E-commerce Payment Fraud
E-commerce was introduced as a way to enhance online sales transactions between online-based businesses and customers. Unfortunately, e-commerce has not been without its issues. The platform has experienced fraudulent activities from hackers and identity thieves.
What is Payment Fraud?
One of the most common fraudulent activities is e-commerce payment fraud, which is basically any kind of illegal online transaction that is being performed by a cybercriminal. The victim is usually an online user that gets deprived of their money, interest, sensitive info or personal property over the internet.
E-commerce payment fraud is something that has been prevalent ever since the launch of e-commerce platforms. Ever since businesses discovered a way that customers could use to safely buy products from them without necessarily going to the firm’s physical premises, hackers have tried their best to steal that information and benefit from it.
How Payment Fraud Happens
Payment fraud can happen in the following three ways:
- Losing or being robbed of merchandise that you expected would be delivered at your place after buying it
- Unauthorized online payment transactions
- False demand for refund or bounced checks
Types of Payment Fraud
- Identity Theft: It’s not a new thing to hear about identity theft since it also occurs outside the digital world. This type of fraud typically involves a cybercriminal stealing the personal information of an internet user by hacking their system. The hacker then uses such information to carry out illegal online payment transactions. Since the cybercriminal has all of the user’s important details, they can bypass fraud detection firewalls and restrictions. To the e-commerce site, it looks as if the original owner of the credit card is making the purchase. However, in the real sense, it’s the hacker that does most of the buying.
- Phishing: You’re likely to come across various websites and email subscriptions that prompt you to opt-in for newsletters and alerts. More often than not, these sources will require you to provide some personal data, which can include your credit card information. If the email is not from a credible source, your data will be stolen and used to carry out fraudulent e-commerce transactions.
- Luckily, search engines and web tools have now made it possible to identify trusted sources such as a bank or registered business website. That way, you can be guaranteed that your data will be safe.
- Advanced Wire and Fee Transfer Scams: The internet is broad, and you’re likely to come across fake sites that will ask you for a ‘tiny’ down payment and promise to give you more money later after the initial payment has been invested. The scammers will trick you into giving out your credit card information and completing the payment of a false service or product via advanced money wire transfer.
- Merchant Identity Fraud: This type of fraud involves a cybercriminal that comes up with a similar merchant account to that of a legitimate business. The culprit then goes ahead and places false charges on stolen credit cards. This activity is done as fast as possible and before the cardholders come to a realization of what is happening.
- Pagejacking: E-commerce business sites are sometimes attacked by cyber criminals who attempt to hijack it by directing customers to an untrusted website source. This unwanted site may contain malicious programs that can breach website security systems and acquire the customer’s funds.
The Prevalence of Payment Fraud
E-commerce platforms depend on online payment systems in order to bill clients and complete payment for products and services. Furthermore, most businesses have taken it upon themselves to facilitate online transactions through their websites as a way to increase their revenues.
This means that billions of dollars are electronically transferred in between accounts using the online payment system. As a result, more and more criminals are trying to steal some of this cash away through fraudulent payment schemes.
In 2016, online merchants lost a total of $6.7 billion because of chargebacks. This is after the original owners requested their banks to reverse fraudulent transactions. Despite spending millions of dollars to combat payment fraud, online merchants still lose money because of fraudsters. The total amount lost because of fraudulent payments was $57.8 billion in 2017.
Clearly, payment fraud is a big problem for e-commerce, and something needs to be done.
How to Prevent Payment Fraud
E-commerce businesses have now started to raise awareness of e-commerce fraudulent activities. As much as it’s impossible to completely do away with cybercriminals, here are a few measures that you can take to curb payment fraud:
- Be aware of the latest trends in online fraud
- Have a verified payment processor
- Use antivirus software that will run constant checks
- Regularly change login and token credentials
- Set-up strict policies for accessing crucial and sensitive information
- Emails and transactions with confidential information need to be encrypted
It’s important for internet users to be aware that not everything on e-commerce platforms can be trusted. This should also prompt e-commerce businesses to go the extra mile to protect their platforms and ensure customers aren’t exposed to fraud.
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