Inevitably with the growing popularity of online shopping, particularly since the pandemic, there has also been a rise in e-commerce fraud. Many of these methods of fraud are not new or unique to e-commerce, but instead have been given a modern makeover. For example, refund fraud has long been an issue for retailers. It has been a while since I worked on the shop floor, but I will never forget some of the customers who looked me in the eye and swore an item of clothing - with the tags still on - had not been worn, despite it smelling like a brewery, and looking like it had been worn whilst the person in question had been dragged through a bush backwards. However, in the digital world, arguably this type of fraud can be undertaken more easily or, at least, without the shame of having to dissemble directly to someone's face. 

What are the different types of frauds?

It is worth noting that there is overlap between some of the types of fraudulent activities cited in the infographic, but broadly speaking here are some of the lesser understood types: 

Friendly fraud (also called chargeback fraud). This is when a cardholder identifies a purchase on their account statement as fraudulent (either inadvertently where someone else in their household made the purchase or deliberately).  

Triangulation fraud. One definition is where a customer makes a genuine purchase on a third-party marketplace but the seller fraudulently (using stolen cardholder information) purchases the item from a genuine merchant. Once the owner of the card notices the odd charges, it challenges them, and the merchant has to refund the amount.

Affiliate fraud. This may include false activity undertaken to generate commission from an affiliate marketing programme via the use of bots or creating a fake promotion to drive traffic to a site. 

What can be done about these types of fraud?   

Unfortunately, there is no one neat solution to tackle all of these forms of fraud. However, the starting point for retailers and other online businesses is knowledge. What are the common types of fraud experienced by your business? It is likely finance and customer service teams will be the most familiar with these issues, alongside the legal team. 

Here are a few steps that can be undertaken: 

  • ensure your IT support team has robust security measures in place and explores the technical solutions on offer (e.g. 3D security authentication or email verification) 
  • investigate whether there are any forms of insurance that you can take out to protect against such frauds, although note that cyber liability insurance can often be more limited than businesses expect 
  • review your online terms of sale, affiliate programme terms and price promotions terms to ensure you prohibit certain behaviours (and see whether there are practical measures you can take to reinforce this e.g. if a voucher code is only intended to be used once, issue unique codes that can be tracked) 

As we have continued to see since more and more people have embraced online shopping, new challenges have emerged for online businesses and it is important for those businesses now more than ever to continue to innovate in tackling those challenges.