The cost of global e-commerce fraud rose by 14% to reach $20 billion in 2021. Understanding cyber criminals’ strategies will help you craft commensurate mitigation tactics. Below we narrow down the most rampant attack vectors fraudsters use to carry out payment fraud.

• Credit card fraud

As we intimated in the preceding section, credit card fraud happens when a scammer uses stolen card details to make an e-commerce transaction. Credit card fraud covers a spectrum of all frauds committed over a card-not-present transaction. And industry estimates put the cost of CNP fraud to e-commerce businesses at $32.04 billion in 2021.

Credit card frauds often lead to chargebacks, which makes them a double-edged sword in the hands of the perpetrators. The merchant is defrauded of the transaction cost and incurs enormous ancillary expenses due to the chargeback. 

Apart from the outright payment frauds where a scammer makes a payment with a stolen card, credit card frauds are often in the form of card testing; a criminal tests different cards to ascertain the valid ones.

• Friendly fraud

Friendly fraud happens when a cardholder makes a purchase, receives their order, and then files a chargeback. Some friendly fraud incidents are honest mistakes by the buyer when they don’t recognize a merchant’s billing on their statement. In other instances, it could be driven by the good-old buyer’s remorse. 

Whatever the case, friendly fraud is escalating to an all-time high, as research puts the annual cost of friendly fraud to merchants at $48.02 billion. A quarter of all e-commerce vendors have a chargeback rate above 1%, and up to 80% of merchants say their chargeback rate exceeds 0.6%.

• Phishing scams and account takeover

Traditionally, e-commerce websites store customers’ details for optimum repeat transactions and product recommendations. However, if such crucial real estate falls into the hands of a determined online fraudster, it can be used for harmful purposes.

A scammer can hack into a merchant’s Shopify store to steal data. Fraudsters can also access a merchant’s store by taking over a customer’s social media account or stealing credentials with bots. They can steal the customer’s credentials by sending the customer messages or emails from the vendor to reveal their account and login credentials. 

• Affiliate marketing fraud

In affiliate marketing, third-party publishers earn commissions for driving customer visits to a merchant’s store. The vendor gives the “affiliate” a unique, trackable, tagged link that points prospective customers to the Shopify vendor’s store. When prospects click on the link or make a purchase, the merchant will give the publisher a predetermined commission. Hence, affiliate marketing fraud happens when a cybercriminal circumvents the standard affiliate marketing system to defraud the e-commerce merchant. 

They achieve that through various unscrupulous methods such as IP spoofing, cookie stuffing, malware, and typosquatting, thereby using fake customer activities to increase their earnings.

• Triangulation fraud

In triangulation fraud, the scammer builds a fake online storefront claiming to sell popular products at overly-subsidised prices. Their aim here is to steal cardholders’ credentials and card details. Hence, if a customer makes an order, they purchase the order from an actual merchant and ship it to the buyer. The buyer is happy they got their need met at a super affordable price point, but the fraudster goes on to make several other purchases for themselves with the cardholder’s details. 

• Order interception fraud

The scammer aims to redirect the shipment to a preferred address here. First, they use a stolen card to make a transaction from a merchant’s Shopify store and instruct the storefront to ship the order to the address on record. Immediately after the company confirms the order, the fraudster intercepts the shipment and reroutes it to their preferred location. They can call the vendor’s customer service or contact the shipping agency to block the delivery.