As global online retail continues to grow, so does the scale and sophistication of eCommerce fraud. The convenience of digital shopping has brought an influx of customers and a rise in fraudulent activity targeting online stores. From stolen credit card transactions to account takeovers and fake returns, fraud schemes are evolving in both volume and complexity.

According to Juniper Research, global losses to online payment fraud are expected to exceed $362 billion between 2023 and 2028, with annual losses reaching $91 billion by 2028. Meanwhile, the U.S. Federal Trade Commission (FTC) reported that consumers lost over $10 billion to fraud in 2023 alone, marking a 14% increase from the previous year. These numbers reflect a growing challenge for businesses operating in increasingly digital marketplaces.

For retailers, the impact goes beyond direct financial losses. Fraud damages brand reputation, erodes customer trust, and often results in costly chargebacks and operational disruptions. As consumer expectations for secure, seamless experiences rise, companies that fail to manage fraud effectively risk losing not just revenue but long-term customer loyalty.

Chargeback Fraud – When Customers Exploit the System

Chargeback fraud, sometimes called “friendly fraud,” happens when a customer uses their own credit or debit card to make a purchase, then falsely disputes the charge through their bank to get a refund — while keeping the product or benefiting from the service. Unlike traditional fraud, where a third party uses stolen payment details, this type of fraud is initiated by the actual cardholder, which makes it harder to detect and prevent.

There are several ways it occurs. A common scenario involves a customer receiving their order and then claiming it was never delivered. In digital transactions, like downloads, subscriptions, or online bookings, customers may argue they didn’t authorize the charge or never used the service, even when they clearly did. Some may even regret a purchase and use the chargeback system as an easier way to get their money back rather than contacting customer support or going through the standard return process.

The impact can be significant. A 2023 study by the Merchant Risk Council found that chargeback fraud costs businesses more than $20 billion annually, factoring in not just lost revenue but also penalties, investigation time, and higher payment processing fees. For smaller businesses and eCommerce platforms, even a modest volume of chargebacks can trigger account freezes or higher transaction costs.

Several real-world examples highlight how this plays out. A customer may order a designer handbag, receive it, and then claim the package never arrived. In other cases, subscription-based travel services or ticketing platforms see users who book and complete their trip, then file a dispute afterward. This type of abuse is particularly common in industries with intangible or non-returnable goods, such as digital media, virtual services, or travel experiences.

To help identify potential fraud, businesses should monitor for key red flags:

• Unusual refund or chargeback frequency, particularly from the same customer or IP range

• Mismatched billing and shipping addresses, especially with expedited shipping

• Multiple purchases from the same cardholder in a short time, followed by disputes

• Frequent use of international cards on domestic orders

• Disputes from customers with a history of similar behavior, often after full delivery or service use

Fighting chargeback fraud requires both prevention and documentation. Tools like address verification (AVS), 3D Secure authentication, and delivery confirmations help reduce risk. When disputes do occur, merchants should be prepared with strong evidence, such as tracking numbers, IP logs, order history, and customer communication, to submit during the chargeback resolution process.

Ultimately, chargeback fraud is a growing concern as digital commerce expands. Businesses must strike a balance between a smooth customer experience and smart, layered protection strategies to defend against abuse.

Bots – Automated Threats That Target Your Store

Automated bots are one of the fastest-growing threats in eCommerce fraud. While some bots serve helpful functions like indexing search engines or monitoring prices, malicious bots are often used to carry out attacks at scale, far faster and more efficiently than a human could. Fraudsters rely on bots to test stolen cards (carding), break into user accounts (credential stuffing), and create fake profiles to exploit loyalty programs or manipulate referral systems.

Carding bots test thousands of stolen credit card numbers across checkout pages, looking for valid combinations of number, CVV, and expiration date. Credential stuffing involves bots trying leaked username-password pairs across login forms, hoping that users have reused credentials. Other bots are programmed to rapidly fill out registration forms to create fake accounts that may later be used for fraud or to scrape data from protected sections of a site.

Several types of bots are commonly seen in these attacks:

• Simple script-based bots: Lightweight and easy to deploy, often used for mass form submissions.

• Headless browsers: More sophisticated, mimicking real users by executing JavaScript and rendering pages.

• Distributed bots: Operate across multiple IP addresses or devices to bypass basic security, like rate limiting or IP blocking.

Signs of bot activity aren’t always obvious, but some patterns stand out:

• Unusual traffic spikes at odd hours or from unexpected geographic regions

• High login failure rates in a short time window

• Form submissions or cart activity happening in milliseconds, far too fast for a real user

• Sudden increase in account registrations, often without verification or follow-through

Bots can overwhelm systems, distort analytics, and drive up infrastructure costs — all while setting the stage for fraud. To defend against them, businesses should consider using bot management tools that detect behavior anomalies, require CAPTCHA challenges, or analyze device fingerprints in real-time. Monitoring traffic patterns closely and setting stricter validation rules for key actions (like logins and purchases) can also limit exposure.

Account Takeovers – When Trust Becomes a Vulnerability

Account takeovers (ATOs) occur when a malicious actor gains unauthorized access to a legitimate user’s account, often using stolen credentials from phishing schemes, data breaches, or credential-stuffing attacks. Once inside, attackers may change account details, make fraudulent purchases, redeem loyalty points, or gain access to sensitive personal and payment information.

ATO incidents are increasingly common as users tend to reuse passwords across multiple platforms. If a password is exposed in one breach, it can be used to unlock accounts elsewhere — including eCommerce stores, booking platforms, and travel service portals. Sophisticated attackers may even lie low, monitoring accounts for a period before making high-value purchases or transferring account benefits.

The consequences of account takeovers extend far beyond financial loss. For customers, it’s a violation of trust. For businesses, it can mean chargebacks, support overhead, and reputational damage. A 2024 study by Javelin Strategy & Research reported that account takeover fraud caused over $11 billion in losses globally, with recovery often costing more in customer churn than direct fraud losses.

Several indicators may suggest an ATO is in progress:

• Sudden changes to personal information, such as email addresses or shipping details

• Unusual purchasing behavior, like high-value orders or digital gift card purchases

• Multiple failed login attempts, especially followed by a successful login from a new device or location

• Login sessions from unfamiliar geographies or IP addresses inconsistent with the user’s history

Detecting and blocking ATOs early is critical. Multi-factor authentication (MFA), behavioral analytics, and real-time monitoring of login patterns can help identify compromised accounts before damage is done. Ultimately, protecting customer accounts protects long-term brand trust — and strengthens your store’s defense against fraud.

Building Resilience – How to Detect and Prevent Fraud

Effective fraud prevention demands a multi-layered approach that addresses the unique tactics used in different types of fraud. For chargeback fraud, one of the most effective tools is two-factor authentication (2FA) at checkout or account login, which makes it harder for fraudsters to complete purchases or dispute transactions without verification. Additionally, collecting and storing strong evidence such as delivery confirmation, signed receipts, or IP address logs can help merchants successfully challenge fraudulent chargebacks.

Account takeovers require a combination of preventive measures focused on securing user credentials and monitoring behavior. Implementing multi-factor authentication (MFA) adds a crucial extra layer of security beyond passwords. Meanwhile, advanced behavioral analytics track unusual login patterns such as multiple failed attempts, sudden changes in account details, or logins from unfamiliar devices or geographic locations. These indicators trigger alerts or require additional verification before allowing access, significantly reducing the risk of unauthorized account access.

Bots, which automate large-scale attacks like credential stuffing or carding, require specialized defenses. Deploying bot management tools can distinguish legitimate human users from automated scripts by analyzing traffic patterns, browsing behavior, and interaction speed. These tools often include CAPTCHA challenges, device fingerprinting, and rate limiting to disrupt automated activity. Since bots evolve rapidly, ongoing monitoring and adaptive responses are necessary to stay ahead of new attack methods.

Across all fraud types, real-time monitoring and analytics are vital. By continuously examining transactions, logins, and traffic data as they happen, businesses can detect anomalies quickly and respond immediately. For example, spotting a sudden spike in refund requests or rapid repeated login failures allows companies to block suspicious activity before losses mount. This proactive approach not only reduces direct financial damage but also protects customer trust and brand reputation.

Partnering with experienced software developers can significantly strengthen your fraud defenses. COAX, a custom ecommerce development company, combines deep technical expertise with a strong focus on security and sustainability. COAX has developed a comprehensive security checklist tailored for online stores, guiding businesses through critical steps from secure payment integration to user verification and incident response planning. Their approach ensures that fraud prevention is built into the product from the ground up, not just patched on afterward.

Stay a Step Ahead

In today’s rapidly evolving digital landscape, fraud tactics are becoming increasingly sophisticated and harder to detect. Recognizing early signals—whether unusual transaction patterns, repeated login failures, or spikes in refund requests—is critical for preventing significant financial losses and protecting customer trust. The urgency to act quickly and decisively cannot be overstated.

To stay a step ahead, businesses must adopt smart, multi-layered prevention strategies that combine advanced authentication methods, real-time monitoring, and behavioral analytics. Partnering with experienced technology providers ensures these defenses are not only effective but continuously updated to counter emerging threats. By proactively addressing fraud, companies safeguard their revenue and reputation while delivering a secure experience that customers can rely on.