it does not require the physical presence of the card to be processed. Rather, the identity thief only needs to input the pilfered credit card details (name, billing address, card number, expiration date, and CVV number), and the online retailer will handle it as a legitimate purchase. 

E-commerce companies are the subject of numerous additional forms of internet fraud. For instance, account takeover (ATO) fraud happens when a cybercriminal obtains the login information of a real consumer on an e-commerce site and uses the account to make purchases. 

Online firms must realize that e-commerce fraud is getting more sophisticated by the minute. Cybercriminals use increasingly sophisticated techniques as they become more intelligent.

Why is e-commerce fraud common?

There are three key reasons why e-commerce enterprises are frequently the subject of online fraud: 

1. Effectiveness

Considering the resources required to initiate an assault, e-commerce fraud is rather inexpensive. 

In order to commit “offline” fraud, a criminal may need to physically take possession of the victim’s credit card by breaking into their home or stealing their wallet. However, fraudsters perceive online fraud as being comparatively simpler and less dangerous. In actuality, thieves may now easily buy credit card information that has been stolen and is inexpensively available on the dark web.

2. Evasion

It is still very uncommon to get charged with e-commerce fraud. Evidence collection might be difficult for the appropriate authorities, because cyberattacks can originate from nations outside the victim’s borders. Authorities may not believe that the expenditures required to pursue an online fraudster are warranted because, in comparison to other forms of crimes, the money involved in online fraud assaults is typically much smaller. 

That being said, e-commerce businesses cannot depend on regulators and governments to shield them from cybercrime. Rather, companies ought to take the initiative to put in place the right defenses, including fraud detection tools.

3. Ease

Because it is so simple to do compared to traditional fraud, online fraud is also very widespread. The offender doesn’t have to take the chance of being apprehended physically. All that is really needed for an attacker to conduct online fraud from their home is a computer (or even a smartphone) and an internet connection. Many “beginner” criminals often attempt e-commerce fraud as their first crime because it is so easily accessible. 

Positively, putting in place an e-commerce fraud prevention solution can be as simple as it is essential for any e-commerce company.

7 Different Types of E-Commerce Fraud

Although there are many various kinds of online fraud that can be used against e-commerce sites, the following are the most common ones:

Types of ECommerce Frauds

1. Classic Online Credit Card Fraud

the most prevalent kind of e-commerce fraud, usually carried out by inexperienced scammers. 

This kind of attack involves the fraudster obtaining credit card information that has been stolen in one way or another (for example, by buying credit card credentials that have been stolen from the dark web or by breaking into someone’s credit card account and taking note of the credentials). The stole credit card information is then used by the fraudster to make an online purchase.

The con artist may employ a number of ruses to make sure they can get their hands on the products (such as sending them to reshippers) and may also employ a number of strategies (such as using residential proxies) to conceal their identity.

2. Card Testing Fraud

Card testing, which is a little bit more sophisticated than simple credit card fraud, has gained popularity recently. Card testing occurs when a fraudster has obtained partial access to credit card credentials that have been stolen. There might be one card, or there might be hundreds or even thousands of cards.

When someone tries to commit card testing fraud, they usually don’t know these two things:

  1. Whether the card can still be used to successfully complete a transaction and is still valid (i.e., not blocked yet).
  2. The credit card limit refers to the highest possible amount of money that can be spent on items with the card.

The fraudster will then test the card by making modest online purchases in order to find out. Following the approval of a transaction, the fraudster will proceed to larger transactions, attempting to extract as much value as possible from each card.

3. Chargeback Fraud

Chargeback fraud occurs when a fraudulent buyer purchases something from an online retailer, then once the item is delivered, the perpetrator files a chargeback. In these situations, the store is still required to pay the same amount to the credit card network/bank, even though the acquirer bank or credit card network would reimburse the transaction to the “customer” (the fraudster). 

The attacker in chargeback fraud contests what seem to be legitimate claims. For instance, they can claim that the item never arrived or claim to have returned the item to the merchant (which they never actually did) to the payment processor. 

Chargeback fraud is also frequently referred to as “friendly fraud” because of the nature of the claims. Detection of chargeback fraud can be difficult since it can be undertaken by legal credit card owners.

4. Account Takeover (ATO) Fraud

When a cybercriminal obtains access to a valid user account on an online store and uses it to make a purchase, it’s known as account takeover or ATO fraud. 

Fraudsters can gain accounts through a variety of means, including: 

  • Brute Force Deployments
  • Credential Manipulation
  • Purchasing On the Dark Web Credentials
  • A Phishing Operation Targeting Authentic Clients 

ATO fraud has the potential to seriously harm consumers as well as e-commerce retailers. ATO may cause customers to become victims of more severe identity theft scams, for which they may hold the online retailer accountable. A successful ATO attack damages a brand’s reputation over time, sometimes permanently.

5. Refund Fraud

When a fraudster is unable to get merchandise at their address or obtain cash from a credit card that has been stolen, they frequently resort to refund fraud. 

Refund fraud occurs when a cybercriminal makes an online purchase using credit card details they stole, then gets in touch with the online retailer to ask for a reimbursement. 

Refund fraud is most commonly committed by making a purposeful overpayment, then asking for a refund for the overpayment, and asking for the money to be paid through a different means (e.g. by saying the credit card was closed). In this manner, the fraudster can obtain the “excess” money without having the initial credit card charge reimbursed, which may lead to a chargeback if the credit card’s original owner challenges it.

6. Triangulation Fraud

A con artist using triangulation fraud will need a second shopper to initiate the scam. Three parties are involved in the attack: the online retailer, a customer, and the fraudster. 

The first step in triangulation fraud is for the perpetrator to create an online store (through Shopify, for example) or a storefront on an online marketplace (like Amazon or eBay). Selling in-demand goods at a steep discount is a typical strategy used to get clients in fast. 

But when a real buyer inputs their credit card information to make a transaction, the fraudster will steal that information and use it to buy the required items from a real online retailer.

Customers who receive the goods may believe they are getting a fantastic deal, but in reality, they are paying the going rate, and their credit card details are now being compromised.

7. Interception Fraud

When thieves place orders from an online retailer using the legitimate billing and shipping addresses associated with the card in order to complete the transaction, this is known as interception fraud. The con artist then makes an attempt to seize the merchandise for themselves, though. 

Although attackers employ a variety of strategies for interception fraud, the following are some of the most popular ones: 

  • Making what appear to be genuine allegations to the customer service department of an online retailer, in order to modify the address prior to shipment.
  • awaiting delivery and making an effort to seize the shipment in person (for example, if the fraudster resides near the actual credit card holder).
  • shifting the shipment to a different address by getting in touch with the shipper directly.

E-Commerce Fraud Red Flags to Look For

If we are unaware of e-commerce fraud, we cannot stop it from happening. The ability of the fraudster to trick your system determines the success of the e-commerce scam. 

On the other side, your ability to spot fraud attempts promptly will determine how well you can fend off fraudsters. To put it briefly, you need to be aware of the “tells,” or warning signs, and the following are a few of the more typical ones: 

  • several orders from several credit cards: It’s obvious that fraud, particularly card testing fraud, occurs when an account (or multiple accounts with similar signatures, such as the same IP address) makes multiple transactions using multiple credit cards.
  • Data inconsistencies: Look for any discrepancies in the data, even if they are minor ones, such as discrepancies between the zip code entered and the city. Another instance is when a customer using a Singaporean IP address purchases a credit card with a billing address in the United States.
  • Strange shopping habits: If the credit card holder is not a new customer, you can review their past purchases to search for any unusual activity. For instance, when the account unexpectedly places a much greater order than the consumer usually does. Devoting attention to preventing gift card fraud might also be beneficial.
  • odd location: If the consumer has previously made a transaction from your company, look for any odd activity coming from locations other than the norm. For instance, suppose a consumer consistently makes purchases from a Japanese IP address then all of a sudden purchases from an Angolan IP address. Better cautious than sorry, even though it’s probable that the account owner is just on vacation. 
  • Many orders from odd places: For instance, you might receive more than ten orders from Indonesia all of a sudden, even though you have never received any orders from that country before. 
  • Multiple mailing addresses: When a customer uses one credit card for multiple purchases and sends the items to multiple distinct addresses, that is also cause for concern. Generally speaking, you should be a little cautious when a customer asks for the items to be shipped to an address other than the billing address on the card. 
  • Rejected transactions: It’s true that even reputable customers sometimes forget their PIN or accidentally spend up their card’s limit. But you should be wary if an account tries more than five times without successfully entering the credit card details (number, expiration date, name, and CVV).
  • Quick back-to-back transactions: Although it would be feasible for a single consumer to make many purchases in a row, it could also be a sign that a fraudster is testing your website with their card.

How to Prevent E-Commerce Fraud in Your Company

Recognizing the attack as soon as possible is essential to safeguarding your online store against fraud. Nevertheless, there are situations in which, by the time you recognize the attack, it’s already too late. Therefore, it’s preferable to put preventative measures in place to lessen or even completely eradicate the chance of fraud. 

Practical Advice for Guarding Against E-Commerce Theft in Your Online Store

Audit Your E-Commerce Platform Security Regularly

Technically, online fraud occurs when hackers and scammers identify weaknesses in your system that you are unaware of. You’ll have an advantage over attackers if you can recognize your weaknesses before they do. 

Even though e-commerce security audits can cover a lot of ground, the following are some crucial components you should routinely evaluate:

  • Ensure that everything is current, preferably as soon as updates become available—especially if there is a security update.  
  • Verify the SSL certificate (HTTPS) for your website. If you haven’t used HTTPS yet, you really should. You should also make sure your SSL certificate is functioning properly on a regular basis.
  • Verify that end-to-end encryption is used in all data transfers and conversations between your company and its clients.
  • Verify that your online store continues to be PCI-DSS compliant.
  • Ensure that you routinely backup your data.
  • Frequently check your e-commerce website for malware by using the proper antivirus and anti-malware software.
  • To stop account takeover attempts and other bot-related dangers, keep an eye on the actions of hostile bots and stop them immediately.

Make All Credit Card Transactions Require CVV Numbers

The CVV (Card Verification Value) numbers are now customarily required for any online purchase. 

The three- or four-digit security code on the back of the credit card, known as the CVV, serves as a kind of second-factor verification when making online purchases. You can have an additional assurance that an online shopper possesses the actual credit card by asking them for their CVV number. This can significantly lower the danger of e-commerce fraud.

Make Sure to Use HTTPS

Ensure that HTTPS is used on your e-commerce website rather than regular HTTP. When you use HTTPS, sensitive data, such as credit card numbers and customer names, is protected throughout data transmission from an online shopper’s web browser to your website. 

Additionally, Google may flag your website as unsafe for Chrome users if you are still utilizing HTTP, which could lower traffic to your online business.

Set Limits on Total Purchases

Determine the typical revenue for your store and impose a daily limit on the quantity of things and dollar amounts that an account may purchase. In this manner, you can lessen the effects and keep your company from suffering serious financial harm in the unlikely event that a fraudster succeeds despite all of your precautionary steps. 

Reject Non-Valid Shipping Addresses

In an effort to evade discovery, online fraudsters may use anonymous locations such as PO boxes or virtual addresses to conceal their true address from being recorded. It is recommended that no orders be shipped to PO boxes or virtual addresses. 

Only Collect the Necessary Sensitive Customer Data

Protecting any sensitive consumer data you have gathered is your responsibility. Therefore, it’s preferable to refrain from gathering an excessive amount of sensitive data. In this manner, you can minimize your exposure in the sad case of a data breach or successful account takeover attack. 

Generally speaking, you should only gather the information that is strictly necessary in order to ship the product and approve the transaction.


It can be difficult to protect an e-commerce website, and as new tools and strategies are used by online scammers, their cunning will only increase. Your online store or large corporation, e-commerce fraudsters will nonetheless target your internet business.

Take preventative measures to safeguard your mobile app, APIs, and e-commerce website. You can create a thorough plan to prevent e-commerce fraud by using the advice provided above.

Moreover, if you are looking for an e-commerce development company that can help you create a secure e-commerce store, then you should check out Appic Softwares. We have an experienced team of e-commerce developers who can assist you with all your requirements.

Additionally, you can even hire dedicated developers from us and let them manage your store. So, what are you waiting for?

Contact us now!

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