# 5 Types of Ecommerce Fraud Schemes You Should Know About > Know the 5 most common ecommerce fraud schemes: friendly fraud, triangulation, interception, card testing, and identity theft. Protect your online store. TL;DR Ecommerce fraud has risen steadily over the past decade, and online stores need to understand the schemes criminals use. Five common types are friendly (chargeback) fraud, triangulation fraud, interception fraud, card testing, and identity theft. Staying vigilant and using a high-quality software solution helps merchants of any size mitigate the risks, since fraud now extends beyond credit cards to alternative payment methods. If you are running an ecommerce store, you need to protect your business and your customers against potential threats – a process which is often overlooked among other business processes like quality control, product sourcing, marketing and customer services. While E-commerce [fraud](/blog/facing-fraud-prevention-in-2020) is not something new, it has been constantly on the rise since the past decade, and online stores need to be more well-informed than ever about different schemes used by cybercriminals for online fraud. Fraud is not exclusive to credit cards, whether they are [magnetic strip embedded](http://www.cardzgroup.com/ContactLessSmartCard.html) cards or smart cards. Rather, alternative payment methods are also attracting criminals. They have become more sophisticated with the use of malware to steal bank account details and use them to log in via computers, phones and tablets. These threats need to be taken seriously to reduce and combat the impact of fraud on your ecommerce store. Let’s look at five of the most common types of ecommerce fraud schemes to help you leverage from and prevent the next fraud attack on your online store. **1.** **Friendly Fraud** Also known as chargeback fraud, this method works by buying a good or service online in a normal manner, and then deliberately requesting a chargeback from the payment processor by claiming that their account was hacked or credit card details were stolen. The bank or credit card company reimburses the amount – which still must be paid by the retailer, but the customer gets to keep the item. Friendly fraud method is more common with services such as those in gambling or adult industries. It also tends to be combined with re-shipping, where a customer makes a purchase using stolen data and instead of receiving items at their home address, uses a middleman’s address details, who then forwards the goods after receiving them. In other instances, a criminal may buy an item from your store and claim that it didn’t get delivered, while telling their payment processor that they returned the item but never got a refund – or that they cancelled the order but the item was still delivered to them. Whatever the scenario, using a chargeback management software can help you deal with disputes and reduce the likelihood of loss occurring as a result of friendly fraud. **2. Triangulation Fraud** The name, triangulation fraud, comes from the fact that it involves three parties – the legitimate shopper, the fraudster and the e-commerce store. The first party, the fraudster, creates an online storefront on an ecommerce site like Amazon or eBay and offers very low prices for goods in high demand to the second party, the legitimate customer. In many cases, they add an additional bait. For instance, they mention that for immediate shipping of goods the customer must purchase via credit card. This way, the store collects credit card and address information of many customers. The fraudster then not only collects payment from the customer on its fake store, but also uses their stolen information to purchase goods from the third party, the legitimate e-commerce store and ships them to the customer. **3.** **Interception Fraud** In this type of fraud, a cybercriminal places an order on an ecommerce store where the shipping and billing address match the information linked to a stolen card. After placing the order, they aim to intercept the package and take the goods for themselves in one of the following ways. - Ask a customer service representative to change the shipping address before shipment. - Contact the shipper or courier to reroute the package to a different address. - If they live in proximity to the actual cardholder’s address, they may wait for the delivery to arrive and receive the package as their own. **4. Card Testing** This is a widespread tactic that is used to defraud ecommerce stores. In 2017 alone, card testing fraud accounted for 7 percent of all fraud for bigger ecommerce merchants and 16 percent of ecommerce fraud in total. In a card testing fraud scheme, a fraudster tests the validity of a stolen card with the intention to use correct card credentials at a website. They visit ecommerce websites and make small test purchases, usually with bots or scripts to test multiple card numbers in rapid succession. They target websites that show a different response for each decline. For instance, if a card is declined because of incorrect expiry date, they get a different response – and know that all other information is valid except the expiry. They then just need to find the correct expiration date for the card to work. The initial purchases are very small, since the main purpose of the fraudster is to see if the card can be used to complete a transaction. Once they know that the card works, they will start making bigger purchases. **5.** **Identity Theft** In identity theft, a cybercriminal adopts the identity of another person, creates credit cards in their name and carries out transactions from the victim’s identity. To do this, rather than creating completely new fake identities, they target the personal information of real people, such as names, email and home addresses, as well as financial information. They then shop online under a someone else’s identity and pay with their credit card information or bank account. Identity theft is rapidly increasing with the increase in scope and number of data breaches. It is also very difficult to identify because the cybercriminals behind identity theft are often sophisticated hackers. **Defending Yourself Against Fraud** There is no denying that the world of online fraud is complex. With time, fraudsters are now more knowledgeable and intelligent and often accomplish their goals with out-of-the-box techniques. Whether your business is small or large, using a high-quality software solution can make a big difference. Moreover, if you are vigilant and informed about [prevention](https://blog.clear.sale/e-commerce-fraud-prevention-vs-e-commerce-fraud-protection) methods, you can considerably mitigate risks associated with ecommerce fraud. ## Frequently Asked Questions ### What is friendly fraud in ecommerce? Also called chargeback fraud, it happens when a buyer purchases a good or service normally, then deliberately requests a chargeback by falsely claiming the account was hacked or card details stolen. The bank reimburses the amount, but the merchant must cover it while the customer keeps the item. Chargeback management software helps merchants dispute these cases and reduce losses. ### How does triangulation fraud work? Triangulation fraud involves three parties: the legitimate shopper, the fraudster, and the ecommerce store. The fraudster creates a fake storefront offering high-demand goods at very low prices to collect card and address information from customers. They then use the stolen information to buy the goods from a legitimate store and ship them to the customer, pocketing the original payment. ### What is interception fraud? In interception fraud, a criminal places an order where the shipping and billing address match a stolen card, then intercepts the package. They may ask customer service to change the shipping address, contact the courier to reroute the package, or wait near the cardholder's address to take the delivery. The goal is to receive goods bought with stolen card data. ### How does card testing fraud operate? A fraudster tests whether a stolen card is valid by making small purchases, often using bots or scripts to test many card numbers quickly. They target sites that return different responses for each decline, which reveals what information is wrong. In 2017, card testing accounted for 7% of fraud for bigger merchants and 16% of ecommerce fraud overall. ### What is identity theft in ecommerce fraud? A criminal adopts another person's identity, often using real names, emails, addresses, and financial information rather than fully fake identities, then shops online and pays with the victim's credit card or bank account. It is rapidly increasing alongside the rise in data breaches. It is difficult to detect because the criminals are often sophisticated hackers. ### How can merchants defend against ecommerce fraud schemes? Fraud now extends beyond credit cards to alternative payment methods, so vigilance and information are essential. Using a high-quality software solution makes a meaningful difference for businesses of any size. Staying informed about prevention methods helps merchants considerably mitigate the risks. --- Source: [https://www.clear.sale/blog/5-types-of-ecommerce-fraud-schemes-you-should-know-about](https://www.clear.sale/blog/5-types-of-ecommerce-fraud-schemes-you-should-know-about)