In the dynamic realm of eCommerce, fraud continues to evolve, presenting a significant threat to online merchants. As digital transactions increase, so do the tactics employed by fraudsters to exploit weaknesses in payment systems. For eCommerce merchants, understanding the various types of fraud and implementing robust countermeasures is crucial to protecting your business and maintaining customer trust.

At Axcess Merchant Services, we recognise the ever-changing landscape of eCommerce fraud and its effects on online retailers. This blog highlights the most common types of fraud in the industry and shows how partnering with Axcess Merchant Services can strengthen your fraud prevention strategies, safeguard your business, and support your growth in a rapidly evolving market.

Common Types of eCommerce Fraud

1. Card-Not-Present (CNP) Fraud Card-Not-Present fraud involves the use of stolen credit card details for online purchases, where the physical card is not required. This type of fraud is prevalent in eCommerce, as the merchant cannot verify the cardholder’s identity beyond the transaction details.
2. Account Takeover Fraud Account takeover fraud occurs when cybercriminals gain access to a customer’s account through methods such as phishing or credential stuffing. Once in control, fraudsters can make unauthorised purchases or exploit stored information, leading to significant damage to both the customer and merchant’s reputation.
3. Chargeback Fraud (Friendly Fraud) Chargeback fraud, or friendly fraud, happens when a customer disputes a legitimate transaction with their bank, claiming it was unauthorised or that the product was not received. This results in a chargeback, where the funds are reversed, often leaving the merchant to absorb the loss.
4. Refund Fraud Refund fraud involves fraudsters exploiting the refund process by purchasing items with stolen credit cards and then requesting a refund to a different account or card. This type of fraud can be challenging to detect and prevent.
5. Triangulation Fraud In triangulation fraud, fraudsters set up fake online stores to sell popular products at low prices. They use stolen credit card details to buy these items from legitimate merchants and have them shipped directly to the customer. The fraudster then pockets the payment from the unsuspecting customer, leaving the legitimate merchant to deal with the fraudulent transaction.

Emerging Fraud Trends in eCommerce

1. Return Fraud Return fraud is a growing concern where fraudsters abuse return policies to their advantage. Common tactics include:
   
   • Receipt Fraud: Using stolen or falsified receipts to return merchandise for profit, or returning goods purchased at a discount to claim a higher refund.
   • Switch Fraud: Returning a damaged or defective item in place of a purchased working item.
   • Bricking: Deliberately damaging an electronic item before returning it to claim a refund.
   • Open-Box Fraud: Purchasing an item and returning it opened, exploiting store policies to re-purchase it at a reduced price.
   • Inventory Depletion: Buying up a store’s inventory to force consumers to purchase from the fraudster’s own store, then returning the items for a refund.

2. Wardrobing, a form of both return and friendly fraud, involves purchasing clothing with the intent to wear it briefly and then return it. This practice, which costs retailers billions annually, is increasingly common with online purchases where no direct interaction with store staff occurs.
3. Account Takeover Fraud When online stores offer store credit, they effectively become e-wallets, making them attractive targets for criminals. Account takeover fraud allows fraudsters to exploit customer accounts for further crimes and damages the merchant’s reputation as customers complain about compromised security.
4. Bonus Abuse Fraud Fraudsters exploit promotional offers and bonus programmes by creating multiple accounts and referring themselves to claim rewards or discounts illegitimately. This undermines marketing efforts and impacts profitability by diverting potential revenue from legitimate customers.

How to Combat eCommerce Fraud
Addressing these fraud types requires a comprehensive approach, leveraging technology, expertise, and robust processes. Here’s how partnering with an ISO and PSP like Axcess Merchant Services can enhance your fraud prevention strategy:

1. Advanced Fraud Detection Tools

Axcess Merchant Services offers sophisticated fraud detection solutions that use machine learning and behavioural analytics to identify and mitigate fraudulent transactions in real-time. These tools help reduce the risk of Card-Not-Present fraud and other types of online scams.

2. Strong Customer Authentication (SCA)

Implementing Strong Customer Authentication (SCA) can significantly enhance transaction security. SCA requires customers to provide multiple verification factors, such as passwords, biometrics, or one-time codes, reducing the likelihood of fraud. Axcess Merchant Services can assist with integrating SCA into your payment processes.

3. Chargeback and Refund Management

Effective chargeback and refund management systems are crucial for mitigating the impact of friendly fraud and refund fraud. Axcess Merchant Services provides support for monitoring, disputing, and managing chargebacks, helping protect your revenue.

4. Tokenisation and Encryption

Protect sensitive payment data with tokenisation and encryption. Tokenisation replaces card details with a unique identifier, while encryption secures data during transmission, safeguarding against breaches. Axcess Merchant Services employs these technologies to enhance data security.

5. Ongoing Education and Support

Staying informed about emerging fraud trends is essential. Axcess Merchant Services offers continuous education and expert guidance to help you adapt to new threats and refine your fraud prevention strategies. Our team is dedicated to keeping your business secure and compliant.

The Axcess Advantage
At Axcess Merchant Services, we understand the complexities of eCommerce fraud and are committed to providing tailored solutions that protect your business. Our expertise and advanced fraud prevention tools are designed to safeguard your operations and ensure a seamless customer experience.
Don’t let fraud undermine your eCommerce success. Contact Axcess Merchant Services today to learn how we can help you strengthen your fraud prevention measures and enhance your payment security.

In conclusion, recognising and addressing the various types of eCommerce fraud is essential for safeguarding your business. By partnering with Axcess Merchant Services, you can leverage advanced tools and expert support to combat fraud effectively and maintain the integrity of your online operations.
Ready to bolster your fraud prevention strategy?