Abstract: The good news is e-commerce market size continues to grow, while the bad news is that so does e-commerce fraud. Online retailers should know what they face and how to handle it, especially during the coming holiday season.

As online and mobile sales grow, experts forecasted that more than 17% of B2C sales worldwide will occur online by 2022, citing data from 451 Research. The expansion of the e-commerce industry attracts retailers and even more fraudsters.

Given that circumstance, responsible enterprises should be aware of what kind of threat they are facing. If you happen to be an online retailer or business owner, you would want to know the solutions to prevent online fraud, especially during the holiday season.

1. E-commerce Growth Attracts Fraudsters

According to the Census Bureau of the U.S. Department of Commerce, the revenue of online retail sales in the U.S. hit $211.5 billion in the second quarter of 2020. One of the reasons might be the ongoing pandemic that keeps people at home in many areas, and no one knows when it will end.

People are forced to purchase online, and stores have no choice but to move online to survive the pandemic. Bang! A double-edged sword comes out, and it can cut both ways. It removes restrictions on where and when to shop for consumers and eliminates stores' physical door locks, exposing sellers to a risky cyber environment.

Bad actors swoop in and exploit this booming industry by abusing the vulnerabilities of e-commerce stores and ravaging the internet. What they do to wreck online stores is commonly known as e-commerce fraud.

2. What is E-commerce Fraud?

E-commerce fraud refers to any kind of fraud that occurs on an online shopping platform. The typical tricks of fraudsters include using stolen or forged credit cards, false identities, fraudulent personal information, etc. E-commerce fraud is basically any type of illegal or erroneous transaction online.

3. Types of Fraud to Watch Out

Account Takeover Fraud

ATO fraud usually is the first step in a series of e-commerce fraud. It is a form of online identity theft where a malicious actor illegally takes ownership of online accounts and gains access to confidential data (i.e., passwords, credit cards, email, bank accounts, SIM cards, and more).

The bad actors abuse stolen accounts to commit illegal acts, like using bots to automatically place fraudulent bulk orders to make sellers' inventory unavailable. ATO fraud has become more prevalent than ever since we saw a sharp increase in data breaches this year.

Credit Card Fraud

Credit card fraud (or carding) is similar to ATO fraud in the way they work. However, ATO fraud focuses on the login page, while credit card fraud targets the checkout page.

Fraudsters use stolen card information to access batches and batches of credit cards and then repeatedly buy things with the cards on an online shopping platform (by using automated bots in most cases). This kind of transaction harms the cardholder and defrauds the store owner because, in the end, they have to refund all the stolen money.

Gift Card Cracking

As a variation of credit card fraud, gift card cracking aims at the less protected gift cards that are anonymous and sometimes passwordless. Fraudsters use brute force to enumerate figures to get valid gift card numbers.

After that, fraudsters check the card balance and sell them or use them to repeatedly purchase goods on the online store. This kind of fraud seemingly does not cause a significant loss to the store owner, but it also damages consumers' trust and brand image if the scam continues.

Denial of Inventory

Denial of inventory is more subtle and sophisticated than others. Fraudsters make products or services out of stock by adding them to online shopping carts but never checkout. It can significantly cramp online retailing businesses by preventing customers from placing orders which not only stains the business reputation but also impacts revenue stream.

4. E-commerce Fraud Surges During the Holiday Season

Time flies. The holiday season is around the corner. Online retailers are expecting a big "harvest," so are fraudsters. Every year when peak season comes, online retailers are haunted by e-commerce fraud way worse than usual, particularly on Black Friday and Cyber Monday sales. Research finds a 14% rise in suspicious e-commerce fraud in the 2020 holiday weekend compared to all of 2020.

Sophisticated bots have become the most preferred tool of bad actors and fraudsters. Without reliable countermeasures, the bots may turn holiday shopping campaigns into a holiday disaster.

(Photo : TransUnion)

5. Secure E-commerce Site with GeeTest Solutions

Have you ever considered how bots sneak into your website and do all the bad things? GeeTest found that the answer is quite apparent: bots are disguised as real customers.

• First, they have numerous devices (through which they get access to online stores)

• Then they get fake identities (which are hard to tell the difference between real ones)

• The last step is to forge human behavior when interacting with websites.

When you figure out the three methods of fraudsters, it's effortless to clear the threat. With that in mind, GeeTest developed the game-changing bot managing product: GeeTest 4.0 CAPTCHA - Adaptive CAPTCHA.

CAPTCHA (Completely Automated Public Turing test to tell Computers and Humans Apart) is what you come across every day on the internet. I believe you already understand what it is. What I want to point out is what GeeTest CAPTCHA is capable of.

1. It, of course, can detect malicious activities on websites and apps.

As a 9-year player in the cyber security industry, GeeTest knows well about what security means to online businesses. There is no need to illustrate how much effort GeeTest has put into the security capability of its product. Here are those who trust their security to GeeTest.

2. It increases the cost of fraudsters.

GeeTest CAPTCHA has AI models that can learn from the practice. When bad actors find new ways to attack, GeeTest Adaptive CAPTCHA evolves, too. That's why it's named "adaptive."

3. Bonus! It provides risk analysis for decision-makers.

We know that any responsible business does not only have one protection for its website or app. GeeTest Adaptive CAPTCHA cooperates with your existing security systems. It provides data and analysis for your risk system to make the most accurate risk judgment for anyone, but only you know the best for your business.

Make sure you are fully prepared for what's going to happen in the 2021 winter holidays. Protect both your customers and your business, making peak season success a real thing.