Retailers and the Rising Challenge of E-Commerce Fraud: Insights from the 2 ...

Thousands of retailers converged on New York City last week for the National Retail Federation's (NRF) biggest trade show. On their minds? Fraud. By 2024, it's estimated e-commerce merchants may lose $24 billion to online payments fraud, according to a study by Juniper Research.

It's no secret that the past few years have reshaped the retail industry, and the sessions at NRF reflected this. While "normal life" was put on hold at the start of COVID-19 for people around the world, retailers never stopped. They faced the challenges of immediate digitalization head on to meet the needs of customers and communities. And now that consumers know what retailers are capable of, they have grown to expect it, and fraudsters have been hard at work working to exploit those systems.

A recent survey by Kount found 41% of respondents said they would continue to make most of their purchases online after 2020. Increased fraud is an unwelcome byproduct of that rise in digital transactions, and it's becoming more prevalent and sophisticated. In fact, there are at least 10 types of e-commerce fraud retailers should be aware of.

1. Payments fraud: When bad actors use stolen credit cards to purchase goods and profit by reselling items.

2. Friendly fraud: When a consumer makes an online purchase and then disputes the charge with their bank.

3. Account takeover (ATO) fraud: When a human, bot or botnet uses stolen credentials to access customer accounts.

4. Retail arbitrage fraud: When malicious bots allow a single buyer to purchase large quantities of discounted items for resale on a different marketplace

5. New account opening (NAO) fraud: When a bad actor creates new accounts using bits and pieces of real identity data to take advantage of offers and services.

6. eGift card fraud: When a bad actor steals a consumer's payment information and buys an eGift card from the retailer.

7. Refund fraud: When bad actors exploit gaps in logistics or fulfillment processes to turn a profit or get goods for free.

8. Promotion or coupon fraud: When a bad actor abuses a business's coupon or promotional policies.

9. Triangulation fraud: When bad actors build fake online stores to sell items at cheaper prices.

10. Interception fraud: Bad actors attempt to intercept a customer's order and obtain goods for resale.

While these attacks are nothing new, bad actors are launching more sophisticated fraud attacks. Following some basic best practices can provide some e-commerce fraud protection, but most retailers can't do it alone.

E-commerce fraud will continue to evolve, but the technology that prevents it has never been more advanced. Learn more about Kount, an Equifax company, here.