Ecommerce fraud FAQs

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A false decline is an online transaction that is rejected because it is wrongly identified as fraud. This happens when a merchant is trying to be cautious about fraud, but ends up over-declining good customers, which comes at a high cost.

According to INETCO, global losses from false declines reached a staggering $430 billion in 2021, up from $331 billion in 2018. The impact of these figures is multifaceted and extends well beyond the immediate lost sale. According to The Aite Group, merchants could lose up to 75 times more revenue to false declines than to actual fraud.

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An account takeover is a form of fraud that happens when a bad actor gains unauthorized access to an online store account. When fraudsters gain access to the online accounts of legitimate customers, they obtain a wealth of high-value information. The fraudulent transactions they are able to commit with this information are harder to detect and stop because they look like they are made by known customers.

 ATOs are also more damaging than other forms of card-not-present (CNP) fraud: in addition to the lost revenue from stolen loyalty points and the costs associated with chargebacks and reacting to fraud incidents, these attacks have a devastating impact on brand reputation and the lifetime value of a customer.

First-party fraud can be defined as when a cardholder makes a legitimate purchase, calls their issuing bank and says that they did not make the purchase–requesting for their money back. The issuer pays out the cardholder, which is in turn owed to the issuing bank by the merchant. There are two types of first-party fraud: Intentional and unintentional first-party fraud.

Unintentional first-party fraud arises from forgetfulness, a misunderstanding, or if the cardholder forgets they made the purchase or doesn’t recognize it on their billing statement.

Intentional first-party fraud carried out by illegitimate actors who intentionally abuse this system, claiming the transaction was unauthorized or the goods were never received/defective in order to defraud the merchant. This may also be a result of transaction descriptor or return period confusion, buyer’s remorse, family fraud. 

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