New Articles
  January 31st, 2023 | Written by

Realities of eCommerce Fraud – Can you Protect your Business?

[shareaholic app="share_buttons" id="13106399"]

Commerce businesses have a long history of dealing with fraud. Since the first retailer decided to open its business, a malicious actor was there waiting to exploit them and steal their profit. Even though the industry has evolved and expanded to the digital world, the threat remains the same. 

Fraudsters and cybercriminals are constantly looking for new opportunities for their malicious actions, and the development of eCommerce has opened new doors for them. This is why online security needs to become a priority for every eCommerce company that wants to stay in business and protect themselves and their customers from online dangers. By learning to recognize the signs of eCommerce fraud and developing proper strategies for mitigating the problems, you will be able to stop them before they can cause any damage. 

What is eCommerce fraud? 

The term covers different fraudulent activities in which fraudsters and scammers exploit merchants and their customers for their gain. While this causes significant financial loss for the merchant, this is not the only consequence they will experience. Falling victim to an online commerce scam can also cause reputational damage and loss of trust from current or potential customers. Nobody wants to interact with a company they don’t trust can keep them or their data safe. 

With global eCommerce constantly growing and sales expected to reach $5.55 trillion in 2022, the danger will only become greater. As stated, predictions for e-commerce fraud total losses in 2022 were already high at $41 billion, but 2023 will bring a record high with $48 billion in losses globally.

Before you can start protecting yourself from malicious actors, you must know what you will be dealing with. Let’s look at the most common types of eCommerce fraud online retailers will most likely experience.

1. New cybercrime trends taking over the eCommerce world 

Ecommerce is continuously changing, implementing new technological developments to reach as many customers as possible while providing the best service they can and maximizing their profit. But, unfortunately, they are not the only ones changing. Fraudsters and scammers are also constantly evolving their malicious activities. While there are types of fraud that have been present since the beginnings of e-commerce, such as account takeover or card testing fraud, that will most likely remain one of the biggest online threats; new threats are slowly taking over. From application fraud, BNPL fraud to the use of synthetic identities to commit fraudulent actions, new cybercrime trends will soon start presenting more significant danger than we thought possible. 

2. Chargeback fraud

This type of fraud happens when customers purchase a product or service from your website but request a chargeback from their bank soon after. This might be an example of friendly fraud when the item wasn’t what they were expecting or it wasn’t delivered, but more often, it happens due to fraudsters trying to scam you.

Regardless of the reasoning behind the chargeback request, chargeback fraud has a severe financial impact on the company. They will have to pay the chargeback fees, administrative costs, and banking fees while accepting the loss of merchandise and shipping costs. Sometimes, when a business receives many chargeback requests, their account provider might cancel their contract, considering them high risk. 

3. Card testing fraud

Card testing fraud happens when fraudsters gain access to stolen credit card information and use your website to determine if they work and if there are any funds on it. They use stolen credit card details to make small and low-value purchases, which are harder to notice by either a merchant or cardholder. Once they confirm the card is working, they continue making bigger purchases on your and other eCommerce sites.

Because they are making small purchases, they often go undiscovered until they start making bigger purchases. When anyone gets the chance to react, they can already get away with a significant amount. 

4. Account takeover fraud

Account takeover is a type of identity theft that happens when fraudsters gain access to a customer’s online account and use it for their own advantage. Once they manage to get access to the account through illegitimate means, such as a phishing attack or buying their details from the dark web, they will have their hands free to do anything they want with it. Their options are limitless, from using the account details to breach other accounts that might share the same login details to making purchases or withdrawing funds. 

5. Triangulation fraud

This type of fraud is a severe issue for any kind of eCommerce business. It happens when fraudsters create a fake site or ads that sell your products for a lower price. After the customer purchases that item, fraudsters gain access to their payment details they can use for further fraudulent actions. They use a separate stolen credit card to buy the item from your site and ship it to the customer. Customers receive the item without realizing their payment details are compromised; fraudsters get away with the money while the merchant needs to deal with the aftermath. 

How can you protect your business?

A prevention strategy in place is a must-have for any business dealing with online payments as it takes the whole payment ecosystem to fight it. By detecting and preventing fraud before it even happens, you can ensure your customers’ safety while avoiding any financial loss. 

1. Familiarize yourself with warning signs

The best step for protecting your business from fraud is to identify it before it can cause any damage. Keep an eye on the following red flags, and you will have a better chance of doing it: 

  • Low-value transactions that might indicate credit card testing
  • Customers using different cards for several purchases 
  • Several declined transactions
  • Higher order volumes
  • Billing and shipping address not matching
  • Unusual IP locations

While these potential red flags might just be a legitimate customer having a problem with their card or purchasing a present, it is always better to be safe than sorry when it comes to cybersecurity. 

2. Make sure you have clear and easy-to-understand policies on your website

While you might think that nobody reads your security policies, the truth is that fraudsters are very much interested in them. For example, a badly worded return policy can open the door to various fraudulent activities. Your policies need to clearly state how your business works and your terms and conditions without leaving any space for misunderstanding, especially regarding the refund policy and password policy.

3. Use fraud detection solutions.

Cybercrime is constantly evolving, and it is becoming harder and harder to stay ahead of cybercriminals. To keep up with them and fight back, you must also evolve to give yourself a fighting chance. Many businesses simply do not have time or resources to conduct their own cybersecurity procedures, such as manually checking every transaction, and luckily they don’t have to. Implementing efficient fraud detection solutions can detect, identify, and prevent fraud in real-time.

4. Limit your orders.

Determine your standard order quantity and amount of money spent on average transactions, and limit any order that goes over those numbers. You can either block them entirely from purchasing on your site or contact them with the request for additional verification

5. Request proof of delivery 

Request proof of delivery from your delivery partner for every product you sell to ensure your customers have actually received their items. This can significantly reduce the number of chargeback requests from customers claiming they never received a product.


Ecommerce fraud is here to stay, especially with the growth the eCommerce industry will continue to experience. Start taking steps in the right direction to protect yourself from fraudulent activities, especially new cybercrime trends. 

About the Author

Ana Galic is a freelance writer with interests in all things technology such as IoT, fintech trends, big data, machine learning, and cybersecurity. In her free time, Ana is an avid bookworm who enjoys traveling and exploring new places and activities while staying busy with her lifestyle and parenting blog.