The Top 12 Types of Fraud Experienced by Merchants Worldwide

Top Types of Fraud 2024: Key Insights

• Top frauds: The leading type of fraud globally is refund/policy abuse, reported by 48% of merchants. It is followed by first-party misuse (45%) and phishing/pharming/whaling (42%).

• Frequency of fraud: All except one type of fraud on the list were reported by a higher share of survey respondents in 2024 compared to last year. Among these, first-party misuse, loyalty fraud, and triangulation schemes have seen the highest yearly increases.

• Regional variation: In North America and Europe, the top fraud is refund/policy abuse. In Asia Pacific, phishing/pharming/whaling ranks highest, whereas in Latin America, card testing is most widespread.

eCommerce has made shopping accessible from screens, but it has also unlocked many new doors for online scams.

Fraud takes many different faces in online retail, leaving eCommerce merchants vulnerable to wide-ranging fraudulent activities. There are well-known scams like returns policy abuse, alongside more complex ones like triangulation schemes. Knowing which types of frauds are most common empowers businesses to nip them in the bud.

We list and explain the top types of fraud merchants face in 2024, alongside yearly variation in their occurrence and, where applicable, regional differences.

Top Types of Fraud Merchants Face Globally, 2024

According to Global Fraud and Payments Report 2024 by Merchant Risk Council (MRC), online merchants face more fraud today than in previous years.

New types of fraud have broken into the top list. Moreover, the frequency of most types of fraud has increased from last year, with shuffles in each fraud type’s ranking also taking place.

The top 12 types of fraud are:

1. Refund / Policy Abuse

Merchants have identified refund/policy abuse as the leading fraud they encounter. Nearly half of all merchants around the world (48%) are impacted by it. Notably, this type of fraud was not listed in MRC’s surveys in the past years, but it ranks at the top in 2024.

Refund/policy abuse occurs when customers exploit the return policy to return items after using them, claim multiple refunds for a single product, or falsely claim they received damaged items or that the items were not delivered at all.

We previously covered this fraud’s prevalence in the U.S., with the data now revealing that is a global phenomenon. It is the top fraud in North America as well as Europe. It stands second and fifth in Asia Pacific and Latin America respectively.

2. First-Party Misuse  

The second most common fraud is first-party or friendly fraud: 45% of merchants have experienced it in 2024. This is a significant increase from last year, when 34% of merchants reported it.

This type of fraud occurs when individuals (“first party”), rather than professional fraudsters, defraud businesses in their role as customers. Typically, customers charge back the price of items they have already received. Whether done maliciously or unintentionally, it causes financial and reputational loss to businesses.

First-Party Misuse or Friendly Fraud ranks second in both North America and Europe. It stands fourth in Asia Pacific but is not so common in Latin America, where it does not make it to the top five.

3. Phishing / Pharming / Whaling

42% of respondents encountered Phishing, Pharming, or Whaling in their organization in 2024. Its ranking has dropped from last year, when it was the top type of fraud at a slightly higher rate of 43%.

The goal of this type of fraud is to obtain consumer credentials so that criminals can gain access to private banking information or online payment accounts. Pharming involves the creation of a fake website that tricks users into entering their credentials, while Whaling specifically targets high-profile members of organizations.

Phishing/pharming/whaling is the most recurring type of fraud in Asia Pacific. It ranks second in Latin America, and third in both North America and Europe.

4. Card Testing

Card testing ranks fourth, with 38% of merchants having experienced it in 2024. Its prevalence has increased compared to 2023, when 33% of merchants reported it.

Also called carding, this fraud involves fraudsters stealing credit card information and making small purchases to verify the card’s status. Through small transactions, they test whether the card is active, goes through without being denied or flagged, and can be used for more substantial fraud.

Card testing is the top ranked fraudulent activity in Latin America. It stands fourth in North America and Europe, while it does not rank in the top five for Asia Pacific.

5. Identity Theft

Identity theft impacts 36% of merchants across the world. Its incidence has also increased from the past year, when it was reported by 33% of survey respondents. However, its rank has dropped from fourth to fifth.

Identity theft involves physical theft of private information. Hackers obtain confidential data about an individual from online store databases, phishing scams, or devices at ATMs that capture card details. They use the stolen information to impersonate their victims and make fraudulent purchases. Consumers face loss through unauthorized transactions while businesses lose money from refunds or chargebacks.

Two regions report higher incidences of identity theft: it is the third-most occurring fraud in Latin America and ranks fifth in North America.

6. Coupon / Discount Abuse

34% of merchants report facing coupon/discount abuse in 2024, making it the sixth most prevalent type of fraud.

Fraudsters take advantage of company policies of discounts to illegally receive bigger benefits for a smaller price. They may exploit loopholes – for instance, create multiple new accounts to get new customer discounts or apply multiple coupons to a single purchase. Or they may actively use forged documents such as fake coupons.

Coupon/discount abuse ranks fifth in both Europe and Asia Pacific but is less common in both North America and Latin America, where it is not among the top five types of fraud.

7. Account Takeover

32% of merchants report fraud through account takeover. Its occurrence has increased 5 percentage points since 2023, when it ranked sixth.

Account takeover is like identity theft but has a narrower scope. Fraudsters generally obtain login credentials to misuse an existing account and make fraudulent eCommerce purchases.

From a regional perspective, Latin America reports a higher prevalence of account takeover, where it is the fourth most occurring fraud. It is less common in all other regions, where it doesn’t rank in the top five.

8. Loyalty Fraud

Loyalty fraud impacts 31% of merchants. While it has dropped one rank, its occurrence has significantly risen compared to last year – by 9 percentage points.

Also known as points or rewards fraud, loyalty fraud is like coupon/discount abuse. Customers may think of it as a “hack” to unfairly make the most of an existing loyalty program. But it can also be organized fraud, where criminals break into existing customer accounts to drain their loyalty rewards. In this case, it is preceded by an account takeover.

Loyalty fraud is the third most frequent type of fraud in Asia Pacific. It does not rank in the top five for North America, Europe, or Latin America.

9. Triangulation Schemes

A more sophisticated type of fraud, triangulation is reported by 26% of merchants in 2024. Its frequency has also surged considerably from 2023, when it ranked eleventh at 17%.

Triangulation Schemes involve fake sellers who exploit legitimate platforms, buyers, as well as sellers. Fraudster put up a fake listing on an online marketplace. After a buyer places their order, they use their payment and shipping information to place a new order with a legitimate seller.

In many cases, the customer may receive a lower-value item or nothing at all, after which they may initiate a chargeback against the legitimate seller, whose suffers loss.

10. Affiliate Fraud

A quarter of all survey respondents report facing affiliate fraud in 2024, making it the tenth most occurring fraud globally. Last year, 22% of merchants were affected by it.

Affiliate marketing is a way for businesses to increase traffic to their website by partnering with affiliates who direct consumers to their site. Merchants pay a commission to affiliates based on the leads or sales that they generate.

When this number is distorted, for example by generating fake engagement through bots, this is called Affiliate Fraud. Since merchants are forced to pay for non-genuine transactions, they incur direct loss.

11. Re-shipping

22% of merchants report re-shipping fraud. There has been a small increase in its occurrence since 2023 (20%).

In this type of fraud, criminals exploit individuals to receive, repackage, and re-ship products bought with stolen card information or any other type of fraud. The re-shippers are hired under false pretenses and may not be aware that they are participating in a fraudulent activity.

12. Botnets

21% of respondents report facing fraud from botnets. Its prevalence has gone up two percentage points compared to last year.

Botnets refer to devices, computer or mobile phones, that are infected with malware and controlled by cybercriminals. In eCommerce, botnets are used in various ways to cheat businesses.

For example, they can be used to steal login information and carry out an account takeover. They can also manipulate pay-per-clicks on ads placed on websites to get a share of the ad revenue.

Top Types of Fraud: Closing Remarks

The expansion of eCommerce has opened new avenues for cybercriminals who are tech-savvy and find it easier to commit fraud against online retailers whilst hiding their identity.

This has serious repercussions for eCommerce businesses. Not only do they stand to lose multimillion dollars, but such events are also likely to damage their customer relationships and market reputation.

Knowing the types of fraud and how common they are is the first step. The rising tide of fraud necessitates the use of advanced fraud management tools and capabilities to mitigate the risks. Merchants may benefit from modern technology such as AI, machine learning, and blockchain, whose effectiveness in curbing the alarming levels of eCommerce fraud is being researched.

Sources: Global Ecommerce Payments and Fraud Reports: 2024, 2023