As the online shopping industry has risen remarkably in recent years, the risk of being scammed on eCommerce platforms also increases. It is reported that the global eCommerce industry lost approximately $41 billion to online payment fraud in 2022 alone, and this figure will continue to grow in 2023.

Considering how dangerous it may get for opportunistic fraudsters to roam around and scam money from people online, there is an urgent need for you to acknowledge the best eCommerce fraud prevention practices. This article gives insights into recognizing eCommerce platform fraud and applying the finest strategies to keep your business and online customers safe.

What Is eCommerce Fraud?

Ecommerce fraud involves the criminal act of deceiving people online for financial or other personal gains, targeting the merchant and the customer. It happens when these scammers try to attack a commercial transaction and steal money from one of the mentioned victims or both.

Once involved in online payment fraud, the merchant and the customer can lose money. Even if customers can secure their money during fraudulent transactions, fraudsters can steal their identities and payment card data. At the same time, business owners might be charged for any costs related to these fake purchases, such as the chargeback fees.

Regardless of various ways to intercept, most eCommerce frauds fall into these main categories:

  • Inventory denial: Placing bogus orders by purchasing many high-value products paid by card without the genuine intention to buy them.
  • Identity theft: Stealing someone else’s identity to buy online products.

Popular Types Of eCommerce Fraud

Friendly fraud

The most common fraud on eCommerce platforms is friendly fraud when a customer purchases from your website and demands a later chargeback. Customers may claim that they have not received the package, your product looks different from the picture, or they would cancel the order quickly after placing it. About 39% of online merchants worldwide experienced friendly fraud attacks in 2021.

Online payment fraud

Another popular fraud you are likely to experience is when fraudsters buy things from your online store using stolen payment details from other people. It is also called credit card fraud because scammers duplicate your website into many versions and offer customers to purchase from those fake ones. After that, these hijackers would regain their money and save the credit card data to commit future fraud.

Card testing fraud

Once in a while, a low-value, small order may come up in your store, which is probably an attempt to scam. Fraudsters need to test whether their stolen credit cards still work, so they will randomly purchase something cheap to avoid being detected by the legitimate card holder.

Interception fraud

To attempt interception fraud, scammers use a stolen credit card’s shipping and billing addresses. After placing the order, they will intercept the transaction often by reaching out to customer support for a change of address or asking the delivery guy to reroute this package.

Triangulation fraud

The main purpose of this fraud is to steal payment data from online shoppers. For example, after a scammer creates a similar eCommerce store to yours and invites people to purchase from it, they would buy from your real merchant and have these items shipped to the customers. Despite receiving the order, their payment card information is still compromised by the scammer in the end.

Refund abuse

Some customers would return damaged, stolen, or broken products to an online seller in return for a monetary refund. It is known as refund abuse, and while many merchants have already delivered strict return policies to determine the necessary refund qualifications, it still costs them to lose a certain amount of money for each compensation request.

Loyalty or affiliate abuse

Using an affiliate marketing or loyalty program is a current trend for eCommerce brands. Should you be interested in developing an affiliate program for your eCommerce merchant, this comprehensive guide will be a great starting point. But at the same time, it attracts fraudsters with complex tactics to scam money from these promotions.

When customers introduce their friends to purchase from your store, you give them a commission for these orders. Fraudulent affiliate activities involve sending spam traffic to your website or getting paid out with stolen credit cards, even if the referred customers are not legitimate.

Simultaneously, scammers may request online shoppers to pay for membership or join a loyalty program. This is a popular type of affiliate scam, requiring you to provide a clear policy on free membership sign-ups for customers to keep in mind from the beginning.

Popular Types Of eCommerce Fraud
Popular Types Of eCommerce Fraud

How To Identify Fraud On eCommerce Platforms?

Here are some simple red flags to identify whether your eCommerce website is experiencing fraudulent activities.

  • Unusually higher or lower order volume: Fraudsters do not purchase things the same way as regular customers. While some attempt to spend as much money as possible before getting caught, others will place low-value orders to check whether the stolen credit card works and stay under the radar.
  • Suspicious IP locations: Watch out for different orders coming from the same IP address or a suspicious IP location. For example, if most of your customers live in the US, an unusually high-value purchase from a Malaysian IP address is likely to be an eCommerce fraud.
  • Transactions being repeatedly declined: Sometimes, scammers do not have all the required information on a stolen card to make a purchase. 
  • Expedited methods of delivery: One way to identify fraudsters is by them checking off for the fastest shipping method to avoid manual detection and review. Since they want to resell these items as quickly as possible and do not have to pay the delivery fee, they would not mind if it costs more.

Best Fraud Prevention Practices For Your eCommerce Store

Listed below are the 5 best eCommerce fraud prevention practices as a means of precaution to protect your store and your online customers from possible fraud attacks.

Review risky orders manually

It is unnecessary to check every purchase before fulfilment, but you should better do spot checks to make sure. Moreover, suspicious activities on your website should be reviewed manually. Contact them directly to confirm if a customer tries to make several low-value purchases rather than a large order.  No replying means they probably used a stolen credit card for these transactions.

Although it can be pretty time-consuming to revise stuff manually, it is one of the most guaranteed best practices for eCommerce fraud prevention since you cannot rely entirely on AI to monitor all activities.

Apply verification software

Integrating innovative verification software on your eCommerce website is still a must-have to automatically identify orders with more obvious fraudulent signs.

Apart from the owner’s information on the front of a payment card, it always includes a 3 to 4-digit code called card verification value (CVV) number on the back. It only takes the front data for scammers to make fraudulent purchases, but you can reduce the risk by requiring this as an extra layer of security at the website checkout.

Address verification system (AVS) is another helpful tool to compare the actual billing address of the credit card with the one your customer provided. In case these addresses do not match, you should ask for more information before accepting their payment.

Best Fraud Prevention Practices For Your eCom Store?
Best Fraud Prevention Practices For Your eCom Store?

Set a limit for order quantities

Limiting how many product units a customer can buy is among the best practices for eCommerce fraud prevention. The average number of units sold daily should be your standard to decide a maximum limit for all shopping accounts. For instance, you would not want someone to make 50 orders in an hour, so the system automatically restricts purchases above this volume.

Show clear, customized policies

User policies are displayed on your website to explain how your eCommerce business works. However, not all standardized policies can provide enough protection from friendly fraud. As a result, you will need more customized regulations to minimize fraud risks, such as a return policy or strong password requirement, because selling through social media channels like Facebook or Instagram needs different policies from your website.

Install timely website updates

In our last suggestion for the top best practices for eCommerce fraud prevention, there are a few software and application updates that you should take into account while running your eCom store.

Scammers tend to steal payment data from application vulnerabilities; for example, if you run JavaScript on your eCommerce platform, they might look for fields in the content management system (CMS) to get a hold of customer data. Therefore, remember to keep your website themes, CMS, and shopping cart plugins up-to-date with the latest versions.


Fraudulent attacks happen daily on global eCommerce websites, washing away a devastating amount of time and money for online merchants and shoppers. Thus, it is best to understand how each type of eCommerce fraud works and simple ways to identify them so that you can minimize the risk of unwanted financial loss from the very start. Along with this knowledge of precaution, the 5 best eCommerce fraud prevention practices are essential to ensure a safe online shopping experience for your customers and protect your eCommerce business.

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