🚨Fraud

In this fraud focused guide, we'll discuss steps you can take to mitigate your losses from fraud and keep yourself safe.

Fraud: an unfortunate part of doing business as a reseller. Keep in mind that all businesses involve some level of risk — including the risk of being a victim of fraud. While resellers can prepare for the risks of fraud, there is no surefire way to keep from being a victim. Instead, it's important to learn to minimize losses and build “shrink” into your business' bottom line.

Common Sense Fraud Tips

• IF IT SOUNDS TOO GOOD TO BE TRUE, IT PROBABLY IS! This is true in many parts of life, but especially in the eCommerce industry. If someone offers to pay you MORE than you’re asking or offer an additional “convenience payment” to do something strange for them, it’s probably a scam.

• The word “kindly” is usually a sign that you should be vigilant. "Kindly" is commonly used by scammers who may be less familar with phrases that legitimate buyers use regularly. This shouldn't be a confirming factor of fraud, but it's never a bad idea to give things a second look.

• Be vigilant. Sometimes, something will feel “off” about a buyer. If you get this feeling, you can cancel their order and issue them a refund. Don’t feel bad about it — you ultimately must do what’s best for your business.

• Know your customer. Depending on the platforms you choose to sell on, you may be able to get a good feel for your customers. Even if you can’t, you can learn which transactions seem suspicious. For example, let’s say you sell MacBooks and someone orders three of them — who needs three MacBooks? Touch base with them before sending. Ask for a government issued ID. Do a quick Google search of their name and address. There are many ways you can protect yourself and your customers.

• Understand that at some point you will probably get scammed AND see your customers get scammed. It’s unfortunate. It really is. But it is a possibility that you must prepare for because as you continue to grow your business, the probability of a scam goes up. Don’t be too hard on yourself if you do get scammed because sometimes there is simply not much you can do. You may also hear from customers get their credit card information stolen as well. They may come to you hoping for you to personally refund them. This is another unfortunate thing — while you want to help your customers, you have to draw the line somewhere. Trust the buyer and seller protection built in to your credit card processor.

Chargebacks

• A chargeback is when a customer reports to their bank that there was an issue with your transaction. A chargeback claim can be made for a variety of reasons — ranging from someone committing credit card fraud against the holder of the card to the actual card holder trying to commit fraud against you.

• Some eCommerce payment processors will cover you better than others when it comes to unauthorized transaction chargebacks. Amazon, eBay, and PayPal will generally cover chargebacks where an unauthorized transaction is claimed (the owner of the account claims someone else fraudulently used their card). In these situations, however, you will usually want to provide proof of delivery and other information requested by your payment processor.

• Other payment processors, such as Stripe and Shopify are a little more tricky. There are plug-ins you can use to decrease your fraud risk and to better identify unauthorized transactions, so you are generally held liable for unauthorized transaction claims. Stripe does offer a service called “Stripe Chargeback Protection.” There's a fee on each transaction, but will help to stop fraudulent transactions and if it is unable to, they will typically cover the cost of the dispute.

• In addition to unauthorized transaction disputes, buyers may also file several other disputes, claiming that their item did not arrive, was not as described, or that they did not receive a refund they were owed. In these situations, you are able to dispute the chargeback by providing information to the buyer’s bank which could help your case.

  • For example, if a buyer claims an item did not arrive, a delivery confirmation showing that the item did, in fact, arrive will likely help your case.

• Payment processors typically charge fees when it comes to chargebacks. Some, such as Stripe, typically charge a fee no matter what if a chargeback is initiated, while other platforms, such as eBay and PayPal, will only assess a fee if you as the merchant do not win the chargeback case.

• Some platforms, such as eBay, will protect you from chargebacks if you have already won a dispute through their money back guarantee. This is especially helpful if you win a case on eBay and then the buyer tries to file a chargeback.

Types of Fraudsters

• Card Information Thieves - These criminals steal card numbers from everyday, innocent people. Many of these are gained through data breaches where millions of card numbers are harvested, then sold. If you’re selling on a marketplace that provides you with seller protection from these fraudulent transactions (as described above in the chargebacks section), you don’t need to worry much about these thieves. However, if you are selling on a service that leaves fraud detection and prevention to you, such as Shopify, these thieves should worry you and you should have a plan in place to prevent these sorts of thefts.

• Amateur/Opportunity Fraudsters - Some thieves commit fraud to get items for themselves without paying. These fraudsters are often amaturers and are not all that experienced. They are not committing fraud on a mass scale for profit, but rather for personal use. Why is this important to know? They may be less comfortable with scamming and more likely to back down from their scams when challenged.

  • To challenge these scammers and deal with them, you may threaten them with legal, criminal, or other actions. You may consider informing these potential scammers that if they go through with their scam, you will file a police report, an IC3 internet crimes report with the FBI, and report them to the marketplace. Sometimes, this will keep a scammer from going through with their scam, other times it won’t, but it’s always worth a try.

• Professional Scammers - These people have their scams figured out. They know what to say to make sure the marketplace or payment processor will side with them a majority of the time. They will not back down, no matter the threats you make, because in most cases they are not worried about the consequences of their actions. Many local police departments and the FBI will not truly investigate these internet scams due to a lack of resources. Do your best to work with the marketplace to respond to these scammers, but understand that you can't win them all.

Combating Fraud

There is no way to 100% prevent fraud — it’s part of doing business unfortunately, however, you can work to combat fraud. Here’s some methods you can use:

• Create detailed listings that use your own photos. Some fraudsters will prey on form listings that they think are less organized sellers. By including lots of details about your items and photos to show that you actually have the item, you are making yourself less of a target. Just be sure not to include sensitive information like serial numbers or MAC addresses if you sell electronics.

• Be aware as a new seller. Scammers know to take advantage of new sellers. If this is you, don’t be afraid to say no or take time to make a more informed decision before immediately responding to a buyer. Review online help guides from your marketplace’s support page. Ask other members on our Discord group. Open a support ticket. We’d rather help you avoid a scam situation than fix a situation where you’ve been scammed.

• Take individual photos of high value, serialized items. Expensive electronics are high targets of fraud. Take photos of these items to record serial numbers and send them to your buyers with their own identification (such as a packing slip or shipping label) somewhere in the photo. This provides you with photo evidence later if there is a dispute or case open with the marketplace.

• Promptly respond to requests, chargebacks, returns, and cases. By being prompt, you’ll make sure that you control the conversation as much as you can, not the scammer. By having a “home field advantage,” marketplaces will be more likely to side with you.

• Never change a buyer’s shipping address after payment or accept alternate forms of payment. Many platforms will not give you seller protection if you ship to a different address than was provided at checkout. While some buyers have legitimate requests to change their addresses, these requests are often scams. If buyers are persistent, feel free to offer them the opportunity to reorder the item to a new address and then you can cancel the first order. Also, don’t allow alternate payment — checks, gift cards to other stores, or weird cryptocurrency payments when not part of your list of accepted payment methods are usually suspicious.

• Understand that you will probably get scammed at some point. Again, this is just part of doing business. Do what you can to recover your losses, but you may ultimately need to call it quits and move on. Don’t take it personally — many marketplace systems are stacked against you as the seller when it comes to scams and fraud.

Responding as a Victim

So you’ve been scammed — what next?

• Be sure to collect and hold on to any evidence of the fraud. Print out digital records or messages and save items that are returned to you. Be sure to take photos of suspicious returns when the buyer claims an empty box, etc.

• Report the fraud to your marketplace or payment processor immediately. You may not win, but that doesn’t mean you shouldn’t try! The scammer might have already worn out their welcome when it comes to buyer protections on the marketplace or with the payment processor. If this is the case, the marketplace or payment processor may end up siding with you — yay! If not, your report may ultimately be used to help another seller win their case, so it never hurts.

• Make a report with the FBI’s IC3 internet crimes center and your local police department. This step is generally optional, but may be required by an individual marketplace or payment provider. You may simply want to file these reports so someone knows about the scam. While you may not receive an immediate response or a response at all, if this scammer is pulling fraud over and over again, the authorities may take a look.

• Block the buyer. Some marketplaces may allow you to block a buyer for any reason. If they have committed fraud against you, that would be a good reason to block them!

• Make peace. Yes, getting scammed is a terrible feeling. However, you must move on at some point. Think of all the good things going on in your business and refine your processes to minimize your fraud risk in the future.

We hope you feel more equipped to handle the nasty reality that is eCommerce fraud! As always, you can take advantage of our Discord community with your questions and concerns about fraud.