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eCommerce Fraud Trends in 2022

By Rafael Lourenco, Executive Vice President and Partner at  ClearSale 

The challenges of 2020 have poured over into 2021. Of course, so have the opportunities. Along with those opportunities is the continued growth of global eCommerce sales, which are expected to top $6.5 trillion by 2023. 

However, along with the increase of eCommerce purchases and first time online shoppers has come an increase in online shopping fraud. Juniper Research predicts that global online payment fraud will exceed $206 billion cumulatively between 2021 and 2025.

It’s this increasing threat, along with the morphing of traditional fraud schemes and the development of new strategies, that makes it important that eCommerce merchants understand what they are up against. Seeing the trends in fraud during the past year will better arm online retailers with the knowledge they need to avoid significant revenue losses in the coming year. 

Trends in eCommerce Fraud Retailers Must be Aware of 

Buy Online Pickup in Store 

Over the last 20 months, shoppers have been driven to find ways to shop that also keep them safe. Enter the meteoric rise of Buy Online Pickup In Store (BOPIS), allowing consumers to shop through apps or eCommerce websites and simply pull up to the store to retrieve their goods. Or, in the case of fraudsters, pick up someone else’s goods. 

BOPIS, or click and collect, saw a 106.9% growth surge in 2020. This rapid purchase to acquisition created a rich field for bad actors, who could use a stolen credit card to purchase items online and then pick them up from the store before the card owner was even aware their credit card had been compromised. 

While the strategy is growing, many of the remedies remain the same. Stores should require shopper validation, require account registration, and include a comprehensive fraud prevention solution as part of their eCommerce platform to rapidly identify and catch fraudulent purchases – before they make it out the door. 

Return Fraud 

Return fraud isn’t new, but like bike shorts and big shoulder pads, this fraud type is having its moment again. 

Strategies include: 

  • Wardrobing: high-end apparel and accessories are purchased, used, and then returned with the tags still intact 
  • Friendly fraud: Purchasers receive items that they order, but then report them to the store or their credit card as Item Not Received (INR) or Did Not Receive (DNR), and then file a chargeback with their credit card provider
  • Return as a Service (RaaS): This newer scheme pairs professionals working with consumers to target specific merchants to exploit their returns policies for profit

Thwarting return fraud frequently comes down to a combination of best practices. Set time limits on returns, and make returns policies clear. Consider seasonal adjustments to returns to accommodate gift-giving. Place tags on clothing in places that are hard to conceal. Consider changing your store policies to offer in-store credit only, instead of cash, and monitor transactions for red flags that can indicate a risky transaction. Also, consider using a vendor that offers chargeback protection, to prevent extensive out-of-pocket costs associated with friendly fraud instances. 

Synthetic Fraud 

A growing concern for the coming year is synthetic fraud. Bad actors are creating fictional buyers, combining information from real people with invented details. They have even begun using “deep fake” technologies to combine facial traits for these new identities to get around biometric verification. 

This is largely a problem for credit issuers, such as banks and credit card companies. However, with the continued increase of credit terms being offered by eCommerce retailers, it’s easy to see that online stores won’t remain unscathed by this trend. Preventing this type of fraud will require credit issuers to combine their own vetting processes with third-party information to validate new customers. 

Stay Ahead of eCommerce Fraud 

As fraudsters become more sophisticated and leverage automation and advanced technology to invent new ways to steal from online retailers, it’s important to stop fraud in its tracks as much as possible. The good news is that there are still straightforward ways to do this, including training for employees to watch out for fraud, following best practices for order processing and fulfillment, and integrating the most sophisticated fraud prevention technology that you can with your eCommerce platform. These steps will minimize the impacts of both amateur and professional fraudsters and protect your bottom line.

From Browsing to Buying: Put Wagento’s eCommerce Mastery to Work for You

Rafael Lourenco, Executive VP and Partner at ClearSale leads in card-not-present fraud protection, helping retailers boost sales and prevent chargebacks with advanced technology and expert analysis.

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