Understanding E-commerce Fraud Prevention

Understanding E-commerce Fraud Prevention

Far from the brick-and-mortar days of old, e-commerce has become an increasingly popular option for consumers both globally and right in your own backyard. The convenience of shopping from anywhere keeps consumers glued to online shopping carts, but are they doing so safely? As the demand for online shopping rises, so does the risk of online fraud. This specific type of fraud impacts both consumers and retailers but verified data can help to safeguard both buyers and sellers.

The Basics of E-Commerce Fraud

E-commerce fraud refers to any online fraud within an online retail platform, for both services or products. The most common types of e-commerce fraud involve using stolen credit card information or stolen identities to acquire free products, cash returns or kickbacks from affiliate companies. This particular brand of fraud impacts financial stability and credit standings for consumers, while impacting the revenue and reputation of the platforms.

The best tool that any business has against fraud, is information and the knowledge of how to put it to use. This involves identifying the most common types of e-commerce fraud and how to best combat them:

Card Testing Fraud: the process of gaining access to credit card information through theft or by purchasing it illegally from a third-party seller. Even with the numbers in hand, criminals do not know the specifics of the account, such as limits. This means testing the card with multiple small purchases to ensure that the card is usable.

Chargeback Fraud: occurs when users make a purchase online and then contact credit card companies to report the transaction as fraudulent. The cost of the item is then removed from the credit card bill, but often not until the item has already shipped. By claiming an item never arrived, the fraudster has both the item and the refund, leaving the shipping party to cover the cost.

Affiliate Fraud: Unlike other types of identity fraud, this particular brand works against consumers through fraudulent affiliate relationships. It is not uncommon for businesses to connect with other industry professionals, usually offering commissions on sales or referrals. Fake activity or increased transactions can earn a kick-back on invalid transactions.

Phishing Attacks: Many online stores offer client logins for customers to record purchasing and store payment information for future use. Phishing schemes work to gather login and username information to break into these accounts and gain personal information that can be used for the purpose of identity theft.

Triangulation Fraud: This is one of the most sophisticated brands of online fraud. Triangulation fraud involves setting up a fake online storefront, often using popular brands and low prices to attract the attention of potential customers. Once a purchase has been made, the fake retailer visits a reputable site to purchase the advertised item, sending it to the purchaser, providing peace of mind. Now, the fraudster is able to continue using the credit card information without suspicion.

How Can Data Verification Protect Against E-Commerce Fraud

There is no question that online fraudsters are creative but data doesn’t lie. With every purchase made, there is an element of data that is left behind. Everything from address verification to purchase history can play a role in consumer identity verification. By comparing data source history and understanding basic fraud practices, data verification can detect fraud and verify the identity of consumers.

  • Inconsistent Order History: When processing a fraudulent order, there are inconsistencies to watch out for. For example, should the zip code and city entered not match, that is a sure sign that there is an issue. The same premise goes for occasions where IP addresses and email addresses do not match.
  • Larger Than Normal Orders: Unless in a resale scenario, it is important to keep an eye out for larger than normal orders. If there are multiple items with the same SKU, it warrants further investigation.
  • Inconsistent Locations: If customer purchases are most often shipped to a standard location in North America but a new order is being shipped to Malaysia, for example, this may be a red flag for fraud.
  • Irregular Buying Frequency: Back-to-back purchases in a tight time frame may be indicators of fraudulent purchases.

Every e-commerce transaction involves data in one way or another. By accessing verified and up-to-date data, it is possible to identify the key components of fraud in a real time setting.

Data Verification Services

Transaction inconsistencies can be identified during routine credit reporting but this does not help to prevent it from happening again. Proper data analysis can help with a wide range of issues, from improving customer experiences to identifying friendly fraud and performing consumer ID verification to protect businesses; knowledge is key.

Identity verification services work to protect companies from unnecessary loss while addressing potential risk. From invalid payments, fraud attacks and phishing schemes, there is nothing that proper data can’t address.

Working alongside data experts means taking a deeper look at your internal data and utilizing outside sources when internal data is insufficient. From basic collection of personal information, such as phone numbers and addresses, to more complex databases, such as those with e-mails that can be used to cross reference IP addresses for orders, there are distinct advantages to up-to-date information.

For more information on e-commerce fraud prevention, visit https://www.pacificeast.com/ecommerce/ or give us a call at 800-665-8400.