First-Party Fraud in Ecommerce: How Digital ID Verification Can Help

Explore the impact of first-party eCommerce fraud and how advanced digital ID verification solutions can safeguard your business. Learn the latest strategies and technologies to prevent fraud, protect revenue, and enhance customer trust.

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1. FIRST-PARTY FRAUD IN ECOMMERCE How Digital ID Verification Can Help

2. What Is First-Party Fraud? First-party fraud occurs when account holders exploit policies for personal gain, making it harder to detect than identity theft. A typical example is 'friendly fraud,' where customers dispute legitimate charges. A 2023 Socure study found that 35% of Americans admitted to first-party fraud, and 40% knew someone who did. This widespread issue resulted in over $100 billion in annual losses for U.S. financial institutions and merchants.

3. Types of First-Party Fraud Customers sometimes report unauthorized transactions for refunds even after receiving goods, causing businesses financial loss and security challenges. 1. Chargeback Abuse (Friendly Fraud) Wardrobe shopping, which involves buying, using, and returning items for a refund, is on the rise, especially for events like weddings. Retailers are combating this with stricter return policies and tracking. 2. Return Fraud Scammers use stolen credit cards to buy gift cards for resale or personal use, then falsely claim non-receipt for refunds. This fraud is hard to track and costly. 3. Gift Card Fraud

4. Types of First-Party Fraud This fraud occurs when customers falsely claim they did not receive a delivered order to get a refund or replacement despite having received the product. 4. Lost in Transit Fraud This fraud occurs when customers falsely claim to have received wrong or damaged items, often with fake evidence, in order to get a refund or replacement. 5. Item Not as Ordered Fraud Fake accounts exploit payment systems and promotions by making unauthorized transactions and abusing discounts intended for genuine users. 6. Ghost Funding

5. Why Solving First-Party Fraud Is So Difficult Identifying first-party fraud is challenging as it's hard to distinguish between honest mistakes and intentional abuse. For example, an online retailer selling high-end electronics might face a customer disputing a laptop purchase, claiming non-receipt. The retailer must then prove delivery and manage costly chargebacks. Insufficient identity verification during account creation allows for fake accounts. How Weak Verification in Ecommerce Enables FPF Lack of strong transaction monitoring allows suspicious activities to be overlooked. Weak return policies allow fraudsters to easily commit return fraud. Inadequate delivery confirmation processes lead to lost-in-transit fraud claims.

6. Digital Identity Verification to Prevent (FPF) First-Party Fraud Verifying Real Customers When conducting an e-commerce transaction, the customer is typically not present in person. Consequently, verifying their identity becomes significantly more difficult. Liveness Detection During checkout, customers take a selfie. Facial recognition with liveness detection ensures they're real, not a photo or mask, preventing fraud with stolen credit cards or identities. Account Match Verification The selfie can be matched to a submitted government ID photo, verifying the purchaser's identity and reducing the risk of fraudulent transactions using compromised accounts.

7. Digital Identity Verification to Prevent (FPF) First-Party Fraud Improving the Dispute Process Strengthens Identity Proof Gives Content for Disputes Reduces Unnecessary Chargebacks Prevents Fake Accounts Preventing Lost in Transit (LIT) Fraud Account History Linked Information Deterrence Preventing Return Fraud Account History Deterrence

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