Types of E-Commerce Frauds That You Need to Avoid

E-commerce businesses lost a total of $3.5 billion in 2012 due to online scams. Fraudulent online transactions dropped in an average of 0.8 percent, whereas revenue loss in mobile commerce due to fraudulent transactions declined below 1.4 percent.

If you come to think of it, these numbers are relatively small, but no amount is too small to jolt a business.

You need to take precautions when dealing online, and that includes knowing what kinds of e-commerce frauds you need to avoid.

Here are some of the most common online scams that reside in the e-commerce world:

1. Identity Theft

You may not be affected with this directly. However, the last thing you want is for your customers to stop trusting you. Identity theft can happen to anyone at any time.

There were 17.6 million American victims of identity theft back in 2014. However, people seemed to not care about the increasing risk of scams since the internet started to consume their lives even more. More people are becoming susceptible to identity theft every day.

Unfortunately, there is nothing much you can do for your customers than to maintain and achieve PCI compliance.

The PCI refers to Payment Card Industry Data Security Standard. The company works to ensure that any merchant that, store, process, or transmit credit card information maintain a safe environment for their customers. This action helps protect every online buyer.

The PCI requirements are there to ensure that customers' personal information is secured and safe from frauds. You may be protecting your customers at this point. However, you’re also protecting your business indirectly.

If many people are experiencing identity theft involving your business, then you’re going to lose customers, or worse you might even have to close down.

2. Clean Scams

Most of the time, people are being robbed out of their money without even knowing. They’ll only find out once they check their bank balance or if their credit card bill shows up on their front porch.

So, why is it called a clean scam or clean fraud?

Some fraudsters know how to go around your security system. They get a hold of your customer’s banking or credit card details. From there, they can start stealing money from your clients. 

The only way you can protect your customers from this type of fraudulence is by checking your site security regularly.

After you’ve started complying with the PCI standards, there is still another set of safety measures that you need to do. These include:

• Make sure that all your checkout pages stay under the “https” mode
• Leave your checkout page, check back again a little later, and then check to see if your checkout page remains under the “https” status
• Make it a habit to change your security passwords in your web server control panel and databases
• Invest in a security auditor to regularly check for weaknesses in your site

You might also want to consider installing these programs on your website. These tools will provide your site and customers extra protection against fraudsters and hackers.

These are:

• McAfee Secure
• Verified by Visa
• MasterCard Merchant Fraud Protection
• VeriSign

3. Merchant Fraud

There are two types of merchant fraud. The first one is referred to as the Classic Fraud. The classic fraud can take on various forms. However, the purpose is always the same: to deceive the seller.

Imagine receiving an order from a bogus buyer who purchases an item online using a fake or stolen credit card. In this scenario, you have zero chance of getting back the lost money, most especially if the payment was made through a stolen credit card.

The second type of merchant fraud is Friendly Fraud wherein a buyer asks for a chargeback. This kind of fraud can either be intentional or unintentional and is often called “buyer’s remorse.” Intentional fraud can only occur if the purchaser felt that he didn’t receive what was promised to him.

The credit card company of the buyer investigates the transaction and will, later on, decide whether or not to remove the charge or just let it be. The merchant usually loses around $0-$100, just to dispute a buyer chargeback. The worst part is traders often lose the dispute.

The only solution to this problem is through prevention. Before you begin your online business, you should already install an order tracker for your business. This way, you’ll be protected from civil fraud.

In a friendly fraud, a buyer would claim that he has not received the product. You'd have no way of proving that even if the customer is lying. No buyer can insist on not receiving the item when you use tracking numbers.

More Fraudulence and Scams

Scams and fraudulence can exist in many forms, and the types of frauds are endless. However, the kind of fraud that you should be worried about is the one that uses a fake credit card to purchase items from you. You shouldn’t wait to realize that there was no such credit card.

The best way to prevent scammers from making a fraudulent transaction is by asking for credit card security codes. Not only will you be protecting your customer’s information but you will also be protecting your business in the process.

As soon as the transaction is processed, the credit card company responds detailing whether the transaction is approved or declined due to the security code’s validity.

Different names are referring to various types of credit cards, and they are as follows:

• Visa – CVV2
• American Express –CID
• MasterCard – CVC 2
• Discover – CID

The first step to ensuring that your online business is free from fraudulence is by getting familiar with the most common types of online e-commerce scams as listed above. Prevention might be a long process.

However, it’s much better to put up with the process rather than to suffer the consequences later on.

It’s much easier to put up with the hard and long process of keeping your site secure from hackers rather than to recover from the loss later on.