Types of eCommerce Fraud and How to Protect Against Them


    Ecommerce retailers deal with an average of 206,000 web attacks per month. Understanding the various types of eCommerce fraud is essential if you want to know how to effectively stop them.

    As consumers continue to shift towards purchasing products primarily online, small businesses are having to adapt to these changes and accommodate the preferences of their customers. The COVID-19 pandemic forced retailers to embrace online shopping channels, creating meteoric growth for the eCommerce industry in 2020.

    This was great news for suffering economies, but concerning for retailers who were inexperienced with running an online business, unaware of the potential threats posed by fraudsters lying in wait.

    In this article, we'll explore the three most common types of card-not-present fraud that eCommerce businesses experience, and provide tactics that you can use to help protect yourself from them.

    Account Takeover Fraud

    As the name suggests, account takeover (ATO) fraud occurs when an unauthorized user gains access to a customer account. Although this could easily occur by sharing your login information with another party, you'll find the most common culprit for ATO fraud is data breaches. Fraudsters can illegally obtain stolen login credentials and use this information to gain access to a person's private accounts. 

    Regardless of the cause, the consequences of this type of fraud are often quick and severe. In context, the unauthorized user aims to make as many fraudulent purchases as possible before the victim closes their account or freezes their payment method.

    The most effective method of stopping ATO fraud is by investing in an account protection tool. With Vesta Account Protect, you can detect and prevent fraud at the account level, without waiting until the fraudster attempts a financial transaction.

    Chargeback Fraud

    Chargeback fraud is one of the most common types of fraudulent activity on eCommerce platforms. This scenario involves someone making an online purchase and then requesting a chargeback from the payment processor they used. To help facilitate this, they will claim that the transaction was either fraudulent or invalid.

    The customer themselves is refunded the amount of money spent, but the retailer must pay the transaction value. The retailer will have to front the cost for the lost inventory, and they also risk having to deal with increased transaction processing fees if too many chargebacks are filed within a given period of time.

    The best way for an eCommerce retailer to prevent chargebacks would be to implement a fraud solution that offers a chargeback guarantee. Vesta Payment Guarantee is a proven, fully managed service that helps digital businesses eliminate payment fraud risks completely. With Payment Guarantee, all Vesta-approved transactions are backed by our zero-fraud-liability guarantee, so you don't have to worry about paying for chargeback fees.

    Triangulation Fraud

    In contrast to other types of fraud, triangulation fraud is much more involved.

    In fact, it requires three separate components to complete. These include the person committing the fraud, the store itself, and an online shopper.

    First, the fraudster will create an eCommerce business that sells legitimate products. When customers order from this store, they use stolen credit card information to purchase the same products from a different store.

    They then ship the purchased items to the customers. On the surface, those ordering the goods may not notice anything is out of the ordinary. The primary victims are those who have had their financial information stolen.

    The store the goods are purchased from also suffers, however. Triangulation fraud is a particularly difficult form of fraud to detect, and the best method for stopping it is to communicate with customers whom you suspect have been the victim of triangulation fraud. First, determine the fake website that they visited to purchase the products. Gather as much information about the seller as possible, this way you can make a strong case to get their site removed.

    Understanding Ecommerce Fraud Is Essential

    Otherwise, you won't be able to sufficiently protect your company from eCommerce fraud incidents. Keep the above information in mind when moving forward. This will help you know how to recognize common scenarios and how to implement the appropriate protections.

    Want to learn more about what Vesta has to offer your business? Feel free to get in touch with us today and see how we can help.


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