5 e-Commerce Fraud Trends | Pinpoint Payments | Merchant Processing Service

The beginning of every year is a time for predictions, so here’s one: fraud will continue in 2016. But not all  fraud is the same. Knowing what to look for  is a big part of identifying and preventing fraud. Here are five  major fraud trends to look for in 2016:

Chargeback fraud or “friendly fraud” occurs when a customer places a legitimate order, receives the  product or service, and  then claims he or she didn’t. When the customer files a chargeback, the burden of  proof is on the merchant to show that the customer got what he or she paid for. Proving this takes time and  labor, making it a headache for merchants. Friendly fraud is a maj or burden on merchants, especially in the e – commerce space:  A 2014 study   from CBS showed that 86% of all chargebacks are fraudulent.

When   we think of fraud, we typically imagine a scheme that falls into the category known as “genuine  fraud.” In this case, a fraudster has obtained someone else’s credit card information by nefarious means. E – commerce retailers are an attractive target for thi s brand of thief, because there is no need to present the  physical card or risk face – to – face interaction with a store employee.

To attract more website traffic and drive business, many e – commerce storefronts rely on pay – per – cl ick (PPC) advertising through an affiliate network. Pay – per – click and commission – based advertising models  create an incentive for the affiliate to do everything possible to maximize clicks. Some affiliates turn to  black – hat or fraudulent tactics to raise t heir revenues. A  November 2015 study   from the Interactive  Advertising Bureau revealed that U.S. businesses pay $4.6 billion per year for f ake traffic.

Every year, merchants report returns of items that are not damaged, not defective, and were exactly what  the customer ordered. So why did the customer return the item? In some cases, this is a deliberate act. Custo mers order an item, enjoy it ( even wearing clothes with the tags still attached, according to ABC  News ), and only then return it to get their money back. For e – commerce storefronts, this is a serious threat. E – com merce businesses are faced with sunken shipping costs, and cannot sell the returned item, especially  in the case of apparel that’s been worn.

In “merchant identify fraud,” a more sophisticated form of fraud, a crim inal creates a fake merchant  account using your businesses identification. Then the new “merchant” posts charges to consumer credit  cards, often in small amounts that go unnoticed by the cardholder. Once the revenue is collected and the  fraudsters close up   shop, the real merchant (whose information was used fraudulently) is left to deal with  the headaches and fees of chargebacks, fraud reports, and a tainted reputation.

By knowing what to look for, you can be prepared to identify and prevent fraudulent tran sactions in 2016. Just because fraud is happening doesn’t mean your business has to become a victim. When you have the  right solutions in place, you can prevent these five fraud trends from waylaying your bottom line.