# eCommerce Fraud Prevention: Common Types + How to Prevent It

Published: March 1, 2023

## Table of contents

- [What is eCommerce Fraud](https://www.unit21.ai/blog/ecommerce-fraud-prevention#what-is-ecommerce-fraud)
- [Types of eCommerce Fraud](https://www.unit21.ai/blog/ecommerce-fraud-prevention#types-of-ecommerce-fraud)
- [eCommerce Fraud Prevention Best Practices for Online Marketplaces and Payment Processors](https://www.unit21.ai/blog/ecommerce-fraud-prevention#ecommerce-fraud-prevention-best-practices-for-online-marketplaces-and-payment-processors)

## **What is eCommerce Fraud**

eCommerce fraud is any form of fraud conducted on an eCommerce platform or online marketplace. Both customers and the merchant themselves can be victimized. Common examples of eCommerce fraud include identity theft, the use of stolen credit cards, [impersonation](https://www.unit21.ai/trust-safety-dictionary/impersonation), and affiliate fraud.

It is one of the most common types of fraud due to the number of online stores and virtual shopping experiences established in the past decade. Around [$41 billion was lost to eCommerce fraud](https://www.forbes.com/advisor/business/ecommerce-statistics/) just last year.

### **Why eCommerce Fraud is so Common (and on the Rise)**
- **Anonymity:** Fraudsters can obscure their identity and conduct crimes without being physically present.
- **Opportunity:** Easy access to tools and stolen credentials.
- **Evasion:** Lower risk of being caught due to online transactions.

## **Types of eCommerce Fraud**

### **Online Payment Fraud**

Online [payment fraud](https://www.unit21.ai/blog/payment-fraud) occurs when fraudsters access another person's payment information to make purchases. This form is malicious and targeted, defrauding both customers and merchants.

### **Card Testing Fraud**

Fraudsters test stolen credit card credentials with small transactions to verify limits. Detecting this fraud can reduce losses for organizations.

### **Triangulation Fraud**

In triangulation fraud, a fraudster sets up a fake online store, collects payment, and then uses a stolen credit card to purchase and ship the item to the victim. Organizations need to monitor user activity to combat this fraud.

### **Refund or Return Fraud**

Refund or return fraud exploits a retailer's return policy, often leading to losses for online merchants. Defined return policies can protect against this type of fraud.

### **Chargeback or Friendly Fraud**

In this type of fraud, a customer files a false chargeback claim after making a purchase. Clearly defined refund policies help prevent this.

### **Interception Fraud**

Fraudsters intercept items either by taking them at delivery locations or redirecting shipments. Employing delivery verification can mitigate losses.

### **Account Takeover Fraud**

Criminals gain access to a user's eCommerce account, making it difficult to detect fraud. Monitoring user activity can help identify this type of fraud.

### **Loyalty Member and Promotion Fraud**

Fraudsters exploit loyalty programs. Establishing clear guidelines is crucial to prevent fraud.

### **Affiliate Fraud**

In affiliate fraud, criminals benefit from affiliate programs without proper engagement. Clear tracking and policies are essential for prevention.

## **eCommerce Fraud Prevention Best Practices**

### **Use Robust Customer Onboarding Procedures**

Diligent customer onboarding solutions can prevent bad actors from accessing services.

### **Leverage User Authentication at the Point of Checkout**

Use multi-factor authentication, biometric identification, and facial recognition for transactions.

### **Ask for Card Verification Codes (CVV) at Checkout**

Ensure CVV codes are required for purchases to establish user verification.

### **Incorporate Address Verification Services (AVS) at Checkout**

Verify customer addresses to flag potential fraud cases without impacting user experience.

### **Leverage Transaction and Activity Monitoring**

Utilize data monitoring tools to analyze user transactions and activity for fraud prevention.

### **PCI Compliance**

Adhere to Payment Card Industry Data Security Standards to protect cardholder data and avoid penalties.

### **Set Payment Limits and Restrictions**

Limit transaction amounts to deter potential fraudsters by reducing their potential gains.