Due to the many different ways of committing fraud over the Internet, such as stolen credit cards, identity theft, phishing, and chargebacks, users of the Internet, including online merchants, financial institutions and consumers who make online purchases, must make sure to avoid or minimize the risk of falling prey to such scams.
First, there is the consumer who may be susceptible to giving away personal information in a phishing scam, or have it be acquired by rogue security software or a keylogger.
In a 2012 study, McAfee found that 1 in 6 computers do not have any sort of antivirus protection, making them very easy targets for such scams.
[3] Business owners and website hosts are also engaged in the ongoing battle to ensure that the users of their services are legitimate.
Financial institutions, such as credit card companies, who refund online customers and merchants who have been defrauded also have a strong interest in mitigating Internet fraud risk.
Using this method, the person committing the fraud would use stolen credit cards with the popular celebrity of the time's name.
Following the "Famous Names" strategies were more technical attacks in which hackers created card-generator applications that came with real credit card numbers.
Following the creation of the new account, the merchant would perform a series of third-party checks to validate the information provided by the consumer.
As auction sites like eBay and uBid gained popularity, new fraud methods arrived specifically targeting this new merchant community.
Preemptive steps to reduce chances of fraud include installing anti-virus software, keeping and maintaining current records, and reviewing statements and charges regularly.
Other safe practices include being cautious of account number distribution, keeping credit cards separate from a wallet or purse, keeping constant sight of credit cards, and drawing lines on blank spaces above the total on receipts.
On accounts in which one has saved card information, it is important to have a strong password with a mix of numbers and symbols.
[12] Individuals experiencing identity theft can take immediate steps to limit the damage to their finances and personal life.
The first step is to contact one of the three national credit reporting companies and place an initial fraud alert.
Phishing is a scam by which an e-mail user is duped into revealing personal or confidential information which the scammer (phisher) can use illicitly.
[14] Phishing is typically carried out by email spoofing or instant messaging, and it often directs users to enter details at a fake website whose look and feel are almost identical to the legitimate one.
Legislation, user training, public awareness, and technical security measures are all attempts to control the growing number of phishing attacks.
[15] As early as 2007, the adoption of anti-phishing strategies by businesses needing to protect personal and financial information was low.
[19] The concept of a chargeback rose as a measure of consumer protection taken by issuing banks and credit card companies.
With the rise of technology,[20] and the resulting increase in online and telephone transactions and commerce, it has become easier to commit fraud via chargebacks.
Finally, another common situation is where the customer buys a product, but then files a chargeback with their issuing bank claiming they never authorized such a transaction.
[21] Producers and merchants have responded to the rise of fraudulent chargeback claims and have implemented measures to combat friendly fraud.
[21] One of the best ways to prevent friendly fraudsters is for online merchants to require signatures for the delivered packages upon their arrival.
The drawback to signature confirmation is that it increases shipping costs, which still hurt producers' bottom line.
In some cases, chargebacks can be reduced by implementing more refined tracking tools to measure reasons for returns and employing more live customer service personnel and improving their training.
This technique employs fraud detection software based on algorithms and AI/machine learning, combined with manual review by customer service personnel.
Some of the newcomers in the field include Fraudio, Signifyd, Eye4Fraud, Kount, Riskified, Sift Science, Forter and Feedzai.