Online shopping is becoming more popular every year. Revenue from retail e-commerce in the United States was estimated at roughly 768 billion U.S. dollars in 2021. The Statista Digital Market Outlook forecasts that by 2025, online shopping revenue in the U.S. will exceed 1.3 trillion dollars.
But this rise in popularity has also been accompanied by a rise in online fraud and criminality. Online retailers experienced an average of 824 attempted fraud attempts each month in 2021, more than double the number in 2020, according to a survey of e-commerce merchants. And the bigger the business, the faster that figure rises.
No matter how many clients you have, con artists will eventually target your website. You are in charge of protecting not only the safety of your company as the store owner but also that of your clients from fraud. If not, you run the danger of losing customers, money, and reputation.
Any dishonest behavior that occurs during a transaction on an e-commerce platform is referred to as eCommerce fraud, also known as payment fraud. E-commerce fraud can range from identity theft to the theft of credit card data. Although there are many different kinds of e-commerce fraud, they all try to make money off the seller.
Anyone may now open an online store more easily than ever thanks to the growth of eCommerce. Unfortunately, it has also made things much simpler for scammers, who may now conduct transactions without actually having a physical payment card in their possession.
Nowadays, buying stolen credit cards through shady web marketplaces is rather simple. Scammers have also discovered weaknesses in a variety of systems, including the procedures credit card companies use to process refunds and the flimsy passwords that users use to log into their accounts. Fraudsters can run these scams successfully for years without being discovered.
The worst part about this is that, in the end, eCommerce fraud hurts online businesses the most. Customers can ask their credit card company for a refund if they feel they have been defrauded. This implies that the company loses its merchandise without receiving a refund.
As if that weren’t awful enough, frauds that are successful destroy customer and store trust. You are considerably less likely to return to a website after falling for a scam there, let alone make a purchase from it. Why would you believe a website that offered you the chance to be duped?
Next, let’s examine some of the most prevalent strategies utilized by con artists nowadays so that we can better comprehend what eCommerce fraud actually looks like.
Types of Ecommerce Fraud
Ecommerce fraud takes many different forms, and new tactics and iterations are constantly devised to take advantage of eCommerce companies and their users while evading security precautions.
However, some time-tested, tried-and-true techniques are still effective today. Here are a few of the most common types of e-commerce fraud so you can learn how to recognize them.
Account Takeover Fraud
In an account takeover assault, a fraudster accesses your online account and makes unlawful transactions using stored payment information. This is a type of identity theft and a popular tactic used by online con artists.
Scammers can gain access to your online account in a number of methods, but their most common strategy is to con customers into giving over their login information voluntarily. Phishing is a prevalent technique where a hacker poses as a trustworthy business or person to fool a target into giving them confidential information.
Phishing attacks are typically sent via text message or email. A hacker may use these communications to assume the identity of a customer service agent and request login credentials or credit card information. Alternatively, they can send links to bogus login pages by email to clients, asking them to enter their usernames and password. Even worse, they can send a link to a malicious website.
What happens if an online order is incomplete or arrives damaged? A customer can request a refund for their purchase in certain circumstances by filing a chargeback with the credit card company. If the chargeback is accepted, the customer’s purchase will be refunded by the merchant.
When fraudsters use this method, chargeback fraud happens. In this kind of fraud, the perpetrator makes a purchase and then submits a chargeback, falsely alleging that the order was not delivered, was defective in some way, or was made without authorization. Alternatively, they can cancel their order as soon as it ships and submit a chargeback when it shows up. The scammer then receives both their product and the refund.
The issue with chargebacks is that retailers lose money from both types of chargebacks since it can be challenging for credit card issuers to discern between chargebacks from honest customers and chargeback fraud done by con artists.
Scammers utilize a multi-step procedure called triangulation to get client purchase information.
A con artist starts by setting up a phony internet storefront and pricing things higher than they would be in real stores. After that, a consumer “buys” something from this fictitious storefront, but in reality, they’re just handing the con artist their credit card details. The con artist will then buy the same item from a legitimate retailer for less money, ship it to the consumer, and pocket the difference using the payment information that was obtained.
The fact that triangulation techniques are difficult for customers to spot is their main advantage (for the con artist, that is). As far as the consumer is concerned, they made an online purchase and received the item as anticipated, unaware that they had overpaid. Even worse, the stolen client data may be used to make more fraudulent purchases.
Through affiliate marketing, businesses can reward people or organizations for referring customers to their products. The owner of each special affiliate link that results in a purchase earns a commission from the sale.
A great technique for retailers to sell their goods through affiliates is through affiliate programmes. Sadly, affiliate schemes are another entry point for fraudsters. In affiliate fraud, a con artist will assume the identity of an actual affiliate and then send fake visitors to their affiliate links to earn money. Scammers might also use stolen credit cards to pretend to make affiliate programme purchases.
Impersonating someone you are not is another name for identity theft. Your client’s personal information will be stolen by hackers, who will then exploit it to assume their identities. As a result, you are in the dark when the hacker placing orders through your WooCommerce store poses as one of your customers. The true consumer requests a refund for their order as soon as they learn the truth.
The mechanics of merchant fraud are rather straightforward. A dishonest businessman will sell goods to fictitious customers. In other words, the buyer buys for a thing that doesn’t exist and will probably end up complaining on the eCommerce site. In this kind of fraud, the eCommerce website is required to cover the cost of the customer’s return while the dishonest vendor gets away with it.
Card testing fraud
Card testing fraud occurs when criminals use fictitious credit card numbers to make purchases from your online store. This fraudulent credit card information can belong to someone else who ultimately files a lawsuit against the purchase order. After selling goods, you are once more left without any cash.
A widespread form of fraud that occurs online is phishing. It occurs when a person is tricked into clicking on a bogus SMS or email and divulging all of their personal information. This is one of the most efficient ways for hackers to obtain personal login information from unaware users, including tech-savvy individuals.
For online shops that accept payments by cash on delivery, fake orders are rather typical. Your internet store is attacked by hackers who place an expensive order and pay with cash on delivery. The parcel is taken from the delivery person before he gets to the billing address. As a result, the eCommerce company is responsible for the losses.
Using a more approachable method is another ingenious technique fraudsters use to place orders from your WooCommerce site without paying. Customers use your online store to place regular orders before requesting a chargeback and claiming that their credit card was stolen and used without their knowledge. This kind of fraud may also include loyal customers.
Credit card fraud
Credit card fraud is the most prevalent scam that WooCommerce stores experience. A customer’s credit card information is obtained by hackers by stealing it or buying it via the dark web. They then make purchases from your WooCommerce store using the credit card data that was stolen. It is the duty of the online store owner to guarantee secure card payments. As a result, the online retailer is now liable for reimbursing or making up for the money the fraudster stole.
Since the majority of online retailers have a return policy, hackers and scammers take advantage of it to make money or obtain free goods. The returned goods are frequently stolen or destroyed, leaving business owners to cover their losses.
It’s crucial to be aware of all the many frauds that take place in online retailers in order to protect yourself from them. By doing this, you may reduce costs, provide a more secure shopping environment, and increase brand loyalty among customers.
How to prevent WooCommerce fraud
Now that you are aware of the typical types of WooCommerce fraud, let’s explore how you can stop them from happening on your WooCommerce website.
WooCommerce fraud protection plugins
The best way to prevent Woocomerce Fraud is through AuthSafe Plugin
AuthSafe is an identity protection platform that provides information about fraudulent login details in your applications. An easy-to-install, fully automated solution that helps to identify the potentially compromised accounts by predictive fraud research, cognitive engine modeling, and using suspicious account activity.
AuthSafe works with financial services, SaaS products, and online digital goods organizations to detect and prevent account takeovers without compromising customer experience. It helps track the location, time, accessed data, and IP address details of the user. To get started, you need to integrate AuthSafe with your web application.
How AuthSafe Works
AuthSafe collects data regarding user activities, devices, browsers, and many more. These data and events are evaluated, and signals are generated against it which helps AuthSafe in calculating the risk score for that device. There are various types of signals like Brute Force, Credential Stuffing, Robotic Activity, too many devices, etc.
You can stop hackers from placing orders on your WooCommerce store in this manner. As a result, it might lower eCommerce scams and shield your company from any losses.
To avoid overspending and compensating for fraud on your eCommerce site, it’s critical to secure your WooCommerce store against hackers and dishonest people. Knowing the most typical forms of fraud that happen on eCommerce sites will help you spot them more easily and guard against scams from hackers.