HomeNewsEcommerce Fraud: Return Fraud and how to prevent it

Ecommerce Fraud: Return Fraud and how to prevent it

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Ecommerce Fraud is a criminal offense or deception that is conducted on a regular basis these days. In contrast, commercial transactions undertaken over the internet with the aim of personal gain or financial gain by any criminal or fraudster harms the bottom line of ecommerce retailers and merchants.

The ecommerce fraud prevention software is helpful to Ecommerce businesses as it detects high-risk transactions and analyzes if there are any risk factors involved. It helps to prevent and reduce such fraudulent behavior.

The fraud prevention software helps reduce Ecommerce retailers’ exposure to fraudulent product orders and fraud payments by using algorithm-based analysis to assess potential risks related to all transactions.

E-commerce businesses are susceptible to fraud when online transactions are done on unsecured websites or mobile devices.

Ecommerce fraud prevention software analyzes information from various sources before approving or rejecting transactions. It works by identifying anomalies, preventing possible chargebacks, and preventing loss of revenue.

It is integrated with other software applications such as shopping cart software, web security software, and website’s ecommerce platforms.

Different types of online frauds exist; return fraud is most difficult for retailers and merchants to prevent and track. It is because various tactics are used by criminals who commit fraud, as it is challenging to look out for.  

Difference between unintentional return fraud and Return Fraud:

Not all ineligible returns are vindictive. Sometimes, a customer returns a product that is not eligible for return by accident.

It can also be due to an unclear return policy. It is an honest mistake and not malicious intent. It is better to avoid such returns with a clear return policy. It should be easily accessible to customers to prevent fraud unintentionally and intentionally.

Types of Intentional Return Frauds:

Under standard returns, online retailers refund customers’ money per the return policy. Merchants initiate a return process that passes through the payment department to the bank, and the bank credits the customer account with the due amount.

The fraudster does online return fraud to receive that credit or fund at the end of the process. They do it by gaining access to an Ecommerce website and merchant account, sending refund requests, and then transferring those funds into their accounts.

They use customers’ accounts so they cannot be identified when fraud is discovered. They hack payment terminals to use credentials to save and access accounts of previous owners.

Types of Return Fraud and how to prevent them:

Merchandise Return Fraud:

This fraud person attempts to claim returns on purchased items by showing a receipt and not including any merchandise. Avoid frauds that your return policy mentions on the website and include relative information on return receipts.

Ensure the return policy is explicit and deemed legitimate for making a return. Product exchanges return policy is better than giving refunds.

Wardrobing return fraud:

Wardrobing is the latest and new trend in online return fraud. It is not limited to clothing but also includes electronics and computers etc. This product is purchased, used, and returned to the store for a refund.

There has been an increase in wardrobing returns, impacting profit margins because of the handling of fraudulent returns.

Training of support staff is a must to identify such fraud. Include product tags on the item that cannot replace if it has been removed and considered as evidence of tampering. Only returns accepted that have tags intact.

Retailers must attach a return policy to tags to prevent fraudulent return activity.

Digital Gift Card fraud:

Digital gift card fraud is usually untraceable and very convenient for fraudsters. Gift cards are like a digital form of cash. These are not subject to any regulations of credit and debit cards, or they are not linked to any bank account. It makes it easy for fraud attempts than any other online return fraud.

These digital gift cards are easy for online purchases and get back into cash. The peak time for this fraud is during the holiday shopping season. They use it during peak sales season.

To prevent this fraud, ecommerce fraud prevention software helps strengthen internal controls that track each gift card from purchase and redemption.

Card data tracking will show unusual and fraudulent activity from different locations.

You must ensure the best security practice avoids breaches on data from gift card processing.

To combat return frauds and other online frauds, ensure you are updated with new technology, and security measures need to be implemented to minimize this mounting problem.

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