Merchant online fraud is a rampant deceptive activity that targets online businesses. ECommerce threats include scams like setting up fake storefronts, using stolen credit cards, account takeover, and identity theft.
This type of fraud can result in financial losses and reputational damage for the merchant, and customers may have their information compromised.
Types of merchant online fraud
Fake merchant storefronts: Fraudsters create fake online stores that look like legitimate businesses to steal customer payment information.
Credit and debit card fraud: Criminals use stolen credit card numbers to make purchases, often from fake online stores, to defraud credit card companies.
Account takeover (ATO): Scammers gain access to a customer’s existing account, using their credentials to make fraudulent purchases that can be difficult to detect because they appear to come from the legitimate account holder.
Phishing scams: Fraudulent emails or messages are sent to trick individuals into revealing sensitive information like login details or credit card numbers.
Identity theft: A fraudster obtains someone’s personal information (like name, address, and Social Security number) to make fraudulent purchases or open new accounts in their name.
Triangulation fraud: A fraudster sets up a fake online shop, takes a buyer’s payment, and then uses a stolen credit card to buy the same item from a real merchant, which is then shipped to the buyer. The fraudster pockets the original payment, while the legitimate merchant eventually faces a chargeback from the cardholder who disputes the charge.
Consequences for merchants
Financial loss: Merchants lose money from fraudulent transactions and are responsible for costs associated with chargebacks, which can include fees and penalties.
Reputational damage: If customers’ information is compromised or they are victims of a scam originating from the merchant’s site, it can damage the business’s reputation and erode customer trust.
Termination: A high chargeback ratio can lead to merchants being terminated from credit card networks, making it impossible for them to accept card payments.
How to protect against merchant online fraud
Monitor transactions: Look for unusual patterns, such as multiple transactions from the same IP address or different cards with the same billing address.
Use fraud detection tools: Implement systems that can identify and flag suspicious transactions before they are completed.
Follow best practices: Stay informed about the latest 2026 fraud trends and use methods to protect your business and customers.
From the Coach’s Corner, here are more tips to deal with threats:
Plagued by Chargebacks? 5 Ways to Fight Back — Increasingly, merchants are being victimized by chargebacks in illicit of behavior credit-cardholders. To avert being victimized by such fraud, here are five key steps.
10 Unusual Prevention Tips to Effectively Fight Fraud — If you ever think you might be victimized by fraud, you probably are. Businesspeople are typically victimized by fraud in several ways. The causes will surprise you. Here are simple ways to prevent fraud.
Best Practices to Buy Cyber Insurance for Business Security — Security has become problematic in all sectors – business, nonprofits, government, politics and individuals. The aggregate financial losses are so staggering, cyber insurance is a necessity.
With Fraud Running Rampant, How HR Can Help Prevent It — By taking alert measures, human resources can play a major role to put a dent in the global epidemic of fraud in the workplace.
Key Measures to Prevent, Recover from Ransomware — Published reports indicate ransomware cost businesses $350 million in 2015. The FBI considers ransomware attacks one of the three worst cyber threats.
Tips to Avoid Advertising Scams Tricking You to Ask for Tech Support –Advertising scams that prey on Internet consumers have prompted four Internet companies to band together to fight the abuse. The scams use harmless-looking ads to trick consumers into using phony tech support that actually enable cybercriminals to invade the unsuspecting owners’ devices.
Benefits, Precautions in Issuing Business Credit Cards to Employees — Business credit cards are easy, cost-effective ways to control expenses. They’re a great small business tool to pay expenses and to manage your cash. Indeed, there are dos and don’ts to remember in case you’re one of those entrepreneurs who trust your employees to use a company credit card.
Protect Your Bank Accounts So You Can Sleep at Night — Imagine for a moment — you’re sitting at your desk enjoying a second cup of morning coffee. Then, your phone rings. It’s a call from your bank to discuss possible fraud. Your bank is concerned about possible suspicious activity with your accounts, and wants to make sure you’re not a victim.
“Never let your ads write checks that your website can’t cash.”
–Avinash Kaushik
__________
Author Terry Corbell has written innumerable online business-enhancement articles, and is a business-performance consultant and profit professional. Click here to see his management services. For a complimentary chat about your business situation or to schedule him as a speaker, consultant or author, please contact Terry.
Photo courtesy Searick1 at www.freedigitalphotos.net
