New Year, New Fraud: The 5 Types of Fraud to Watch
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Refund Fraud
Imagine being thrown in jail for a crime that you didn't commit … without a trial. That's what refund abuse can feel like for online merchants. This type of fraud occurs when a customer bypasses the retailer by going straight to their bank to dispute a purchase. The customer may say that the order never arrived (even when it did) or that their credit card was stolen (when it wasn't). The bank will issue a refund to the customer and deduct the transaction from the merchant, often with an added fee.
This type of fraud is a challenge, since the fraudsters skip the merchant altogether. Often falling under the umbrella of "friendly fraud," the shoppers that commit refund fraud look and act like legitimate customers.
The good news: It's a great time to be an online retailer. In fact, this year's Black Friday saw a record number of online shoppers. For the first time in history, online sales exceeded transactions in brick-and-mortar shops.
The not-so-good news? More fraudsters than ever are targeting online businesses. Credit card fraud attempts grew from 2014 to 2015, and thanks to the October EMV rollout that makes physical credit cards much harder to counterfeit, experts predict that more criminals will move online. When examining the numbers from other countries that implemented EMV cards, retailers saw exponential growth in online fraud in the following years, increasing anywhere from 30 to 60 percent.
So, what can merchants operating online do to prepare for the inevitable flood of shoppers, both good and bad? Knowing how to spot the suspicious shoppers is key. In this slideshow, Jason Tan, CEO and co-founder of Sift Science, and Emily Chin, market manager at Sift Science, have pulled together the most common types of fraud that you might encounter.
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