Online sales platforms have become increasingly popular, offering consumers convenience and affordability. Unfortunately, the rise in popularity of these platforms has also led to an increase in the number of fraudulent activities. Businesses must become aware of the different types of fraud on online sales platforms to protect themselves and their customers. Likewise, it is also equally important for consumers to be extremely vigilant when shopping or making transactions online.

What is fraud involving online sales platforms?

Fraud involving online sales platforms is any fraudulent activity used to obtain money or goods from an e-commerce platform illegally. This can include stealing credit card information, manipulating affiliate links, or even taking over accounts. Losses to e-commerce due to fraud worldwide may exceed $48 billion in 2023. This is a massive amount lost by businesses and consumers that can be brought down with better awareness and security measures.

Types of fraud on online sales platforms

The different types of fraud on online sales platforms can vary depending on the platform and type of transaction. Here are different types of fraud on online sales platforms you need to be aware of.

Affiliate fraud

This involves targeting a business’s affiliate marketing activities to divert affiliate commissions illegally. The fraudster may generate fake affiliate links or manipulate existing ones to receive commissions from a sale or increase the commission amount.

Refund fraud

Refund fraud is when a fraudster makes a purchase but requests a refund after receiving the product. Typically, the fraudster will purchase using a stolen credit card and may claim they have paid more than the actual amount. They may also claim they had cancelled the order or did not receive the product. When you agree to refund the amount, they may ask you to send the money to a different source stating a legitimate-sounding reason for not being able to use the original account or card anymore.

Chargeback fraud

Also known as friendly fraud, chargeback fraud is when a fraudster contacts their credit card company to dispute a charge after they purchase on an online sales platform. This type of fraud can be difficult to detect, as the fraudster will often wait until the charge has been made before they dispute it.

Account takeover or identity theft

Account takeover or identity theft is when a fraudster obtains a stolen account or personal information and uses it to gain access to an online sales platform. This type of fraud is difficult to detect, as the fraudster will impersonate a real customer to make purchases that will never reach them.

Interception fraud

Interception fraud is when a fraudster intercepts a package that was intended to be shipped to another address. They will usually pick a victim with the same billing and shipping addresses linked to their credit or debit card and their e-commerce store account. After the order is placed, they may ask for the shipping address to be changed or even pick up the order when it is delivered.

How to spot and avoid fraud on online sales platforms

Now that you know the different types of fraud on online sales platforms, it is important to know how to spot and avoid them. Here are some tips to help you protect your business and customers from fraud on online sales platforms.

– Look for any inconsistencies like

  • Mismatched shipping address and IP address or email of the buyer
  • Unusual order sizes or numbers
  • Using one billing address but multiple shipping addresses for a set of orders
  • Multiple purchases made using different credit or debit cards
  • Repeated failed transactions
  • Many orders received from an unusual location
  • Non-physical shipping addresses like PO boxes or storage services

– Conducting regular site audits to detect and prevent threats is important.

  • Check if your backend software and plugins or APIs are up-to-date
  • Update your SSL certificate and use Hypertext Transfer Protocol Secure (HTTPS)
  • Regularly back up your data
  • Encrypt sensitive data
  • Look for possible malware infestation

– Ensure your websites and online storefronts are PCI-DSS compliant. Use secure payment gateway aggregators with advanced encryption technology to protect customer data and prevent fraudulent transactions.

– Make it mandatory for your customers to provide CVV for card purchases and additional safety measures like strong passwords and two-factor authentication.

Prevention is better than correction

Remember that fraudsters always devise new ways to scam people and businesses, especially small enterprises. It is important to stay up to date on the latest security measures and to be aware of any suspicious activity. The Reserve Bank of India (RBI) regularly provides information on financial scams and how to leverage them. In case of a fraud case, immediately contact concerned authorities to tackle fraudsters and protect your customers.

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