Last Updated: February 11, 2021
Isn’t it cool that you can sell the ugly Christmas sweaters your aunt knits and earn a living without even leaving your bed? Online retail has made our lives so much easier. However, it does come with certain risks.
Scammers quickly realized the malicious potential. How bad is it? Is there a way to protect yourself? Let’s dive into the ecommerce fraud statistics to answer these questions!
We’ll start by taking a look at the most fascinating stats out there!
- Online shopping frauds grew at a rate of 30% in 2017 – twice as fast as the rate of ecommerce sales.
- The rate of credit card chargebacks is rising with 20% each year.
- Ecommerce frauds increased by 45% in 2017. This lead to losses of $57.8 billion across 8 big industries.
- In 2017, 16.7 million US consumers were victims of ID theft. To put that in context, this fraud alone cost 15.4 million US consumers a total of $16 billion in 2016.
- In 2018, people lost $1.4 billion to scams – an increase of 38% compared to 2017.
- Chargeback scams accounted for $6.7 billion dollars in losses in 2016. The amount includes fees, as well as revenue and merchandise losses.
Now that you’re intrigued, it’s time to go further and take a look behind the scenes of digital fraud.
Essential Ecommerce Fraud Statistics
So are online shopping frauds really all that common? Let’s check out what the facts say.
1. The staggering 92% of fraudulent online transactions in 2017 involved a credit card.
(Sources: Digital Commerce 360, Shift Processing)
– In 2018, over $24 billion were lost worldwide due to fraudulent credit card transactions.
– The statistics indicate that most credit card fraud, 38.6% of reported cases, occurs in the US.
– Credit card fraud rose by 18.4% in 2018 and continues to increase.
– It’s 81% more likely to encounter a card-not-present fraud than point-of-sale fraud.
Yikes. So, to rephrase that old saying – keep your debit cards close, but your credit cards – closer!
2. In just 3 months – January to March 2019, there were 5,305 ecommerce fraud reports in the US.
(Sources: econsumer.gov, FTC)
– In 2017, 40 million US citizens, or 15.9% of study respondents, confirmed they have been victims of fraud.
– The most popular scams in the US sold fraudulent weight-loss products. There were 10 million registered purchases in 2017 alone.
– In fact, 2.6% of US citizens, or 6.5 million people, reported buying such products.
– The statistics show 50% of ecommerce fraud took place in Delaware, New York, and California.
– In 2017, attacks in Delaware and Oregon increased by 300%, in comparison with the previous year.
Scammers are getting smarter and more aggressive. And while giving up on ecommerce altogether is not the way to go, learning about different methods of protection against fraud is important. Still not convinced it’s a big deal? Well, keep reading.
3. In 2018, the FTC registered 1.4 million fraud reports – an increase from 2017.
(Source: FTC’s 2019 Report – Consumer Sentinel Network Data Book)
– In fact, compared to 2010, there was an increase of 104% of fraud reports.
– Out of these 1.4 million reports, 25% involved loss of money. That amounted to $1.48 billion lost due to internet sales fraud in 2018.
– The most common payment method was wire transfer. There were over 100,000 registered incidents and a loss of $423 million.
More and more ecommerce fraud cases get reported each year. However, what are the chances of you becoming a victim? Are you in a high-risk group?
4. Statistics indicate that people aged between 25 and 34 are the most likely victims of ecommerce fraud.
(Sources: Digital Commerce 360, Scamwatch)
– People in this age range who were subject to fraud lost over $1 million in 2017.
– Customers aged between 20 and 29 lost money in 43% of the reported fraud incidents.
– People between 70 and 79 lost money in only 13% of the scams. However, their average losses were much higher than those of the first group.
– A 2019 study revealed women submitted 54.4% of all reports of fraudulent online purchases.
– However, men lost more to the scammers – 55.6% of the whole amount.
While discussing the demographics of scammed users, it’s important to keep in mind that all the data comes from reports. This could lead to discrepancies. For example, elderly people may find it more difficult to report this type of crime.
In any case, take the steps to be sure you’re safe even if you’re not in the high-risk groups. One of the best prevention tools is to know how ecommerce fraud works. Let’s take a look at the different types of scams!
Stats About Common Ecommerce Scams
First of all, let’s answer a common question – what is an ecommerce fraud? Basically, it occurs when a fraudster uses stolen or fake information to pay for a product or a service.
So now that we’ve covered the definition, let’s focus on the most common examples of ecommerce frauds.
5. 71% of merchants are most concerned about identity theft.
(Source: Information Age)
– There’s a good reason for that. In 2018 alone, over 450 million records with personal information were compromised.
– The second most worrying fraud is phishing – 66% of retailers agree it’s a big issue.
– Account theft comes in at third place of the worst ecommerce scams, with 63% of merchants being concerned about it.
Chargeback is the fourth most feared ecommerce fraud. Despite also being known as “friendly fraud”, it can actually cost merchants a lot. How much? Well…
6. Ecommerce businesses lose $3.94 for every $1 from a chargeback.
(Sources: Ravelin, Quick Sprout, Midigator)
– It doesn’t stop there. The statistics show that 40% of customers who file a chargeback will do it again within 2 months.
– Then, 50% of those people will file again within 3 months.
– A big portion of chargebacks is filed within a week of the transaction. More than half, 54.53% of them, get filled within a month.
– The intentions behind chargebacks are rarely fraudulent. 80% of consumers select this route, simply because they don’t want to take the time and get a refund directly from the merchant.
– This explains the high percentage of invalid disputes – 78.6% of processing error chargebacks mistakenly went through.
– Only 0.46% of fraudulent chargebacks were invalid. The reason behind it – issuers submitted the disputes after the deadline.
Chargeback is one of the best examples of unintentional ecommerce frauds. That’s why it’s also known as friendly fraud. Customers may not even realize they’re committing a crime.
7. In the US, shipping fraud increased by 37% and billing fraud – by 34%.
– By definition, a shipping fraud occurs when the scammers use their own address to receive stolen goods they purchased online. In 2017, the western part of the US experienced an increase of 60% in shipping fraud.
– 25% of the attacks occurred in New York and California. These two states also made 19.6% of all ecommerce purchases.
– In a billing fraud, scammers use a victim’s stolen address to purchase the goods. The North Central region experienced a 50% increase in this type of attacks.
– 18% of billing fraud cases took place in Delaware, Oregon, Washington D.C., Florida and Georgia.
Now, let’s take a look at what the statistics say about when you’re more likely to encounter ecommerce fraud.
8. Online retail gets riskier before big holidays. In 2019, the first 20 days of November resulted in over 60,000 potential scams, targeting 26 popular brands.
(Source: Consumer Reports)
– Over 11,000 of these frauds mentioned giving gifts.
– Almost 5000 straight up used the word “holiday.”
– More than 600 referred to Cyber Monday or Black Friday.
The vast amount of ecommerce orders around holidays can make fraud detection quite challenging. Cybercriminals know this. Additionally, customers scouring the internet for good deals are more likely to take the bait.
Thankfully, merchants can fight back using ecommerce fraud prevention software. It’s a constantly evolving technology that makes payments more secure.
Ecommerce Fraud Protection Stats
Time to check out what measures retailers take to prevent fraud. Let’s dive into the statistics!
9. 80% of merchants file disputes for illegitimate chargebacks.
– However, only 18% manage to win most of their disputes. Therefore, this isn’t the best of solutions to the chargeback problem.
– Still, in 2018 the average chargeback-to-transaction decreased by 13.3%. Behind the scenes, some effective risk management strategies got implemented, leading to these impressive results.
– For example, 43% of customers expect faster deliveries. If they don’t receive their order on time, it’s more likely they’ll file a chargeback.
One of the risk management strategies was, as simple as it sounds – to just make sure deliveries arrive faster, preferably on time.
Turns out that prevention is the best way to deal with this ecommerce fraud. Who knew keeping your customers happy would have such an effect on dealing with ecommerce fraud?
10. Visa’s EMV chip update in September 2018, resulted in an 82% decrease of counterfeit fraud dollars in-store.
(Source: Worldpay, Clearhaus)
– In 2016, Visa also came up with a fraud monitoring program, specially designed to notify merchants if they receive an excessive amount of chargebacks or disputes. It can raise the alarm for fraud-to-sales ratios between 0.65% and 1.8%.
Visa is not the only company working on improving the security of online shopping. Tools like Subuno, BOLT, and Simility offer additional protection against ecommerce fraud.
Ecommerce Fraud Trends after 2019
Okay, we’ve covered how ecommerce fraud has been affecting business over the years. Now let’s check what the future holds.
One thing is certain – scammers won’t suddenly decide to change their ways. However, as we focus on developing better software, we can prevent a lot of crimes. So how will the stats change in the next couple of years?
11. Card-Not-Present fraud is predicted to increase with 14% by 2023!
(Source: Information Age)
– The expected losses for retailers will amount to $130 billion.
While these fraud statistics may give an impression of dark times ahead for ecommerce, that’s not the case. It’s just that an increasing number of merchants will be taking their business online. Fortunately, protection tools will also evolve to handle the threat.
12. The fraud detection and prevention market (FDP) is expected to exceed $63 billion in 2023.
– For comparison, the FDP was worth $19.5 billion in 2017. That will be an increase of 223%!
These tools will be specifically designed to handle all types of ecommerce scams – from identity theft and insurance fraud to money laundering. With online business becoming even more prevalent, the demand for such services will force them to evolve at a greater pace.
13. The global ecommerce market will be worth $4.9 trillion in 2021!
(Sources: Worldpay, Creating A Website Today)
– One-third of the global population, or 1.92 billion people, shop online.
– In 2018, for every $10 spent globally, $1 was spent online.
– By 2022, ecommerce will be responsible for 17% of all sales.
– However, still, only 1 in 8 merchants is online.
Impressive stats, right? This means one obvious thing for the future. Despite the risk of fraud, ecommerce will soon become a necessity for businesses.
To Sum It Up
Scams are an unfortunate reality you need to keep in mind if you’re planning to take your business online.
Still, new software is being developed all the time with the sole purpose of ecommerce fraud protection. Considering that you can significantly limit issues with good management, going online is a great option. The fresh new source of income will be worth it.
Alternatively, if you’re already online – learning how to ensure your online safety is now part of being a businessman.
So take the necessary precautions and take that leap of faith. Set aside resources to create and/or expand your online presence – as well as protect it. You may find it was the best thing you did for your business.
Ecommerce is the buying or selling of goods or services over the internet, as well as the transfer of money and data that enables these transactions.
It’s also known as internet commerce and electronic commerce. One of the most popular forms of ecommerce is online shopping. However, online shopping itself refers only to the purchase of physical products. Ecommerce can also describe sales of services and any kind of commercial transactions over the internet.
Chargeback fraud occurs when a customer pays for a service or an item online and after receiving it, requests a chargeback from their bank. When it goes through, the customer has received both the items or services and a refund.
To calculate your chargeback rate, you’ll only need to apply the equation of the chargeback-to-transaction ratio. In order to find out the rate for a specific month, simply divide the number of chargebacks by the total number of transactions. And voilà! You’ve got your chargeback rate!
(Source: Information Age)
Criminals can get quite original when it gets to scamming. However, here are the most common ecommerce frauds you can encounter:
- Identity theft – criminals make purchases using a victim’s personal information.
- Chargeback – customers pull back payment after receiving their order.
- Clean fraud – a stolen credit card is used to make a purchase and fraud detection systems are circumvented.
- Affiliate fraud – traffic or signup stats are altered to get more money from affiliate programs.
- Merchant fraud – products are offered at a great discount but never get shipped.
To protect your business from ecommerce scams, you should choose a good fraud prevention tool and keep it updated. Popular choices include Subuno, BOLT, and Simility.
Additionally, you should make sure that your verification system is up to par and get an email authentication system. You can also include a CAPTCHA to limit bots and fake interactions.
Ecommerce does come with several risks you need to keep in mind. Most notably, these include:
- Security threats – for example, malware, spam, and hacking, or phishing accounts.
- Server malfunctions – these can cause errors in your online payment systems.
- Personal data leaks – identity theft, unsolicited marketing, and spam can be a big issue.
- Card frauds – scammers can use stolen cards to make purchases.
- Intellectual property – make sure you purchase commercially licensed images.
- Taxation – check local law to make sure you’re paying the appropriate taxes.
So how likely are you to become a victim? Well, ecommerce fraud statistics indicate that 40 million US citizens got scammed in 2018. However, the chances of you becoming a part of the statistics will drop dramatically when you take the appropriate precautions!