Top 7 Ecommerce Fraud Threats Facing Online Retailers in 2020

Fraudsters are constantly devising new schemes to scam retailers, online merchants and customers alike. 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 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, then following 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 one of the other types of fraud.
  • Merchant fraud, which commonly happens in online marketplace sites that contain buyers and sellers in the platform. The seller receives money from the buyer but has no real product to sell. 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 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 ecommerce fraud prevention when an account is opened and at the point of sale, in real time. Typically, 95% to 98.5% of transaction attempts are from real customers. An ideal fraud prevention solution efficiently completes these “good” transactions while rejecting “bad” ones, and enabling merchants to manually review those that, based on fraud scores, are “in-between.”

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

In a world in which fraudsters have 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 fraud prevention platform, and how we can help protect your business.

Contact us today for your free demo!