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March 8, 2022

5 Types of E-commerce Fraud and Prevention Tips: Defend Your Business

Phishing, card testing, friendly fraud and many more... E-commerce fraud is one of the biggest issues for merchants today. Find out 5 types of e-commerce fraud and how to protect your business from these attacks.

As in many sectors today, fraud is also an enormous issue for the e-commerce sector. We encounter mainly five types of e-commerce fraud. E-commerce industry which grows year by year globally has gained more significance, especially during COVID-19. Since physical stores were closed for months to maintain social distance, people had to shop online more often than usual. Moreover, even when stores were opened after a couple of months, purchasing habits of people had already started to change. They mostly started to shop online and wanted to protect themselves from crowds in physical stores. According to the statistics, retail e-commerce sales worldwide in 2021 is nearly 5,000 billion US dollars and there’s a considerable increase in 2020 and 2021.

Yes, the growth in e-commerce business worldwide was great for the e-commerce firms but there was a catch. This growth also caused e-commerce fraud to rise. Fraudsters were ready to take every opportunity to defraud. Therefore, being aware of different fraud kinds and e-commerce fraud prevention ways is crucial for merchants. If you want to know more about types of e-commerce fraud and how to protect your e-commerce business better from imposters, we believe this article can be helpful for you. Let’s dive in.    

5 Types of E-Commerce Fraud


Friendly Fraud

What is friendly fraud: It’s one of the most common types of e-commerce fraud that merchants have to deal with. In this type of fraud, consumers purchase goods or services with their cards, but they claim that their cards were stolen or they want to request a refund. Consequently, merchants pay back to those customers their money, but actually those customers keep the items they bought.

How to Prevent:

  • Set clear and robust refund policies and rules.
  • Participate in a data partnership consortium where merchants share anonymous data of bad actors.
  • Apply legal procedures at the time of delivery.
  • Use a fraud monitoring system that flags repeated transactions.
  • Integrate deep learning models to detect subtle patterns.

Online Refunds

What is online refund fraud: It's one of the types of e-commerce fraud where refund policies are abused. It is a type of friendly fraud. Weak return policies make real customers happy but lead to the problem of return fraud.

How to Prevent:

  • Try refund with gift cards instead of cash payments.
  • As in friendly fraud, tag and score risky user's data.
  • Check ID and contact information during the refund, compare the purchased product with the return request.
  • Update your return policies to reduce threats.

Card Testing

What is card testing fraud: In this type of fraud, thieves take some action to test whether they can use a stolen card or not. For example, through e-commerce sites that explain the reason for the rejection of the card at the purchase step, they can determine which information is incorrect. Thus, they try to learn more about the stolen card and try different options until it's a match.  

How to Prevent: It may be helpful not to provide exact feedback on faulty card transactions on your checkout page. Instead, you can include more general warnings. E.g; "Card not accepted"  

Online Marketplace Fraud

What is online marketplace fraud: Sometimes fraudsters target real marketplaces and create fake storefronts and products. Consumers who do not pay attention to little details easily believe in this and shop. They pay but never get the goods or services.

How to Prevent: If you provide a marketplace service, you must follow strict security and verification measures for businesses to participate in your marketplace. Furthermore, you should plan additional steps to verify each small business.


What is phishing fraud: Phishing fraud is one of the types of e-commerce fraud as well. Phishing fraud, that targets customers' data, is still quite common. Phishing scammers send an e-mail to learn a lot of important information such as username, password, card information, date of birth, etc. These e-mails are usually prepared with professional techniques and direct the recipient to action. When the scammers get the information, they make a series of fake purchases and then ask to the merchants for a chargeback and transfer the money to their cards.

How to Prevent:

  • Tighten up the authentication steps.
  • Complicate the process of stealing personal information by setting a certain set of rules for the password creation step.
  • To prevent this, your customers must be on alert, you can take additional security steps by informing your customers and showing that you are protecting them.


All in all, there are five main types of e-commerce fraud and these are friendly fraud, online refunds, card testing, online marketplace fraud, and phishing. Even though fraudsters take every chance to cheat, it’s not impossible to protect your e-commerce business from them. Besides, if you know more about the types of e-commerce fraud and e-commerce fraud prevention methods, it’s way easier to fight fraudsters. Even executing little fraud prevention tips can make you more prepared against imposters. Don’t forget: You’re more powerful than fraudsters with the right fraud detection and prevention solution. Fraudsters might use advanced technology but you can also use it for fraud prevention.