E-Commerce Fraud Prevention: A Complete Guide for Online Merchants 2026

According to estimations, by 2027, the e-commerce market is expected to total over $7.9 trillion. Global e-commerce continues to grow rapidly, but so does the scale of online fraud. Annual losses to global online payment fraud, including e-commerce-related, are projected to exceed $107 billion by 2029.

With Sumsub’s Identity Fraud Report revealing that 2.2% of all identity verification attempts are fraudulent, there is growing pressure on online businesses as fraud becomes more sophisticated and easier to scale than ever before. This report identifies e-commerce as one of the top 10 industries most affected by fraud, highlighting the sector's vulnerability to increasingly organized criminal activity. In 2026, fraud operations are transnational and cross-border. Card data stolen in one country is often used in another, which complicates enforcement and investigation.

This makes e-commerce fraud prevention essential for online merchants. From stolen card details and chargeback abuse to account takeovers, fraudsters exploit weaknesses in online businesses wherever they can find them.

This guide explains how e-commerce fraud works and outlines practical payment fraud prevention strategies for online merchants.

What is e-commerce fraud?

E-commerce fraud occurs when criminals exploit online stores, their infrastructure, or their customers for financial gain.

Scams can involve using stolen payment details, compromised or synthetic customer accounts, and abusing refund policies. The online nature of e-commerce and rapid technological development allow fraudsters to use automation, synthetic identities, and large databases of stolen payment information to target merchants at scale.

How e-commerce fraud affects businesses

E-commerce fraud can have serious consequences for online merchants. Businesses may lose inventory, reimburse fraudulent claims, and incur chargeback fees, processing costs, and dispute-handling expenses. The financial impact of online payment fraud can accumulate quickly, especially for retailers handling large transaction volumes. 

Incidents of fraud can also increase operational costs as companies invest more resources in investigations and customer support.

E-commerce fraud can also lead to reputational damage and erode trust, which may be incredibly difficult to rebuild. Implementing effective payment fraud prevention measures helps businesses reduce financial losses while maintaining invaluable customer confidence.

Latest payment and e-commerce fraud trends and statistics

The 2026 Interpol Global Financial Fraud Threat Assessment found that financial fraud in general had resulted in an estimated loss of $442 billion globally in 2025, with criminal networks using advanced technology and cross-border operations to target businesses and consumers alike.

Several major trends are shaping the e-commerce fraud landscape:

• Card-not-present fraud dominates online payments. In the UK, around 70% of card fraud losses occur in card-not-present environments, including e-commerce transactions where physical card verification is not required.
• Digital skimming and supply-chain attacks are on the rise. Cybercriminal groups are increasingly infecting e-commerce websites with payment-skimming malware (Magecart attacks) to steal customer card data during checkout.
• Chargeback fraud is increasing. Mastercard projects global chargeback losses to grow from $33.79 billion in 2025 to $41.69 billion by 2028.
• Account takeover attacks are accelerating. Account takeover cases surged by 155% in 2023 and 250% in 2024, and the numbers are expected to keep growing.
• Fraud is becoming more technologically sophisticated. According to Interpol, agentic AI is being used to automate scams, while easy-to-make deepfakes and synthetic identities can fool basic security checks. Law-enforcement agencies warn that new technologies are enabling fraud at an unprecedented scale, with 49% of surveyed companies reporting they had experienced deepfake fraud. AI tools are increasingly used for phishing, voice cloning, and automated scams.
• Organized crime groups are increasingly involved in fraud. This links e-commerce fraud to money laundering and other serious crimes. Large international enforcement operations demonstrate the scale of organized fraud. In Interpol’s Operation HAECHI VI, investigators targeting cyber-enabled financial crime blocked over 68,000 bank accounts and froze hundreds of cryptocurrency wallets linked to fraud and related money-laundering activities.
• Fraud operations are becoming highly globalized. Criminals are targeting victims and businesses across multiple jurisdictions. Interpol notes that payment card data stolen in one country is frequently sold online and used in another, making fraud investigations more complex and harder to prosecute.

These trends highlight the growing need for stronger fraud controls in e-commerce.

Types of e-commerce fraud

Online merchants are at risk of a wide range of rapidly evolving fraud types. Below are some of the most common threats affecting online retailers today.

Chargeback fraud

Chargeback abuse, sometimes referred to in industry usage as ‘friendly fraud’, may arise where a customer disputes a legitimate transaction without valid grounds. The customer may claim the transaction was unauthorized.

In a successful case of e-commerce chargeback fraud, the dispute is approved, and the merchant may lose both the customer’s payment and the product, while also potentially incurring chargeback fees or penalties from payment processors.

Suggested read: What Is Chargeback Fraud and How to Prevent It

Credit card fraud and carding

Credit card fraud is a common form of e-commerce fraud and occurs when criminals use stolen payment card details to make unauthorized purchases. Criminals often obtain these details through phishing attacks, data breaches, malware, or by purchasing card information from dark web marketplaces.

In this form of online payment fraud, criminals often make small transactions to check whether there’s an outstanding balance and whether stolen card details work. This is called card testing fraud and may be carried out using an automated script, allowing criminals to test large numbers of cards quickly against e-commerce merchants with poor transaction monitoring systems. Carding commonly refers to the testing or use of stolen card details, often at scale. 

Refund abuse

Refund abuse is when individuals take advantage of return policies to receive money, goods, or store credit without a legitimate basis. Fraudsters may claim that a product never arrived or even return empty packages. Effective fraud risk management practices can help merchants detect suspicious refund activity linked to e-commerce fraud.

Account takeover fraud

Account takeover fraud is when criminals gain unauthorized access to a customer account using stolen credentials. There is an increased risk of this happening after data breaches, but phishing attacks, malware, and dark web marketplaces can also be used to obtain login details.  

Once inside the account, fraudsters may change shipping details, steal customer rewards, or use stored payment methods to place fraudulent orders. Strong account takeover prevention measures, such as multi-factor authentication, can reduce the risk of this type of e-commerce fraud.

Promo abuse

Promotion abuse occurs when users manipulate discounts, coupons, referral programs, or loyalty mechanisms in violation of platform rules or commercial intent. Fraudsters may create multiple accounts to repeatedly claim sign-up bonuses or free trials. 

While cases may involve small amounts of money, large-scale promo abuse can lead to larger losses if effective fraud risk management is not used to detect signs of e-commerce fraud.

Triangulation fraud

Triangulation fraud is a sophisticated form of online payment fraud involving a legitimate merchant, a legitimate customer, and a fraudster operating a fake online store.

In this scenario, the fraudster creates a fake website offering products at attractive prices. When a customer is lured by low prices and places an order, the fraudster steals their payment details. The fraudster then purchases the same item from a legitimate merchant using payment details stolen from another victim, with the product shipped to the legitimate customer.

While the customer receives their order, the legitimate merchant processes a transaction funded by stolen card details. Eventually, the cardholder disputes the charge, leaving the merchant responsible for the loss, and giving the fraudster the card details of a new victim.

This may also involve card testing fraud, with criminals checking stolen payment details before making larger purchases.

Synthetic identity fraud

Synthetic identity fraud happens when criminals combine real and fabricated personal information to create entirely new identities.

A fraudster may use a legitimate national ID number alongside a fictitious name. These synthetic identities can then be used to open accounts, place orders, or bypass basic verification checks.

As synthetic identities become more sophisticated, merchants are using online identity-verification tools to detect suspicious patterns and prevent this form of e-commerce fraud.

Credential stuffing and bot attacks

Credential stuffing is when attackers use automated bots to test large numbers of stolen username-and-password combinations across multiple websites. Unfortunately, many people reuse the same login details across platforms; this poor cybersecurity hygiene often leads to compromised accounts. Implementing strong account takeover prevention measures can help protect e-commerce platforms from being exposed to this type of fraud.

Digital skimming

Digital skimming, also known as e-skimming or Magecart attacks, happens when malicious code is injected into an e-commerce website to steal customers’ payment details at checkout. This can happen through compromised websites, third parties, servers, or vulnerabilities in the site’s code. Stolen card data is then sold on the dark web or used for further online payment fraud.

Suggested read: Card Cloning Fraud in 2026: What It Is & How to Prevent It

Interception fraud

Interception fraud is when criminals use stolen payment details to place orders using the cardholder’s legitimate billing and shipping address, allowing the transaction to pass initial checks. After the order is placed, the fraudster attempts to intercept the delivery, such as by rerouting the package, contacting customer support to change the address, or physically collecting it before the real customer receives it. Because the transaction appears legitimate at first, interception fraud can be difficult for merchants to detect. Merchants may only discover the fraud after a chargeback is filed.

Reshipping fraud

Reshipping fraud involves fraudsters recruiting individuals, sometimes unknowingly, with attractive work-from-home opportunities, as “reshipping mules” who forward stolen goods to another location. Goods purchased using stolen payment details are first delivered to the mule and then redirected to the fraudster. This makes it harder to trace the final destination of fraudulent orders and exposes mules to serious legal consequences.

Money laundering through e-commerce

According to the United Nations Office on Drugs and Crime, an estimated 2-5% of global GDP is laundered each year. E-commerce platforms can present money laundering risks due to their high transaction volumes and cross-border nature.

One common method involves fake or complicit online stores that process payments for nonexistent goods or services. The transactions appear legitimate, allowing criminals to disguise illicit funds as revenue from online sales.

Another method involves self-purchases, where fraudsters use illicit funds to buy goods from their own marketplace accounts, generating seemingly legitimate merchant revenue. Typologies identified by the Financial Action Task Force and other studies show that online marketplaces can be exploited for money laundering due to their high transaction volumes and cross-border nature, including through fictitious transactions and the use of controlled buyer and seller accounts to circulate funds.

Transaction laundering

Transaction laundering is a specific typology within money laundering. It occurs when criminals process payments for illegal or prohibited goods or services through a legitimate merchant account, disguising the true nature of the underlying transactions. Similar to traditional money laundering, bad actors present themselves as legitimate businesses to conceal illicit activity and misrepresent the origin of funds. This typology is particularly prevalent in e-commerce, where criminals exploit weak onboarding and transaction monitoring controls to obtain and misuse merchant accounts.

How to detect e-commerce fraud

Detecting e-commerce fraud early is essential for minimizing financial and reputational losses for online merchants. Fraudsters often rely on speed, automation, and the exploitation of outdated systems, which means suspicious activity can escalate quickly if it goes unnoticed.

Warning signs of suspicious transactions

Fraudulent behavior often differs from legitimate customer activity. Learning to recognize these signals is a key component of fraud detection in e-commerce and helps merchants identify potential e-commerce fraud before losses occur.

Common red flags include:

🚩Unusually large or high-value purchases, particularly from new accounts

🚩Multiple transactions in rapid succession, indicating automated activity

🚩Shipping and billing address mismatches

🚩Shipments directed to locations or forwarding arrangements that do not align with the customer's profile or transaction history may raise concerns

🚩Multiple declined payment attempts

🚩Sudden changes to account details

🚩Multiple accounts linked to the same device, IP address, or payment method

Monitoring these patterns is a fundamental part of maintaining strong e-commerce security and protecting online merchants from financial losses.

E-commerce fraud prevention strategies

Fraudsters often combine stolen credentials, bots, and compromised payment details, making them difficult to detect through rudimentary checks. 

Effective e-commerce fraud prevention strategies combine multiple layers of protection, including identity verification, transaction monitoring, and behavioral analysis, within a proactive fraud risk management framework.

Below are several key strategies businesses can implement to strengthen their fraud defenses.

Risk-based approach to customer verification

An effective way to balance security with user experience is to implement a risk-based approach. Rather than applying the same verification requirements to every transaction, businesses can evaluate risk levels and only apply additional checks when necessary.

For example, a returning customer making a routine purchase may require minimal verification, while a large transaction from a new device may trigger extra checks.

When integrated into a fraud-risk management strategy, risk-based authentication can improve e-commerce fraud prevention without negatively affecting conversion rates.

Identity verification for online stores

To improve e-commerce fraud prevention, robust online identity verification helps merchants confirm customer identities before approving transactions. Identity verification may involve verifying government-issued ID or biometric data during registration or high-risk transactions. These controls strengthen e-commerce security and reduce risks such as account takeover and payment fraud. However, verification at onboarding is not enough to protect from all e-commerce-related fraud, as most fraud, according to Sumsub research, occurs after the onboarding stage.

Real-time transaction monitoring

While identifying red flags is important, effective fraud prevention requires transaction monitoring in real time to detect suspicious activity before fraud occurs. Anti-fraud systems use behavioral fraud detection to analyze patterns, such as device fingerprints, geolocation data, and purchasing behavior.

By comparing new activity against established patterns, these systems can flag suspicious transactions and support stronger fraud risk management.

AI-powered behavioral fraud detection

Traditional rule-based systems struggle to keep up with the rapid evolution of fraud, especially with the use of complex fraud networks and AI. To address advanced fraud effectively, it is crucial to implement advanced behavioral fraud detection tools.

AI-powered fraud prevention software can detect complex fraud patterns that would be difficult for manual systems to identify, providing a powerful layer of e-commerce fraud prevention.

Multi-factor authentication best practices

Multi-factor authentication adds an extra layer of protection by requiring users to verify their identity with multiple authentication factors, such as one-time passcodes, biometric verification, or authentication apps.

This is one of the most effective ways to strengthen account takeover prevention, particularly when combined with risk-based authentication systems that flag suspicious activity and improve overall e-commerce security.

Encrypting transactions and secure infrastructure

Strong infrastructure and encryption are fundamental to e-commerce security, protecting sensitive customer data by ensuring confidentiality and integrity during transmission and storage. Secure payment gateways, encrypted data transmission, and compliance with standards such as those set by the PCI Security Standards Council help safeguard cardholder information and reduce the risk of data breaches.

However, encryption alone does not detect suspicious activity. Effective fraud prevention requires complementary controls, including transaction monitoring, logging, and analytics systems that can identify unusual patterns and potential fraud. Together, these layered measures strengthen overall payment security and fraud risk management.

Fraud prevention tools for e-commerce

Implementing the strategies above requires the right technological tools. Fraudsters exploit weaknesses across multiple stages of the customer journey, which means merchants need systems that monitor activity throughout the entire customer lifecycle.

Common fraud prevention tools used in e-commerce include:

• Transaction monitoring systems for detecting suspicious payments in real time
• Device fingerprinting technology to identify devices and detect suspicious access patterns
• Behavioral analytics tools that analyze user activity to identify anomalies
• KYC identity verification platforms for confirming customer identities
• KYB verification tools for verifying business partners and marketplace sellers
• Risk scoring systems that evaluate transactions and trigger additional verification checks

These tools work together to detect suspicious activity, block fraudulent transactions, and support a comprehensive fraud risk management strategy.

Suggested read: What Is Fraud Scoring? A Guide for Businesses 

E-commerce compliance and regulations

Online merchants also need to comply with regulations designed to protect customer data and combat financial crime. Failure to meet regulatory requirements may expose merchants to financial penalties, reputational damage, and increased vulnerability to fraud.

PCI DSS standards for online merchants

The PCI DSS is an industry security standard that establishes baseline technical and operational requirements for environments where payment account data is stored, processed, or transmitted. To comply with PCI DSS, e-commerce merchants must implement safeguards such as secure network architecture, encryption of payment data, access controls, and regular security testing. Guidance from the PCI Security Standards Council (PCI SSC) published in 2025 specifically addresses Requirements 6.4.3 and 11.6.1, focusing on payment-page script integrity and tamper detection.

Compliance with PCI DSS is a core element of e-commerce security, as these measures help protect sensitive payment information and strengthen overall fraud prevention.

Financial crime obligations for e-commerce businesses

AML obligations do not apply to all e-commerce businesses; however, financial crime risks are relevant across the sector. Where AML or related financial crime controls apply—depending on the business model and jurisdiction—requirements may include transaction monitoring, customer due diligence, sanctions screening, and suspicious activity reporting.

Even where formal AML obligations do not apply, e-commerce businesses often implement fraud prevention and risk monitoring measures, including those required by payment providers or card networks. These measures help identify and mitigate risks such as fraud and transaction laundering, where criminals disguise illegal transactions by routing them through legitimate e-commerce merchants.

E-commerce fraud FAQ

• What is e-commerce fraud?

  E-commerce fraud refers to deceptive or illegal activities in online transactions where criminals exploit merchants, payment systems, or customers for financial gain. Common types include stolen card use, account takeover, refund abuse, and chargeback fraud.

• How can you prevent e-commerce fraud?

  Effective e-commerce fraud prevention requires a layered approach combining controls such as identity verification, transaction monitoring, and secure payment processing. Businesses often use fraud detection tools, including behavioral analytics and rules-based systems, to identify and mitigate suspicious activity.

• What types of fraud target online stores?

  Online stores are commonly targeted by fraud types such as payment fraud (e.g., stolen card use), account takeover, refund and return abuse, promo abuse, and triangulation fraud. Strong fraud risk management practices help detect and reduce exposure to these threats.

• How can you detect fraud in online transactions?

  Fraud can be detected by monitoring for unusual patterns such as mismatched customer details, rapid or repeated transactions, and abnormal purchasing behavior. Transaction monitoring systems and risk-based analysis help identify potentially fraudulent activity.

• What is chargeback fraud?

  Chargeback fraud, often referred to as friendly fraud, occurs when a customer disputes a legitimate transaction with their bank, typically after receiving the goods or services. This can result in financial losses for merchants, including the value of the transaction, the product, and additional fees.