The Reality of E-Commerce Fraud
Millions of people globally have discovered the world of online mobile shopping during the Covid-19 Pandemic. Due to lockdown, physical stores had to quickly focus on their online strategies to adapt to the changing retail landscape.
For many consumers it is now hard to believe there was a world without the presence of e-commerce behemoths such as Amazon.
While the volumes of e-commerce transactions is growing, so is the prevalence of fraud. It’s the cross-border angle though that is proving to be a problem area. Studies have shown that international online payment frauds occur more than 2 and half times than that of domestic channels.
And the same goes for mobile as well. Brazil, Nigeria, Indonesia, South Africa and Venezuela find themselves amongst the top-ranked countries for mobile fraud. Companies within those countries are increasingly turning to companies like ours to help protect their customers from fraud. So how do we do this?
What Are The Main Types of Ecommerce Fraud?
E-commerce fraud encompasses a wide range of deceptive activities aimed at defrauding online businesses and consumers alike. Below we have listed some of the most common types of fraud:
- Credit Card Fraud – this is one of the most common types of e-commerce fraud. It involves using stolen credit card information to make unauthorised purchases. Fraudsters may obtain credit card details through various means, such as phishing, card skimming devices, or data breaches.
- Identity Theft – this occurs when an individual steals personal information such as passports or driver’s licenses. These stolen identities can be used to open credit accounts, apply for loans, or make fraudulent transactions on e-commerce websites.
- Chargeback Fraud – also known as friendly fraud, occurs when a legitimate customer makes a purchase online and then disputes the charge with their credit card issuer, claiming that the product was not received or was different from what was described. This can result in chargebacks, where the retailer is forced to refund the customer and cover chargeback fees.
- Account Takeover – account takeover fraud occurs when a fraudster gains unauthorised access to a customer’s online account on an e-commerce platform. Once inside, they can make purchases, change shipping addresses, and steal personal information.
- Phishing Scams – these scams involve fraudulent emails, websites, or messages designed to trick recipients into revealing sensitive information, such as login credentials or credit card details. These scams often impersonate legitimate e-commerce sites or financial institutions, luring victims into providing their information unknowingly.
The Costs of E-Commerce Fraud
The costs associated with e-commerce fraud are not to be underestimated, affecting both retailers and consumers in profound ways.
Costs For Retailers – For e-commerce retailers, the financial repercussions of fraud can be staggering. Retailers are often the primary target of fraudulent activities, which can result in substantial monetary losses:
- Fraudulent orders can lead to retailers shipping products to non-existent addresses or to individuals who never intended to pay.
- Failure to comply with industry-specific regulations and standards, like the Payment Card Industry Data Security Standard (PCI DSS), can result in hefty fines and legal penalties.
Costs For Consumers – E-commerce fraud also exacts a toll on consumers. When fraudulent activities occur, it is often consumers who bear the immediate financial burden:
- Consumers may find unfamiliar charges on their credit card statements, forcing them to deal with the inconvenience of reporting and disputing these charges.
- As consumers experience fraud or hear about others falling victim to it, they may become more cautious and skeptical when making online purchases. This diminished trust can lead to a decrease in online shopping, affecting e-commerce businesses’ revenues.
Reputation Damage – another significant consequence of e-commerce fraud, affecting both retailers and the e-commerce industry as a whole. When consumers perceive an online retailer as being vulnerable to fraud or lacking security measures, trust erodes rapidly. This has a ripple effect on the entire e-commerce ecosystem:
- Consumers are less likely to return to an e-commerce site where they’ve experienced fraud or heard of others being defrauded, leading to a decline in customer retention.
- Unhappy customers are more likely to leave negative reviews and share their negative experiences on social media, further damaging the retailer’s reputation.
- E-commerce businesses that are known for their security measures and proactive fraud prevention are more likely to attract and retain customers.
Increase Protection From E-Commerce Fraud
The first step any e-commerce website needs to take is to ensure their customers are who they say they are. This is critical for every transaction and not just at the point a new client signs up or creates an account.
Using real time mobile network operator data, TMT Analysis works with leading E-commerce and Social Networks globally to help verify and authenticate user identity, whilst delivering a low friction and highly reliable customer onboarding process.
Our Verify Protect API alerts businesses when a Sim-Card Swap (or Sim-Swap attack), Call Divert or Port-Out is identified on a mobile device, raising awareness to possible fraudulent activity through mobile number validation. Our Verify On-boarding API can allow to you seamlessly validate important customer data such as name, address and mobile number during your on-boarding process.
Time is critical, and something customers around the world value, which is why everything we do is aimed at verifying a customer in the blink of an eye, well fractions of a second to be precise. All of this is aimed at helping our clients offer a seamless customer experience whilst also protecting them from fraud.
The key is not to block legitimate transactions. Nothing destroys the customer experience as much as mistakenly preventing buyers from purchasing goods and services they truly want.
Preventing Fraud With TMT Analysis
To combat e-commerce fraud effectively, businesses must prioritise security measures and stay vigilant. Implementing secure payment gateways, robust authentication methods, and proactive fraud detection systems are crucial steps in safeguarding against the main types of e-commerce fraud.
Additionally, educating customers about online security and the dangers of phishing scams can help create a safer online shopping environment for everyone.
Mobile devices can be a hotbed for fraud but it definitely does not need to be. Our data helps verify users, detect fraud, and improve the user experience worldwide. Ultimately, we reduce fake accounts and increase conversions.
Speak to us today about how TMT Analysis can help your business.