DIU Blog

Common Patterns of E-commerce Fraud and the Simple Prevention Mechanism

Online buying has opened new doors of opportunity in this era of modern technology, and E-
commerce has become the new normal for many individuals. Many can stay safe at home thanks to e-commerce, but criminals are taking advantage of the situation, and people are becoming victims of cybercrime. Criminals are continually developing more complex methods of committing online fraud, so it’s critical for all e-commerce customers to understand the many types of online fraud and what they can do to avoid financial loss. Online fraud, unlike fraud in a physical location, can be carried out with personal and credit card information, and the card does not need to be present during the transaction. Hackers steal personal and financial information and sell it on the black market in some situations. Although one sort of criminal fraud is more serious, there are other types of customer fraud, such as friendly fraud, in which a client makes a chargeback to receive free goods and avoid payment. Ecommerce fraud is complicated and evolving, with fraudsters utilizing more advanced techniques every year. You must always be correct, whereas bad actors just need to be correct once. Before we look at ways to combat online retail fraud, let’s have a look at the most common types.

Credit Card Fraud: When a person receives one or more stolen credit card numbers, either through theft or the purchase of card data on the dark web, card testing fraud happens. Even if they have the credit card numbers, they have no idea whether or not they will be able to use them to complete a transaction or what the credit card limit is. Fraudsters visit an e-commerce website and make minor test purchases, frequently with the use of scripts or bots, in order to swiftly test several credit card numbers. These initial purchases are quite tiny because the goal is to see if the credit card can be used to complete transactions. They’ll start making considerably more expensive purchases once they’ve figured out how to use a credit card number.

User Account Hacking: When someone acquires access to a user’s account on an e- commerce store or website, this is known as account takeover fraud. This can be accomplished in a number of ways, including buying stolen passwords, security codes, or personal information on the dark web, or effectively executing a phishing scam against a specific consumer. Once they obtain access to a user’s account, they can engage in fraudulent actions. They can, for example, edit a user’s account information, make e- commerce transactions, withdraw funds, and even gain access to this person’s other accounts.

Triangulation Fraud: In triangulation fraud, three types of actors are required: the offender, the shopper, and the online store. The con artist sets up a shop (on Amazon, Shopify, or another platform) to sell high-demand items for a low price. This shop’s opening attracts a huge number of genuine customers in search of a good price. After these customers place orders on the fraudster’s website, the fraudster uses stolen credit card numbers to purchase legitimate goods from your e-commerce website and ships them to their customers.

A fraud detection system is beneficial to e-commerce businesses of all sizes and is one of the most effective forms of fraud prevention available. It is, however, particularly useful for smaller businesses that lack the time, finances, or talent to deploy their own fraud solutions. While you should conduct due diligence to choose the best vendor, a fraud detection solution can be an effective strategy to combat fraud. The Payment Card Industry Data Security Standard (PCI DDS) is a widely-accepted set of rules that ensures businesses that store and process credit card and cardholder data, such as e-commerce businesses, keep their data safe. PCI compliance necessitates the implementation of fundamental security measures, such as the installation of a firewall between your internet connection and any system that stores credit card information. Ecommerce fraud is a complicated world. Fraudsters are resourceful and can think outside the box to achieve their objectives. We need to be aware while purchasing or doing business online and lastly, In case of any fraudulent act we need to take the necessary legal steps against the perpetrators.

Writer: Arif Mahmud is a law academic and socio-legal researcher. He likes to work in the field of comparative law and his key research activities are in the field of artificial intelligence regulation, environmental justice and sustainable development, data privacy law, cyber security regulation, and comparative criminal justice.