Fraudsters are constantly devising new schemes to scam retailers by committing online fraud. ECommerce sales are projected to reach $632 billion in 2020. Unfortunately, with higher sales volumes comes increased volumes of fraud.

Ongoing education and an understanding of ecommerce fraud are of utmost importance, so you can protect your business assets.

Types of Ecommerce Fraud

Ecommerce merchants face hundreds of different types of fraud threats. The most common types of ecommerce fraud attacks include:

  • Credit card fraud, which happens when criminals use stolen credit cards to make online purchases. When the owner of the card notifies their credit card company about the stolen card, the business that sold the goods is responsible for reimbursing the credit card company.
  • Refund fraud, which is similar to credit card fraud but involves the fraudster intentionally making an overpayment. They then follow up to request a refund to a different payment method.
  • Friendly fraud, which involves a consumer reporting they never received their item(s) and requesting a refund even though they did in fact receive the goods or services. This is also called chargeback fraud. ( offers Chargeback Protection technology.)
  • Card testing, which is used by fraudsters in the event they are missing a piece of information from the card. They use the error message(s) returned by the website to pinpoint the correct credit card details they need to accomplish another type of fraud.
  • Merchant fraud, which commonly happens in online store sites that contain buyers and sellers on the platform. The seller receives money from the buyer but has no real product to sell.  Fraudulent transactions like this fall to the responsibility of the online marketplace business.
  • Identity theft, which occurs when the criminal purchases items online using a false name and someone else’s credit card. This is the most common type of fraud. ( offers Identity Verification services, as well.)
  • Phishing, which happens when the criminal sends an email to an individual, but it appears to be coming from an email address of their bank or other financial institution. It asks for credit card information, bank information, or other personal details. Once received, this data allows the criminal to proceed with identity theft.

AI-powered fraud detection is essential in reducing fraud

The best defense against ecommerce fraud is to deploy prevention when an account opens and at the point of sale, in real-time. Typically, 95% to 98.5% of transaction attempts come from real customers. An ideal fraud prevention solution efficiently completes these “good” transactions while rejecting “bad” ones. Additionally, it enables merchants to manually review those that, based on scoring, fall “in-between.”

AI, specifically machine learning algorithms, works with merchant data and consortium data to identify the “signals” indicating an ecommerce transaction is actually a scam. For example, an unusually large number of order sizes, differences between shipping and billing addresses, or a high frequency of small transactions all indicate potential fraud. Successful merchants deploy machine learning detection to validate transactions, authenticate customers’ digital identities, and deliver a risk score in real-time.

In a world in which fraudsters employ hundreds of tactics for committing ecommerce fraud, enables merchants to approve more transactions while reducing fraud with advanced, AI-powered fraud detection, case management, data mining, and visualization.

Learn more about our platform to prevent fraud, and how we can help protect your business.