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What is Internet Fraud? Types and How to Prevent it in E-commerce

Alexis Damen | January 8, 2024
What is Internet Fraud? Types and How to Prevent it in E-commerce

There’s nothing more demoralizing. You have products your customers need, you’ve created a great e-commerce site, and you’re providing an unbeatable service but one day, you discover you’ve become a victim of internet fraud. 

In this article, you’ll learn about the different types of internet fraud and the measures you can put in place to prevent it. 

Table of contents

What is internet fraud?

Internet fraud, or online fraud, describes criminal activities including identity theft, password and data theft, scams, and digital kidnappings, which are committed online. If you run an e-commerce site, it’s important to understand what can happen so you can reduce the possibility by putting adequate protections in place.

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Types of internet fraud

Online fraud isn’t just one thing. There are many types and criminals are often inventing or discovering more. Here are some of the most common:

E-commerce fraud

Online shopping fraud can be broken down into several categories, from identity theft to fraudulent credit card reward schemes. These e-commerce fraud practices can affect anyone but with the right knowledge and action, they can also be prevented. 

Triangulation fraud

This is a very difficult fraud to detect. A scammer creates a fake virtual store using an online marketplace selling a range of products at prices that seem too good to be true. Those prices are, in fact, too good to be true but once a customer buys one, the scammer uses a stolen credit card to purchase that item from a different retailer’s website. The customer ends up with stolen goods and the scammer escapes with the money received.

Phishing or email scams

A customer gets an email that looks almost identical to the ones they regularly receive from a bank or a utility provider. If asks them to fill in personal data to verify a process or links to a site offering a new service. Unfortunately, this email has come from a scammer and the URL is fake. Once the customer clicks on it, they inadvertently give sensitive information, including usernames, passwords, and bank details to fraudsters. Make sure your e-commerce site always has a valid security certificate and try to make customers aware of any URLs that don’t. 

Identity theft

There’s so much information on the internet that it’s no surprise identity theft is one of the most common types of internet fraud. Scammers assume another person’s identity and use it as their own, for various reasons. In e-commerce, it’s often to use a credit card in someone else’s name and make purchases with a stranger’s identity. 


Pharming is a more sophisticated version of phishing and it’s sadly harder to detect. It works by modifying DNS addresses so a website looks identical to the original and even has a credible URL. This allows the hacker to access sensitive data.

Credit card reward point fraud

Also known as loyalty fraud, rewards fraud, or points fraud, credit card reward point fraud exploits loyalty programs for personal gain. Reward schemes allow customers to save by spending. The more you spend, the more you get off future purposes. Scammers take advantage of this by asking for sensitive details to redeem certain rewards, which don’t exist. They’re more effective because the victim already trusts the reward scheme.

Clickbait scams

“What a trip! That’s right, you’ve won a trip for you and your family to the Bahamas! Click this link to confirm your prize.” This kind of clickbait has been around for a long time but it’s still tempting and it’s still effective. With this hoax, the scammer gains the user’s trust to obtain private information.

Online shopping fraud prevention

It’s important to understand the difference between a correct and a fraudulent operation in your online business. Here’s how:

  • Identify shopper data. It’s easier for fraud prevention tools to recognize common patterns with more data. Identify shopper data and share it to prevent fraudulent orders. You’ll need permission to share any customer data and you’ll need to keep it anonymous, to stay in line with data protection regulations like GDPR.
  • Make use of technology. Advances in technology make it easier for fraudsters but it also makes it easier to track and put prevention measures in place. For example, biometric authentication intelligence is a strong defense against multiple fraudulent practices.
  • Manually review risky orders. Although technology is a great help, if there are orders that raise a red flag, review them manually. For example, if you receive a low-value order from an unusual IP location, you might want to reach out to your customer for further verification. Scammers often make low value orders to test if a stolen credit card works.
  • Limit order quantities. A common scam for fraudsters is to order large quantities. Analyze “normal” sales and automatically block orders that are far above the average you sell each day. You can speak to your customer manually when you see a blocked order to check if it’s legitimate. 
  • Make a blocklist. A caught scammer isn’t necessarily a rehabilitated scammer. They could easily become a repeat offender, so once you’ve caught them, add them to a list. You need to be careful with these lists. A genuine customer might not realize their card information has been stolen. You could block them from using their card and they wouldn’t know why, unless you explain why an order is being blocked. 
  • Use the right payment gateway. With the right payment gateway, you’re one step ahead. Secure payments encrypt and transmit payment data with a payment processor. MONEI has 3D Secure 2.0 checkouts, PSD2, and PCI DSS Level 1 compliance, which helps to protect against online shopping fraud.

Protect your e-commerce store from internet fraud

When you understand the different types of internet fraud that exist, you can secure your business and focus on growth. Set up the right protections and make sure you use the best payment service provider (PSP), MONEI, to keep your payments secure.

Internet fraud FAQ

What was the first internet fraud?

Internet fraud began as early as 1994, with the start of e-commerce. As the potential for a faster, more convenient shopping experience developed, so did the potential for scammers. Initially, fraudsters would use a famous person's name with a stolen credit card to pay for a product online. That was quickly clamped down on but many more scams have developed since.

What is the most widely reported type of internet fraud?

Phishing is the most widely reported type of internet fraud but there are many others to be aware of, including pharming, identity theft, triangulation fraud, and credit card reward point fraud.

Was identity theft possible before the internet was invented?

Identity theft didn’t start as internet fraud. Thieves could steal your identity by going through your trash and discovering sensitive information from utility bills on bank statements you’d thrown out. Having said that, internet fraud makes it easier to steal identities as we keep so much information online.

Alexis Damen

Alexis Damen is the Head of Content at MONEI. She loves breaking down complex topics about payments, e-commerce, and retail to help merchants succeed (with MONEI as their payments partner, of course).

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