Defend your business against 3 types of online shopping fraud

Fraud costs U.S. merchants an estimated 3.85 times the lost transaction value. Eliminating fraud completely is not likely, but merchants can take steps to help control their costs.

Ron Romanik

As an e-commerce retailer, you walk a continual tightrope between providing great customer experience and guarding against fraud. And you’re right to worry. Fraud costs for U.S. e-commerce merchants are estimated at 3.85 times the lost transaction value.

No online business can eliminate fraud, but merchants can take steps to help control their costs. In this blog, we look at three common types of e-commerce fraud—and ways to protect your business.

Fraud Type #1: Card-not-present fraud

A scourge for online retailers, card-not-present, or CNP, fraud is projected to account for up to 74% of payment card fraud losses by 2024. That’s a big jump from just 57% in 2019, but not unexpected. Fraudsters are focusing more efforts online with the surge in online commerce and EMV chip technology making point-of-sale fraud much more difficult.

Here are a few ways to tackle CNP fraud:

Fraud Type #2: Chargeback fraud

About 252 million chargebacks were expected in 2022. With a single chargeback costing merchants an estimated $190 on average this year (based on a $90 average transaction value), chargebacks are an expensive problem.

Chargebacks occur when customers dispute charges on their payment card, and the issuing bank files a chargeback with the merchant. Sometimes this occurs for legitimate reasons. Card information was stolen, so the customer didn’t authorize the charge, or a merchant failed to deliver the goods or services as promised.

In addition to third-party fraud or true merchant errors, chargebacks increasingly fall into two other categories:

How can you counter these chargebacks? You won’t be able to eliminate them, but these measures can help, especially with customer confusion.

Fraud Type #3: Affiliate fraud

This type of fraud uses your affiliate marketing programs to generate false referrals for real-life rewards. Fraudsters use automated website crawlers and other fake activities to increase the amount of traffic and commissions on your site.

Fraudulent affiliates can use bots to complete registration forms, deliver bad customer data, or give you opt-out lists instead of opt-ins. By the time you’ve detected this kind of fraud, bots have scattered your analytics, wasted marketing spend, and made your marketing campaign KPIs almost impossible to measure.

To combat affiliate fraud:

Partner with an expert

Fraud prevention is a multipronged, evolving strategy, but you can take action to protect your business and your customers.

If you’re outsourcing parts of your e-commerce business, make sure your partner is as dedicated to fraud prevention as you are—and experienced enough to help shield you from shifting fraud tactics.

At Ubiquity, we’ve helped identify and shut down suspicious transactions. To learn more about how we combat fraud, please reach out to us.

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