5 Types of Fraud That E-commerce Should Be Aware of

With a population of 265 million, Indonesia presents a significant market potential for the e-commerce industry. Nevertheless, similar to other sectors, e-commerce is not immune to the risk of fraud. Despite the implementation of advanced technologies, perpetrators persistently seek opportunities to commit fraud for financial gain.

Outlined below are five types of fraud that the e-commerce industry in Indonesia should be vigilant about:

1. Sellers fraud

There are always opportunities that can be used by mischievous sellers to dredge profits at the expense of others, for example, fake discounts. The sellers mark up the price of the item and give the unreasonable amount of discount to make the impression of huge discount. Another example, the buyers have sent the money for the items they bought, but the sellers never send the ordered items. In this case, e-commerce needs to strictly screen its sellers and monitor from time to time the sellers’ accounts in order to prevent this kind of fraud.

2. Employee fraud

Employee fraud is globally endemic. The world of e-commerce in Indonesia was shocked recently by the employee fraud took place in one of the giant e-commerce during the flash sale moment. A number of employees caused the users to be unable to get goods in a fair way. This act caused lost not only to consumers but also to the company’s brand.

The theft of goods or assets by employees is not the only risk has been faced by companies all over the world. The Employee can also try to redirect consumers’ money to their individual accounts. Companies can actually minimize the risk of fraud caused by the internal factor by tightening the employee recruitment process.

3. Fake review

Don’t underestimate the strength of a testimonial or review of services or product. Online shopping is not like conventional one where consumers can meet face to face with the seller and see firsthand the offered products. Other consumer reviews are the mainstay of a consumer in assessing a product or service sold online before deciding on a purchase. Unfortunately, not all reviews are honest.

Bing Liu, a professor of computer science from Chicago Illinois University, USA, revealed that about 30% of reviews for certain products are fake reviews. As for the results of the investigation of the Cornell research team, there were 10% of product reviews that were considered fake. The e-Commerce in Indonesia may need to learn from Amazon’s effort in coping with this such fraud. The e-commerce provides a review column for consumers who have purchased products on the platform and require them to include the photos of the purchased product when providing a review.

4. Delivery fraud

It is common to hear news of consumers expressing frustration due to their ordered goods never arriving, despite having transferred the payment to the seller. Upon investigation, it is often discovered that the goods were absconded with by a third-party courier. One measure that e-commerce platforms can take is to conduct thorough due diligence on prospective logistics vendors

5. Transaction fraud

According to a study in 2015, Indonesia ranked highest in e-commerce transaction fraud (35%) compared to Venezuela (33%), South Africa (25%), Brazil (11%) and Romania (10%). The fraudsters do various ways to cheat; one of them is identity theft.

The identity theft is often carried out in a mode called ‘triangle fraud’. The fraudsters usually create fictitious accounts in certain e-commerce, and then attract potential customers with various promos, encouraging them to make transactions and steal customers’ personal data – usually credit card information. As an effort to prevent this kind of fraud, the platform should have SLL certificate and implement a two-factor authentication method in transaction process with consumers.