Ecommerce has transformed how businesses sell and how consumers shop. But with convenience comes vulnerability.

As online transactions grow, so do the tactics used by fraudsters and not all of them are obvious.

Some online fraud types are aggressive and deliberate, while others are subtle, even unintentional. Understanding these threats is the first step toward protecting your business.

In this article, we’ll break down the most common ecommerce fraud types, explain how they work, and highlight why they matter to you so that you can easily spot the warning signs before they affect your revenue.

1. Fake Orders and Card-Not-Present Fraud

One of the most common forms of ecommerce fraud is card-not-present (CNP) fraud, often seen as fake or fraudulent orders. In this scenario, criminals use stolen credit card details to place orders online, where no physical card verification is required.

How it works:

Fraudsters obtain card information through data breaches, phishing attacks, or dark web marketplaces.

They then place orders often for high-value or easily resold items and ship them to addresses they control or redirect later.

Why it’s dangerous:

When the real cardholder notices the unauthorized transaction, they file a chargeback. The merchant not only loses the product but also pays chargeback fees and risks higher processing costs or account termination.

Common red flags include:

  • Unusually large orders
  • Mismatched billing and shipping addresses
  • Multiple failed payment attempts
  • Rush shipping requests

2. Friendly Fraud (Chargeback Abuse)

Despite the name, friendly fraud is anything but friendly. This type of fraud occurs when a legitimate customer disputes a charge even though they made the purchase themselves.

How it works:

Customers may forget a purchase, fail to recognize the business name on their statement, or intentionally request a chargeback instead of contacting customer support. In some cases, buyers receive the product and still claim it was never delivered or was unauthorized.

Why it’s dangerous:

Friendly fraud accounts for a significant portion of ecommerce chargebacks and is difficult to prove. Banks often side with customers, leaving merchants with lost revenue and penalties.

Common reasons behind friendly fraud:

  • Confusing billing descriptors
  • Subscription renewals customers forgot about
  • Buyers trying to avoid return policies
  • Household members making purchases without consent

3. Account Takeover (ATO) Fraud

Account takeover fraud happens when criminals gain unauthorized access to a customer’s account and use stored payment details to place orders.

How it works:

Fraudsters use stolen login credentials from previous data breaches or phishing campaigns. Once inside, they change account details, place orders, and sometimes lock out the legitimate user.

Why it’s dangerous:

ATO fraud damages customer trust. Even if you refund the victim, the reputational damage can lead to lost long-term customers.

Warning signs include:

  • Sudden changes to account details
  • Logins from unfamiliar locations or devices
  • Unusual purchasing behavior
  • Multiple failed login attempts

4. Refund and Return Fraud

Refund fraud occurs when scammers manipulate return and refund policies for personal gain.

Common tactics include:

  • Claiming an item was damaged or never received
  • Returning counterfeit or used products instead of the original
  • Requesting refunds without returning items
  • Exploiting automated refund systems

Why it’s dangerous:

Overly generous refund policies can be exploited repeatedly, leading to inventory loss and operational strain. This type of fraud is particularly common in fashion, electronics, and subscription-based businesses.

5. Triangulation Fraud

Triangulation fraud is a sophisticated scheme involving three parties: the fraudster, an unsuspecting customer, and a legitimate retailer.

How it works:

A fraudster sets up a fake online storefront offering popular products at steep discounts. When a customer places an order, the fraudster uses stolen credit card details to purchase the item from a legitimate ecommerce site and ships it to the customer.

Why it’s dangerous:

Merchants see legitimate orders but later face chargebacks when the cardholder disputes the transaction. Meanwhile, the fake store disappears with the money.

6. Subscription Fraud

Subscription-based ecommerce businesses face unique fraud risks. Subscription fraud occurs when users sign up using stolen payment details or intentionally abuse free trials.

How it works:

Fraudsters may create multiple accounts to access free trials repeatedly or use compromised cards that will later trigger chargebacks.

Why it’s dangerous:

This fraud increases customer acquisition costs and skews performance metrics, making it harder to assess genuine growth.

7. Affiliate and Promotion Abuse

Affiliate fraud happens when users manipulate referral programs, discount codes, or promotional offers.

Examples include:

  • Self-referrals to earn rewards
  • Creating fake accounts to exploit first-time discounts
  • Using bots to generate affiliate traffic
  • Stacking unauthorized promo codes

Why it’s dangerous:

While less visible than payment fraud, promotion abuse can silently drain marketing budgets and distort campaign performance.

How Ecommerce Businesses Can Reduce Fraud Risk

No business can eliminate fraud entirely, but proactive measures can significantly reduce exposure:

  • Use layered fraud detection tools that analyze behavior, device data, and transaction patterns
  • Enable strong authentication, including two-factor authentication for accounts
  • Monitor chargeback ratios and dispute invalid claims
  • Train support teams to identify suspicious refund requests
  • Clarify billing descriptors and policies to reduce friendly fraud

Fraud prevention isn’t just about stopping criminals but it’s also about improving transparency and customer experience.

Final Thoughts

From fake orders to friendly fraud, ecommerce fraud takes many forms, and not all of them involve obvious bad actors. Some stem from policy loopholes, unclear communication, or evolving consumer behavior. The key is awareness.

By understanding the most common ecommerce fraud types and recognizing early warning signs, businesses can protect revenue, maintain customer trust, and grow with confidence in an increasingly digital marketplace.

While fraud tactics will keep changing, proactive defenses ensure your business stays one step ahead.