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The Problem of Fraud in the Ecommerce Industry
May 26, 2022

Ecommerce fraud refers to illegal and fraudulent transactions conducted through an online store. The primary distinction between physical and online payment fraud is that you do not always need a physical card to make an online purchase.  All the thing a fraudster needs is credit card information. Hackers can steal this information, as it is often stored and transmitted digitally and they can either use this information themselves or sell it to cyber thieves.

What is fraud?

Fraud occurs when you purposefully present false information. The goal of fraud is to profit at the expense of someone else. Profits can be as follows:

  • Money
  • Goods
  • Sensitive information

According to this report from 2021, worldwide online fraud has increased every year since 1993, with a drastic increase since 2010 and everything indicates that it will continue to increase. The reason for the large increase since 2010 is probably the large growth in e-commerce.

Why are there different types of scams?

A large amount of credit card information is stored online, making it easier for hackers to obtain this information.

Every time you come up with a new way to prevent fraud, hackers come up with new ways to steal credit card information. The followings are some of the reasons why online scams are as prevalent as they are today:

  1. It is relatively easy for hackers to steal card information
  2. It is easy to buy this information on the black market

And these types of crimes are rarely punished for the following reasons:

  1. It is difficult to identify the perpetrator. The fraudster typically uses a fake email address and opens a mailbox under an alias, revealing no information about himself.
  2. The average amount for each case is too low so the police do not place a high priority on online fraud.
  3. Online fraud frequently occurs across national borders, making a legal sanction difficult to combat.

Types of credit card scams

There are many types of credit card scams, here are some of the most common types.

Friendly fraud

When a customer (fraudster) complains about a purchase and demands a refund. The customer keeps the item but receives a refund because they lie about the product not meeting their expectations or claim that the payment was made with a stolen card.

Clean fraud

When a fraudster makes a purchase with a stolen card.

It is more complicated than friendly fraud because a third party (fraudster) is involved, and this person must have extensive knowledge of the cardholder. The fraudster can thus “cheat” systems that attempt to detect fraud.

Identity theft

When a fraudster obtains and uses another person’s personal information to commit fraud, such as making an online purchase.

Stolen accounts are an example in the payment industry.


When a hacker poses as a known or trusted contact and requests personal information or attempts to convince you to install cleverly disguised malware that can download, intercept, and forward the data itself.

Emails sent by people pretending to be from a credible company and asking you to update your personal information are an example.

Card testing

When a fraudster makes low-value test purchases to validate stolen card information or to try randomly generated card numbers.


The fraudster “hires” an unwitting third party to resell goods purchased with stolen credit card information. The promised third party is never paid, and the third party becomes an accomplice.

Triangulation fraud

When a fraudster creates a fake web store and sells products at low prices.

The goal is to gather credit card information. The scammer then orders the products from a legitimate online store and ships them to the customer. The fraudster is paid for the product, and the customer is charged twice:

  • the low cost of the bogus webshop
  • the actual price of the online store

Occasionally, the fraudster will use the card information to make purchases for himself or resell the credit card data.

Consequences of fraud

Chargebacks are frequently the result of fraud. A chargeback is an amount owed by the e-merchant to the cardholder.

Chargeback processing incurs operating costs, such as transaction fees, legal fees, exchange fees, and so on. Another loss is the product sold to the fraudster; while the e-merchant must repay the money, the product is not returned. If an e-merchant receives a large number of chargebacks, it may result in no redeemer wanting to process his payments because he is considered a high-risk customer.

As there are numerous types of fraud, there are also numerous methods for combating fraud.

Interception Fraud

Interception fraud is another common type of eCommerce fraud in which the fraudster uses a stolen credit card to place an order on the eCommerce website and also provides the name and address associated with the credit card to avoid any possible fraud tracking. However, once the transaction was completed, they would intercept the package in various ways, such as contacting customer service and changing the delivery address, calling the shipping company to have the package delivered somewhere else, or even stealing it from the location after delivery.

Affiliate fraud

In affiliate marketing, the eCommerce site pays the affiliate a commission for each purchase made on their platform via a referral link assigned to the affiliate. In affiliate fraud, the affiliate would generate fake activity and send spam traffic in order to defraud the website and fool the system to obtain more money.

As previously stated, eCommerce is more vulnerable to fraud than other industries, and various eCommerce fraud types are evolving and becoming more sophisticated on a daily basis. These online threats harm both businesses and their customers.

The first and most rewarding approach to combating ecommerce fraud is to keep it from reaching your company. There are a few steps you can take to reduce the risk of online scams on your website:

  1. Performing regular security audits on your website
  2. Monitoring all suspicious activity on the website.
  3. Requesting Card Verification Value for all transactions
  4. Collecting as little data as possible from customers
  5. Making use of anti-fraud platforms

Traffic Fraud- your silent revenue killer

According to some estimates, one-third of all digital advertising dollars are spent on fraudulent activities. In other words, thousands of low-cost bots that are misidentified as high-value targets fill the pockets of fraudsters every single day. This revenue drain can be mitigated with a technology that flags every user from the moment they click on an ad or enter a website or landing page.

While most ad agencies have begun a kind of protection process against some types of ad fraud, very few have the tools to combat all types and show the entire sales trajectory. Unfortunately for advertisers, agencies and exchanges have little incentive to invest in costly solutions to a problem that affects them little. Some businesses have begun to demand greater transparency in digital advertising purchases and results, but there is still much work to be done.

So, what are the options?

Advedro has developed an AI-driven solution that is adaptable, affordable, and comprehensive to protect businesses from these traffic fraud threats. Rather than focusing solely on transaction fraud through payment data scoring, our cutting-edge product, Fraud Shield, quickly detects malicious bots and invalid traffic through pre-session data and behavior analytics. We can then remove them from retargeting lists, flag individual ad campaigns to detect both fraudulent traffic and fraudulent leads, and protect you against general order fraud.

Now Affiliates that are using Advedro’s tracker, Vita, or our DSP platform to purchase traffic, can stop worrying about traffic fraud prevention and return their attention to growing their affiliate business and relationship with the affiliate programs they work by as we are combining these capabilities into a single product, Advedro. Using Advedro, they can safely purchase traffic and track and optimize all their affiliate campaigns under one roof.