Preventing Account Takeover & Transaction Fraud in eCommerce Marketplaces

Preventing Account Takeover & Transaction Fraud in eCommerce Marketplaces

As the use of eCommerce, online marketplaces and the sharing economy grows significantly—in 2020 alone, 150 million people shopped online for the first time during the COVID-19 pandemic—so too does fraud; according to the Poneman Institute, organizations are losing $4.5 million per year as a result of online transaction fraud.

Consumers put their trust in the companies, online marketplaces and apps whose services they choose to use, such as rideshares, vacation rentals, P2P (peer-to-peer) payment platforms and delivery services, to name a few, but what happens when that trust is unknowingly misplaced? As fraud continues to rise, companies with ineffective and lax identity proofing measures will likely find themselves facing financial losses, reputational damage and regulatory fines. In some cases, they might also be unwittingly physically endangering their customers, such as having unauthorized drivers and couriers with stolen identifications, that would normally not be eligible for employment, go unnoticed for more than two years and thousands of rideshares and deliveries.


A Growing Threat Landscape for Marketplaces

Trust is a key component of any long-lasting relationship, especially when building (and maintaining) a global and loyal customer base, but with the rapid acceleration of digital use and transactions comes a growing fraud landscape. With an increasing number of people eager to transact online, marketplaces and apps must have the right strategies in place to protect themselves from fraudulent attacks on multiple fronts, from the vendors and from the consumers that use their platforms.

There are numerous types of frauds that fraudsters use, and as the industry picks back up following the global pandemic, marketplaces and sharing and gig economy apps may find that they and their customers are being targeted. Without the right risk mitigation or comprehensive identity proofing strategies in place, companies may find themselves facing the following:

  • Unverified vendors, hosts and drivers: vendors, hosts and drivers who use falsified documentation and spoofing tactics to appear legitimate in order to exploit both the platform and consumers for monetary gain.
  • Falsified listings & fake accounts: unauthorized vendors that create fake accounts and post falsified listings and reviews—in some cases, doing so through buyer & seller collusion by working with other seemingly real “customers” to perpetuate the scam—to scam guests into believing they are paying a legitimate host but are then ghosted when requesting help or a refund.
  • Buy now, pay later muling: consumers, either for themselves or on behalf of others, that use a buy now, pay later payment service when purchasing a good or service with no intention of following through on the payment. Or in other cases such as “friendly fraud” (also known as chargeback fraud), consumers will make a purchase but later claim to their bank that the transaction was unauthorized, resulting in merchants having to issue a refund without receiving the purchase in return.
  • Card-not-present (CNP) fraud: during online transactions, a customer can’t physically hand the credit card directly to the merchant, making it easier for fraudsters to use stolen payment information to make unauthorized transactions, even if the legitimate card owner is unaware of being compromised.
  • P2P payment scams: digital peer-to-peer payments for goods or services that are conducted through bank portals give users a false sense of security, and in some cases end up being scams where people are defrauded and unable to receive protections or refunds from the bank when the scam is discovered.

These frauds come into play when platforms, especially those with a large customer base, use minimal identity verification, don’t consistently monitor transactions and have lax re-verification standards for consumers, partners and contractors. By not placing a strong emphasis on establishing trust, companies will find themselves with serious monetary, reputational, safety and security concerns.

Establishing Trust Without Compromising Customer Experience

Organizations looking to establish and maintain trust with their vendors and consumers must have a multipronged approach to tackling fraud. Using ineffective technologies or siloed services can result in regulatory noncompliance, friction during customer onboarding, higher operational costs and being exploited by criminals.

Just as they do to financial institutions, fraudsters are using similar tactics against eCommerce platforms, marketplaces and apps; however, the latter are seeing significant growth in these types of fraudulent attacks. For example, in 2020, account takeovers accounted for 54% of identity-related fraud for financial institutions but 69% for eCommerce in mid-to-large retailers. By using an automated and comprehensive Anti-Money Laundering (AML) compliance solution, companies will be able to seamlessly adhere to Know Your Customer (KYC) for verifying customers, Know Your Business (KYB) for ensuring vendors are trustworthy and Transaction Monitoring for flagging suspicious behavior. In doing so, eCommerce, marketplaces and apps will be able to efficiently verify the identities of vendors and consumers, transact with trust, improve customer experience, prevent fraud and ensure happy and loyal customers in both the short and long term.

To learn more about how online marketplaces and sharing apps can prevent fraud and establish trust, read our guide, “Fight Fraud & Establish Trust with One Powerful Platform”.


* The Future of Ecommerce Report 2021, Shopify
* The Real Cost of Online Fraud–April 2021, Ponemon Institute
* 2020 True Cost of Fraud™ Study: E-commerce/Retail Edition, LexisNexis 


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