The payment methods include the use of credit or cash cards or electronic online transfers, which are readily acceptable by online vendors. Given the scale of information that is transferred across the web and increasing monetary value of transactions this has become highly susceptible to cyber criminals.
Trulioo provides there are two common types of fraud that impact eCommerce namely account takeover fraud and chargeback “friendly” fraud. Both types of fraud are a real threat to corporate security and personal information, as according EMC’s security division, RSA, one out of seven payment cards used in 2013 was exposed to data breach. These leaks involve sensitive, protected, or confidential information that is copied, transmitted, viewed, stolen, or used by an individual unauthorized to do so.
Account Takeover Fraud
In the case of account takeover fraud, unauthorized individuals are usually scammers, cyber criminals who use the information leaked to benefit by purchasing products and services online.
The losers in this case are the victims whose personal information is stolen by data breaches and other means. The victims are unaware that their credentials have been stolen as the criminals change their registered contact information to delay notification of the purchase activities on their accounts.The criminals also known as identity thieves proceed to make as many transactions on their account before they lose access once it has been detected.
The criminals benefit as they go on to sell the products purchased at 100% profit margin, an example provided by Siftscience is the criminal creates a listing for copies of a novel on an auction site or digital market place, a potential customer customers sees the listing and purchases a copy of the novel. The criminal then uses a stolen credit card belonging to a victim in another state to purchase the novel from the retailer’s site and has it shipped directly to his/her customer. This type of fraud is also known as auction fraud where the fraudster is a middle person purchasing goods using stolen card information and later selling them to unsuspecting buyers.
Chargeback or “friendly” fraud occurs when the online purchase is made by the consumer and once the merchandise is received the consumer, they dispute the purchase with the credit card issuer. In most cases losses are incurred by the bank as the product purchased is rarely returned and refund is provided. This generally happens because it can be costly between the chargeback fees and the time taken to establish the case and follow through in response. Another example for chargeback fraud is the online purchase perpetrated by a third party that has access to the cardholder’s information but does not have the authority to use it to make purchases.
One of the aspects that have played an increasing role in online fraud is the reshipping by recruiting an intermediary to reship the goods from the cardholder’s country of origin to international locations such as Asia and Africa making it more difficult to trace the orders.