Issue Of Frauds In Ecommerce

Published Date: 02 Nov 2017

The issue which is prevalent in the E-commerce these days is of fraudulent activities. Most of the surveys and statistics also point to this problem as it is one of the most common occurring one. Retailers especially are affected by this crime and statistically lose around $4 billion each year due to these activities. The survey was conducted by Cybersource which is the provider of services like risk management and electronic payment in 2011 and it highlights the enormous loss that occurs due to these fraudulent activities. The most important persona that was mentioned in this survey was Sebbe Jones who is a manager at 2Checkout of payment disputes and fraud. She is linked with keeping these types of E-commerce crimes at bay and making sure that such types of fraudulent activities do not hamper the progress of the company.

There is an Economic crisis in these times and most of the people turn to E-commerce crimes to get shortcuts for easy money. Therefore E-commerce crimes pose a great problem for those businesses that are running electronic business. Conducting business electronically makes it more vulnerable to these types of activities and frauds. Fraudulent activities in these times are in upswing rise since criminals find it more appealing and enticing. In order to stop these kinds of crimes, it is better to develop an understanding of them so that a business or an entity can better combat these threats.

In its more common essence, fraud is defined in terms of deception which a person uses to portray false information or hide truth in order to obtain money or monetary value. It is mostly carried out online since it becomes difficult to identify and trace the steps and criminals can do it in the comfort of their home or computer desks. Sometimes fraud can happen also in physical interaction meaning that fraudsters deceive people face to face.

Identification of Frauds

There are some potential threats that exist through which one can identify as to whether fraudulent activity is happening or not. These red flags include risky street addresses, order velocities and anonymous accounts concerning emails and identifications. Through these red flags one can take necessary steps to avoid any kind of these fraudulent activities.

Risky street addresses mean that when you are shipping an order to a particular entity, you have to pay particular attention to the address that you are sending. In this time of technological marvel, one can easily confirm the shipping address. With the help of technology like Google street map, a business can verify the shipping address by closely viewing it at street level. If the address seems suspicious or the building that the product is being shipped to seems abandoned then it is better to cancel the order because most of the time, it will be fraudster trying to scam your business.

Then comes the issue of order velocities which means that a number of different orders are placed within the same time period like a day, hour or minute. If these orders are coming from only one entity like a device, ID user or card then it can be deemed as suspicious. The logic behind this approach that such type of orders have certain velocities determining their speed of booking and coming from a single user is most likely a fraud. Such type of orders is usually made from different accounts to balance out the payments so that the recipient and the business can carry out their operations smoothly.

The most common types of frauds that occur in these times are related to fake email or user ID accounts. These types of email accounts are related to a much higher percentage of fraudulent activities. Criminals use fake accounts and IDs to scam many businesses and pose as potential clients for them. When criminals do these kinds of activities and use these types of accounts, they are hard to trace and catch.

Types of Fraud

There are different types of fraud that occur in commercial retailers and businesses in terms of electronic transactions and dealings. The most common types of frauds that are recognized by law enforcement agencies include gift card fraud (card purchased in store), card not present fraud, friendly fraud and gift card fraud (card purchased online). These types of frauds mostly happen in commercial stores and since these kinds of stores represent a major chunk of business economy of the countries.

Gift card fraud (card purchased in store)

There are many different types of preventive measures implemented by retail stores in order to counter fraudulent activities. Commercial stores are regarded as the most favorable targets of scammers and that is why they have strict fraud counter measures. The criminals in order to avoid the initial screening of these kinds of gift cards pool together certain number of gift cards that have small monetary value and place an order for a large item that is usually meant for cards with more monetary value. The transaction is usually done online so as to keep the risk at minimum and to avoid detection regarding the monetary value of these cards. These kinds of gift cards are usually purchased with embezzled credit card numbers and investigations usually lead towards a dead end.

Card not present fraud

This type of fraud is also known as ‘CNP’ fraud and this activity is done on online purchases. Typically when transactions are done online, physical presence of credit is not required and only the credit card number is deemed important. Fraudsters usually steal credit card numbers from unsuspecting clients and then use these credit card numbers to make online purchases. Such types of transactions are not identified on time as being fraudulent and hence the criminals easily escape prosecution on them.

Friendly Fraud

This is the most common type of fraud that is faced by commercial retailers these days. As the business world is moving rapidly to online deals and transactions, it is only natural for these retailers to shift their business on online domains also. This means that the order for merchandise is placed online and after the confirmation of order, the goods are dispatched to the clients. In friendly fraud, the criminal uses heinous methods to achieve his or her ends by fabricating important information. When an order is placed online, the scammer then immediately follows it up with complaint. The complaint regarding the order may revolve around claims like such order was not placed in the first place or the goods have not been received yet. This type of fraud creates confusion among the mind of the retailer and hence the goods are received free of cost by the fraudster. Such type of activities are usually very hard to trace because there are sometimes genuine complaints of consumers mixed up in it and it becomes harder for the company to separate fake and illegal complaints against the legitimate ones.

Frauds related to E-commerce Industry

In E-commerce industry, the most dangerous factor related to harming the progress of it is the fraudulent activities that happen. Fraud is certainly very harmful to all types of business activities but when talking about the E-commerce industry, it takes a form of a highly dangerous factor. The reason for branding fraud as the major damaging factor lies in the fact it utilizes the latest technology and information for one and only sole purpose which is to get away with as much scams as possible. When this kind of situation develops where one party is at total loss then fraud becomes a total destroyer and in this case the party that is at loss is the E-commerce industries.

In these times, fraudsters are getting better day by day in their activities and deeds and they are posing major problems for E-commerce industries. They have mastered certain fraud ring activities and are making merchants and industrialists to find it difficult the correlating fraudulent activities happening around or in their industries. The deals that are done in these kinds of business sectors are made in such a manner that sometimes even the experts find it hard to label it as a fraudulent activity. Majority of the transactions that are littered with frauds and scams pass through initial security screenings without much hassle and this gives a confidence boost to these types of criminals. Majority of the merchants and industrialists cite frauds as the most difficult type of problem and crime to deal with.

Another rising threat to the e-commerce industries these days is the popularity of M-commerce or mobile commerce. Since the world population is on constant move these days, dealers and merchants make use of their mobile devices to conduct business deals and transactions. Typically these devices are less protected from these types of frauds and contain less security measures. When a website of a particular merchant or industry is browsed, it contains less protective measures due to the fact that they instill a ‘lite version’ of their homepages. These mobile pages are both less on content and security measures and hence become a target for scammers and fraudsters. A desktop version of the merchant’s website is better protected in contrast with the mobile version and hence attacks usually take place through them. Merchants are not typically aware of these kinds of threats on their mobile homepages and hence neglect the required security measures for them.

Possible Solutions

By reviewing the above information presented, it would seem that the presence of fraud in these business deals might be quite hard to deal with. Fraudulent activities provide a very strong challenge to those people who are involved in E-commerce and they also hate the fact that it eats a major chunk of their revenues. However there are ways through which these kinds of frauds can be stopped and the possibility of a company or person being victimized can be reduced. Although it is one of the biggest hazard to the e-commerce industry presently, there exists some solution which if followed can reduce the possibility of these kinds of frauds happening. By investing proper time and technology, these kinds of dangers can be averted. The goods and services sold can determine the types of solutions implemented.

When dealing with Digital Goods

Digital goods mean that kind of commodities that are utilized in their digital format and then processed physically. The delivery of these items is done in real time which makes it highly critical and much more important to process their orders on immediate basis to reduce any chances of fraud. When there is a prompt reaction from the company’s side in handling the customer’s order, then the fraudsters might hesitate in making any kinds of deals. The reason behind this notion is that goods are released immediately when the order is processed and hence when an order is screened and checked for any kind of misdemeanor or fraud, if it is safe then it must be dealt with quickly. After the initial investigation, further screening of the order can make it more legitimate and valid and can reduce the chance of fraud greatly. However if further investigation reveals the order to be a fraud or scam, then the credit card through which the payment was made should be credited back for the amount paid for the goods. This kind of deals helps protect both the victim and the company from any kind of further charge on their behalf.

Goods that are non-digital (All other types)

For these types of goods, the order is processed more thoroughly and the shipment is held at bay until a confirmation is received from both the company and the client. This delay in order processing helps the company to implement more types of protective measures and to check the order thoroughly before shipping it out. Any order that is found suspicious or questionable can be reviewed further to find out any anomalies in it. By implementing procedures like these, the consumers and the companies are protected from any kind of mischievous activities that the fraudsters might perform and damage their transactions and deals.

The technology of today’s world allows the people to implement many kinds of preventive measures like covert ID devices, link analysis tools and risk engines specifically designed to operate in these kinds of environments. By utilizing these tools, one can certainly escape from the hazards of these fraudulent activities either in their business transactions or personal dealings. In the present time, every ID through which the internet is used leaves a digital fingerprint behind. This means that like the physical world crime where fingerprints of the criminal can lead to his or her capture, the digital fingerprint can be used in the same way. With the help from device ID technology, these digital fingerprints can be stored on the servers and then can be recalled for later analysis. This can also enable any kind of web device to be monitored specifically to find out any kind of fraudulent activity in E-commerce businesses.

It is only fair to say that with the implementation of proper tools and techniques in e-commerce businesses, one can certainly be safeguarded from the potential harms of these kinds of fraudulent activities. According to the statistics posed by a major internet researcher, the implementation of these tools can enable the enterprise to screen less than five percent of all orders while enabling them to capture 85 percent of all kinds of fraudulent activities disregarding the friendly frauds types. This is actually a very good figure considering the amount of impact that is reduced with the help from these tools.

Conclusion

It is essential to note here that there is not a silver bullet or a permanent solution to prevent fraudulent activities. As the security measures progress so will the fraudsters and their activities too. There will always be some cases in which fraud is going to happen and this is the reality of the situation. The best example of such kind of cases is friendly fraud that are always present in some of the situations. In order to protect both the company and the client, it always better to implement strategies like layered security approach so that it can recognize any kind of potential fraud first and then investigate orders that appear to be doubtful or suspicious. When such a system is followed, it allows both time-delayed and real-time systems to be implemented in addition to the human intelligence and look out. When these steps are followed properly, it will enable the businesses in achieving maximum possible security on their e-commerce transactions.