Online markets have always had to deal with fraud on both sides of the deal. Takeovers and card-not-present (CNP) fraud can happen to buyer and seller accounts, and sometimes the people who use them are the ones who get scammed. Users sometimes act like scammers by filing fake chargebacks or posting fake listings.
The days of simple fraud are long gone. Now, both buyers and sellers try to take advantage of the system by committing fraud. And as the global online market grows year after year, these eCommerce platforms are seeing more and more new types of fraud.
How eCommerce Fraud is Evolving
Hacked accounts, card-not-present (CNP) fraud, and chargebacks are all too common on global online marketplaces like Shopify and Alibaba. But how do these criminals get the information they need to commit fraud? Let’s take a closer look at each to see what’s going on behind the surface.
Accounts as Products
Most consumers don’t consider their online store accounts to be important assets in and of themselves, but they are to scammers. Customers’ login credentials are obtained and sold to the highest bidder by people who perpetrate accounts-as-a-product fraud.
Fraudsters selling this information will distinguish between accounts that are not fully accessed (NFA) and accounts that are fully accessed (FA) (FA). When an account is marked as FA, it signifies the fraudster has both the marketplace account login credentials and the legitimate account owner’s personal email address.
This is extremely beneficial to fraudsters since they may trick the marketplace’s detection systems by utilising a real account. The order confirmation is delivered to the victim’s email without their awareness.
On marketplaces, there is a lot of competition for business, and sellers rely heavily on user reviews to help them grow. Because of this, more and more sellers are paying for fake reviews. Fraudsters sometimes make a fake account to post the review, and sometimes they use a hacked account, which makes the posting look more real.
Sellers are Buying Fake Services
These fake reviews hurt the seller who gave them, but they also hurt any seller who doesn’t try to cheat the system. The result is an unbalanced and uncontrolled environment, which could turn away good sellers and hurt the marketplace’s reputation.
Buyers are Paying for Fraudulent Refunds
Some shoppers on a marketplace will pay an outside fraud service to help them get a full refund on their purchase. One way is for an eCommerce platform to ask the customer to start a return and then make up fake tracking numbers so the customer can get their money back even though they never sent the item back.
Some “best practises” include putting a limit on the number of items and how much they cost and only going after big sellers to make the refund request look more real. Customers may only have to pay a small portion of what their items cost for this service, making it a great deal for shoppers who are smart about fraud.
Abuse of the Rules
Now that we know all the different ways buyers and sellers cheat marketplaces and their law-abiding customers, let’s see how far the domino effect of these illegal moves goes. Online fraud usually leads to more online fraud because that’s how it works. For instance, when a marketplace account is hacked, the information it stores can be stolen and used in a number of CNP fraud schemes. But it can also be sold to dishonest marketplace sellers to help them make fake reviews that look real. The brand and bottom line of that market are getting worse.
When sellers pay for fake reviews, they break the rules. Even if they don’t mean to scam potential customers, they just want to take advantage of the market, and this isn’t the only way they do it. On sites like eBay, sellers may make fake accounts to make the bidding price go up for their own benefit. If a seller can get real buyers to bid more, they can make more money.
Even though it might not be exactly fraud, everyone would agree that it’s not quite right. When these things get out in the open, they make customers and marketplaces less trusting of each other.
A/B Test Your Forms
Putting in place stricter rules for making decisions about online transactions might keep bad people away, but it will also cause more legitimate customers to be turned down. Also, customer service teams can get swamped with complaints about hacked accounts, requests for refunds, and other fraud-related problems.
This can lead to bad customer experiences that drive away good customers. For obvious and not-so-obvious types of fraud, marketplaces need accurate solutions powered by machine learning that know fraud trends and change as they do.