E-commerce fraud trends merchants should know about

As e-commerce continues to grow, so does the risk of fraud.

According to Juniper Research, between 2023 and 2028, merchants are expected to lose over $362 billion globally to online payment fraud. By 2028 the impact is forecast to rise to $91 billion annually.

To prevent falling victim to fraud it is essential that you stay informed about the latest trends and the best ways to protect your business from it. Read on to discover the rising scale of online payment fraud, the emerging trends you need to be aware of and how you can implement robust preventative measures to counter these.

E-commerce fraud by the numbers

The rise in online shopping has come with a concurrent increase in the sophistication and incidence of e-commerce fraud. This growth has been staggering. A recent Forbes article documents this:

• Global e-commerce sales grew in 2024 by a further 8.8% and exceeded $6.3 trillion.
• 20.1% of all retail purchases in 2024 occurred online.

This growth creates fertile ground for fraud, particularly in the U.S., which accounts for 42% of all global e-commerce fraud, according to Merchant Savvy. What’s more, the loss involved in each fraud also is increasing – with Forbes Advisor recording an average rise from $97 to $102 in 2024.

Forbes concludes its review by commenting that "businesses need to take proactive steps to protect both their own and their customers’ finances."

Most common fraud types

Let’s review the latest fraud trends and how you can prevent them affecting your business. We'll cover the following:

• Account takeover fraud.
• Promotion abuse fraud.
• Friendly fraud.
• Triangulation fraud.
• Refund fraud and policy abuse.

Account takeover fraud

Account takeover fraud occurs when fraudsters gain unauthorized access to customer accounts using stolen login credentials. It’s a growing problem due to the widespread availability of stolen data from breaches and phishing attacks. This data allows someone’s bank account to be used to make purchases without their consent.

This type of fraud has become increasingly prevalent and accounts for nearly a third – 32% – of all e-commerce fraud globally, according to Statista.

How to prevent it: There are several relatively simple steps you can take to reduce the likelihood of account takeover fraud:

• Require multifactor authentication: This adds an extra layer of security by requiring your customers to provide a second form of verification beyond a password.
• Insist on strong passwords: Enforcing the use of unique, strong passwords (for example, including capital and lower-case letters, symbols and numbers) makes it harder for fraudsters to break into accounts.
• Monitor activity regularly: Monitor unusual login activity and unauthorized access attempts.
• Encourage frequent credential updates: Asking customers to update passwords regularly will provide another layer of protection from account takeovers.

Friendly fraud

Friendly fraud occurs when customers dispute legitimate transactions with their bank. They may claim not to have received an item or that the purchase was not authorized by them.

The result is that your business receives a chargeback from the bank.

This type of fraud is growing due to the increase in online shopping and consumers looking to exploit easy refund processes. In 2024, friendly fraud accounted globally for a massive 45% of all e-commerce fraud, according to Statista.

How to prevent it: There are several ways to prevent friendly fraud, including the use of tools to help you handle disputes over orders with your customers.

• Ensure there is clear pricing information on your website: Unclear pricing can lead to confusion and disputes.
• Send order confirmation emails: These leave a clear paper trail of the order and can be used to clarify purchase details further and reduce chargebacks.
• Provide responsive customer service: Chargebacks can often be avoided if the customer’s complaint can be answered by your own team before it is escalated to the customer's bank.
• Use dispute management tools from Worldpay: Our dispute management solutions allow you to take control of disputes and manage chargebacks. It takes away the time involved in handling disputes and chargebacks, offering easy management and proactive defense.

Triangulation fraud

This term comes from the three parties involved: a customer, a fake retail site and a legitimate merchant. It's a complicated process.

Here's how it works: A customer buys an item from a fake website. The fake website's operator then orders that item from a legitimate merchant, but it uses stolen credit card information. The legitimate merchant ships the item directly to the customer. The owner of the stolen credit card, though, sees an unauthorized transaction and files a chargeback.

The legitimate seller loses the cost of the item, and the fake website pockets the money it charged the legitimate customer.

This type of complex online fraud is on the rise and triangulation fraud accounts for 26% of all e-commerce fraud, according to Statista.

How to prevent it: Triangulation fraud can be stealthy, but some signs can help you spot it, and certain procedures can reduce its likelihood.

• Use multifactor authentication: By requiring a second form of verification, such as a code sent to the customer’s phone or email, multifactor authentication ensures that the person initiating the transaction is the cardholder.
• Monitor transactions: Keep an eye out for unusual transaction activity. Pay attention to new accounts making regular large purchases (particularly if these are purchases of the same item). Also track mismatched billing and shipping details as the fraudster’s shipping address often differs from the credit card’s billing address. Implementing address verification can help identify and investigate such discrepancies.
• Train your staff: Make sure anyone handling orders is also aware of how important it is to keep an eye out for unusual transactions – and what they should do when they see them.

Refund and policy fraud

Refund fraud and policy abuse fraud occur when customers exploit return policies to gain refunds for items they never purchased or to return used items as if they were new.

This type of fraud is growing in part due to weak e-commerce return policies. In 2024, refund fraud accounts for 48% of all e-commerce fraud globally, according to Statista.

How to prevent them: Simply ensuring that your return policies follow best practices can prevent this type of fraud.

• Require proof of purchase for returns: This is a simple way to ensure the item had been purchased.
• Offer only limited return times: This reduces the likelihood of used items being returned as new.

Worldpay can help

As the risk of fraud continues to grow it is critical that you are aware of the latest tactics and tricks that are being used. Likewise, it is vital that you understand the best ways to identify and prevent fraud from taking place.

Worldpay fraud prevention helps you to protect your business by providing real-time data insights, machine learning-based fraud detection, and predictive analytics to identify and stop fraudulent transactions before they occur.