You do not need to be a fraud expert to protect your business from fraudulent transactions, but it is highly recommended that you make yourself aware of the most common types of online fraud. Fraud losses can hamper growth if neglected. As an online merchant, you are typically more vulnerable than in-person merchants due to sophisticated techniques that fraudsters develop digitally. As a result, you must be constantly vigilant in monitoring your transactions and payments.

Familiarizing yourself with the most common examples of online fraud can help you determine how to prevent it from happening to your business and avoid unnecessary losses.

  1. Phishing

    Fraudsters may use phished information or stolen credentials to transact with your business. If the account owner has not yet discovered that their information is stolen, payments will still be processed successfully.

  2. Account Takeover

    It is a fraud technique where a malicious third party successfully gains access to a user's account credentials to conduct unauthorized online activities by posing as the real user. Since fraudsters can access credentials, they may change details, send out phishing emails or even obtain financial information or sensitive data to gain access to other accounts within the business.

  3. BOPIS (Buy online, pick up in-store)

    BOPIS is a fraud trend that happens when a fraudster uses stolen credit card details to pay for an order online then picks up the ordered items in-store within the same day. Fraudsters capitalize on this option because they can receive the goods without leaving paper trails such as shipping receipts that may indicate their identity.

  4. Refund or Return Fraud

    This refers to the act of returning goods to a merchant for a refund, but the customer is in violation of the merchant's stated return policy. The customer will attempt to return the goods which are already marked ineligible for a refund (e.g after inspection, the returned item is used, the tag is missing).

  5. Card Testing

    Card testing involves testing stolen or generated card details to check which cards would work. Multiple transactions with small amounts may indicate that your business is being used for card testing. Fraudsters will then use the successful cards to defraud other merchants.

  6. Friendly Fraud

    This type of fraud occurs when a legitimate customer transacts with a merchant but the cardholder files a dispute/chargeback subsequently. Friendly fraud may be accidental, when a customer used a cardholder's details without authorization, or intentional when a cardholder deliberately files for a chargeback despite successfully receiving the goods or services without any issue.

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