Types of eCommerce Fraud: Common Schemes & How to Prevent Them

The most common types of eCommerce fraud include credit card fraud, chargeback fraud, account takeover, refund abuse, and subscription fraud.

These fraud schemes impact revenue, increase chargebacks, and expose online businesses to transaction-level risk. Understanding how they work — and how to prevent them — is essential for scalable eCommerce growth.

Understanding the different fraud types is the first step. Reducing fraud liability at scale often requires stronger infrastructure, including an eCommerce Merchant of Record (MoR) model.

Learn more about how Gapp Group supports enterprise transaction risk through its eCommerce Merchant of Record services.

What are the most common types of eCommerce fraud?

The most common types of eCommerce fraud include:

• Credit card fraud
• Chargeback fraud
• Friendly fraud
• Account takeover fraud
• Refund and return abuse
• Subscription fraud
• Promo and discount exploitation
• Identity-based fraud

Each type targets a different weakness in the online transaction lifecycle, from checkout to fulfillment to dispute resolution.

What is eCommerce fraud?

eCommerce fraud refers to any deceptive or illegal activity that occurs during an online purchase.

Fraud can happen:

• Before checkout (account compromise)
• During payment (stolen card use)
• After fulfillment (chargeback or refund abuse)

For merchants, fraud often leads to:

• Lost revenue and inventory
• Chargeback penalties
• Increased dispute and support workload
• Higher payment processing scrutiny
• Brand trust damage

Fraud prevention is now a core requirement for scaling modern eCommerce.

Quick summary: common eCommerce fraud schemes

• Credit card fraud → stolen payment credentials used online
• Chargeback fraud → customers dispute legitimate purchases
• Friendly fraud → misuse of chargebacks without criminal intent
• Account takeover → fraudsters hijack real customer accounts
• Refund abuse → illegitimate returns or “item not received” scams
• Subscription fraud → stolen cards used for recurring billing
• Promo abuse → discounts exploited through fake accounts or bots

What is credit card fraud in eCommerce?

Credit card fraud occurs when stolen card information is used to place unauthorized online orders.

This remains one of the most common fraud types because digital transactions do not require physical verification.

Common forms include:

• Stolen card purchases
• Automated card testing attacks
• Bot-driven checkout fraud

Merchants often discover the fraud only after fulfillment or chargeback disputes occur.

What is chargeback fraud?

Chargeback fraud happens when a buyer disputes a transaction to force a refund, even when the purchase was valid.

Chargebacks are expensive because they create:

• Lost revenue
• Chargeback fees
• Processor risk scoring impacts
• Potential payment account restrictions

For a deeper breakdown, see Merchant of Record vs payment gateway.

What is friendly fraud?

Friendly fraud is a type of chargeback fraud where the customer claims the transaction was unauthorized — even though they made the purchase.

It often happens when:

• Customers forget subscriptions
• Family members use shared cards
• Buyers exploit refund systems

Friendly fraud is difficult to prevent without strong dispute workflows, transaction evidence, and settlement accountability.

What is account takeover fraud?

Account takeover (ATO) fraud occurs when attackers gain access to legitimate customer accounts and place orders using saved payment methods.

Account takeover is rising due to:

• Credential stuffing
• Data breaches
• Weak password hygiene

Because the transaction appears legitimate, ATO fraud is especially costly for merchants.

What is refund and return fraud?

Refund fraud happens when customers manipulate return policies to receive money back without a valid return.

Examples include:

• Claiming an order never arrived
• Returning counterfeit or damaged goods
• “Empty box” return scams

Refund abuse is one of the most operationally draining fraud categories for eCommerce teams.

What is subscription fraud in eCommerce?

Subscription fraud targets recurring billing businesses by using stolen payment credentials to access services.

This often leads to:

• Chargeback spikes
• High churn
• Increased fraud screening costs

Recurring billing models benefit from layered fraud monitoring and structured liability management.

What is promo and discount abuse in eCommerce?

Promo fraud occurs when users exploit discount codes or referral incentives beyond intended limits.

Common tactics include:

• Fake account creation
• Bot-driven redemption
• Unauthorized stacking of offers

Promo abuse is often overlooked but can quietly destroy margins at scale.

How does a Merchant of Record help prevent eCommerce fraud?

A Merchant of Record acts as the entity that assumes legal and operational responsibility for transaction processing, compliance execution, and risk management.

Importantly, your business remains the Seller of Record, maintaining ownership of the product, customer relationship, and brand.

In its role as Merchant of Record, Gapp Group helps manage critical transaction responsibilities, including:

• Fraud detection and monitoring
• Chargeback and dispute management workflows
• Payment compliance infrastructure
• Risk controls across markets and regions
• Reduced exposure to transaction-level liability

Learn more about the MoR model here: eCommerce Merchant of Record.

For additional clarity, see Merchant of Record vs Seller of Record.

Is fraud prevention included in a Merchant of Record model?

Yes. Fraud prevention is one of the core operational benefits of working with a Merchant of Record.

Unlike standalone payment processors, an MoR model typically includes:

• Built-in fraud tooling
• Transaction monitoring
• Chargeback handling
• Compliance support
• Scalable risk infrastructure

This reduces the operational burden on internal teams while helping merchants grow safely.

Why fraud prevention is also a compliance issue

Fraud is closely tied to tax, regulatory, and payment compliance exposure.

As brands expand globally, fraud intersects with:

• Cross-border transaction risk
• Tax collection obligations
• Identity verification requirements

MoR solutions help merchants reduce fraud complexity while supporting compliant global commerce through structured transaction governance.

FAQ: Types of eCommerce Fraud

Reduce fraud exposure with Gapp Group

Fraud is not just a payment problem — it is a business liability and compliance problem.

Gapp Group helps eCommerce brands reduce fraud exposure, manage chargebacks, and scale globally through an enterprise Merchant of Record model built for modern risk.

To strengthen fraud protection while simplifying operations, contact Gapp Group.