As e-commerce revenues increase, the number of fraud cases and the proportion of e-commerce transaction fraud are also rapidly increasing. But what are the types of fraud? More importantly, how to prevent fraud?
Nielsen (Global Market Research) interviewed 274 entrepreneurs from different industries in six countries and summarized the following major types of fraud.
The most common types of fraud in e-commerce are identity theft (71%), "phishing" (66%), and account theft (63%). Credit cards are the main target of theft because it is very convenient for a scammer to conduct a card-free transaction.
In the traditional case of identity theft, the goal of the scammer is to trade with another identity. It’s easier and faster to create a new identity by yourself and directly misappropriate the identity of others.
A scammer steals the identity of others by obtaining a name, address and email address, and credit card account information. Using someone else's name and credit card account to place an order online. "Phishing" is the use of fraudulent websites, emails or text messages to swindle personal information. Another method of fraud is URL grafting, when a consumer clicks on a website, it is directly imported into another fraudulent website. Typically, this stolen identity information is used for fraudulent transactions - in most cases, the payment information in the account has been stolen.
This type of fraud is not as friendly as it sounds. Consumers order products or services online, paying by credit or debit card. Then claim that the credit card account information was stolen and requested a refund. They received a refund but also retained the goods or services. This type of theft is mostly in the service industry, such as gambling. Moderate fraud is often linked to reshipment. The scammer pays with the stolen payment information but does not want the goods to be sent directly to his home address. Instead, they place orders by stealing information and then return them to the scammer by the middleman (information stolen).
Affiliate Program is a popular Internet marketing model abroad. Affiliate fraud has two manifestations, all for the same goal: affiliate program members defraud illegal commissions by creating false visitors and registration data.
Trilateral fraud is implemented through three points. First, register a fake online store, offer high-demand goods at low prices, and other attractive conditions, such as shipping immediately after placing an order. This store is used to collect consumer addresses and credit card data - this is its sole purpose. The second point is to use the credit card data and customer name stolen from elsewhere to go to the real online store to place an order, and then fill in the customer's address at the fake online shop. Third, use the credit card account stolen by the fake online store to purchase other products. In this way, it is difficult to trace the connection between the order information and the credit card account, which makes the fraud difficult to find and easily causes a large loss to the seller.
Merchant fraud is simple: the product price is very low, but it will not be shipped after the payment is received. This type of fraud also exists in wholesalers. There is no specific payment method, but it is definitely the type that the buyer cannot apply for an automatic refund.
The biggest challenge in cross-border transaction fraud prevention is the lack of a unified market trading normative mechanism. The increasing cross-border transaction volume has also brought great difficulties to fraud prevention. There are also significant differences in fraud prevention tools across countries. Language barriers, as well as the complex process of delivering goods across borders to a single guest, make cross-border transaction fraud more difficult to guard against.
Fraud methods vary according to sales channels, and many companies are struggling to achieve multi-channel sales to make fraud prevention more difficult. Fraudulent transactions through third-party platforms are more likely to succeed because people's precautions are light; followed by mobile transactions and autonomous station transactions.