The quick shift to e-commerce has been accelerated by COVID-19. While this has been highly desirable, and convenient for customers, it has increased the surface area for fraudulent transactions.?
Data fraud itself has many faces and is evolving at a breakneck pace. Some of the most common are Card Testing Fraud, Chargeback Fraud, Refund Fraud and the most invasive and detrimental type, Account Takeover Fraud.
Account Takeover Fraud is the gravest and most serious type of fraud. This is essentially a type of identity theft. It means that the fraudsters gain access to legitimate accounts by obtaining personal information, stolen passwords, stolen security codes, or using phishing schemes and leverage this access to extract personal information and gain access to legitimate customer accounts on an e-commerce website.?
They can then change account information, make purchases and even withdraw funds depending on the type of website they have gained access to. This can have an extremely negative effect on the reputation of the retailer, as well as the relationship with their customers. Customers may feel that their personal and financial data is vulnerable and be unwilling to use the retailer's e-commerce website again.
Card testing fraud is another common method used to complete purchases using stolen credit card or debit card information. Usually, the card is tested initially using smaller transactions before attempting to use it for a larger purchase.?
Essentially, the stolen card and card holder’s information is employed to commit the fraud which may seem like a legitimate purchase made by verified customers.
Chargeback fraud is sometimes considered ‘friendly fraud’ where the customer keeps the goods/products purchased online but still asks for a refund. This could be because the customer legitimately did not recognize the purchase on their credit card, or it could be the customer attempting to abuse the company policy and keep the products free of cost. Having a transparent refund, reshipping, tracked shipping and return policies may help to scale back this ‘friendly’ fraud, and keep relationships intact and retailer reputation unharmed.
Refund fraud is when a purchase is made using a stolen credit card and then a refund is requested to an alternate credit card. Fraudsters can often trick the e-commerce merchant into issuing such a refund by claiming that the old credit card account is now closed and therefore the refund must be put on the new card. This is a fairly simple, yet effective tactic that ends up putting the retailer in a difficult position.?
India is in a better position than most as regulations are progressive. Already, there are a variety of anti-fraud protocols in place as mandated by the Government of India such as two-factor authentication and cyber fraud hotlines.?
Such interventions, along with the incorporation of a robust e-commerce Fraud Protection Strategy, can help to mitigate the dangers of online fraud. It enables the consumer to remain confident while making digital transactions and purchases.
The Indian Government recorded 1.16 million cyber security cases in 2020, this is a 3X spike from 2019. Many of these cases include e-commerce fraud and identity theft as described above.?
The government has been quick to respond and is working on a new and updated ‘National Policy on Cybersecurity by the Department of Electronics and Information Technology’ to be introduced soon. This will see key updates in line with the fast charged digital dependency and remote working environments that have marked the last 18 months.
Businesses intent on limiting losses and generating more revenue from genuine customers can conduct regular site security audits and confirm that all certificates, software and plugins are up to date. But increasingly, they must go further to stay ahead of fraud. Online fraud protection solutions can make real-time, precise decisions about an individual buyer’s trustworthiness—applying machine learning to first party datasets that span merchants for greater context and accuracy.? ?
With large retail companies in India falling prey to digital fraud such as Amazon, Big Basket and Dominos, a fraud protection service no longer becomes optional, but essential to running a thriving online business.
About the author: Monica Acree is the Vice President, Asia Pacific, Forter. Views expressed here are the author's alone.?
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