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Seller Fraud at Online Marketplaces: How to Combat It?

Boaz Gam

Boaz Gam


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4 min
Article content
  1. Types of Risks Faced by Marketplaces
  2. What Forms Can Seller Fraud Take?
  3. Preventing Online Marketplace Fraud
  4. Bottom Line: Is Eliminating Seller Fraud at Marketplaces Possible?

Proven Tips to Combat Seller Fraud on Marketplaces

Ecommerce business expansion on online marketplaces inevitably goes hand in hand with the increasing risk of facing fraud. This is majorly due to the fact that modern marketplaces with embedded payments often act as payment facilitators for the merchants. Despite the fact that this practice allows transaction processing to be more intuitive and easily scalable, it also makes it more prone to malicious attacks.

Learn how marketplaces can anticipate and prevent fraudulent activity to avoid significant financial and reputational damage in this comprehensive guide.

Types of Risks Faced by Marketplaces

As a rule of thumb, the larger the marketplace, the higher the chances of it suffering from fraud coming from both buyers and sellers. Ironically, the approachability and accessibility of such platforms that make them so popular is the core reason behind their vulnerability to fraudulent activity.

There are three layers of risks when it comes to marketplaces, namely:

  1. Payment transaction risk. This is when a dishonest shopper performs a fraudulent purchase using stolen credit card details.
  2. Onboarding and Know Your Customer (KYC) risk. A situation that occurs when a new seller signs up to the platform with false information.
  3. Seller risk. In this case, a merchant that is already registered on the platform conducts fraudulent transactions.

The latter type has recently become increasingly disturbing to growing marketplaces, threatening their security and creating obstacles that prevent frictionless operations.

What Forms Can Seller Fraud Take?

Proven Tips to Combat Seller Fraud on Marketplaces

Seller fraud is the type of malicious activity common at scaling marketplaces when merchants are conducting fraudulent operations while feigning authenticity. They have different approaches to do so - for example, by means of creating multiple seller accounts.

The instances of such dishonest actions from merchants leave marketplaces with a dilemma A fraudulent seller gains access to the account of a genuine merchant to steal the funds or perform scams.of balancing between simple sign-up and onboarding processes and advanced authentication and security measures.

Besides, there are a plethora of modern fraud variations that are continuously evolving, such as:

  • Account takeovers.
  • Collusion. One entity performs the functions of both the seller and the buyer to process stolen bank cards or to transfer illegally acquired funds.
  • Fraud rings. Multiple seller accounts are created with the use of false personally identifiable information to hide fraudulent activity.
  • Synthetic fraud. The type of illegal activity on marketplaces when a user account combines actual personal information with fake data to generate new identities and establish fraudulent accounts.
  • Platform abuse. This category entails various scams like fake listings and non-delivered items, the goal of which is to steal money or personal data, as well as instances when the marketplace policies are abused.

Considering the large scale of some modern-day online marketplaces, all these fraud types can result in significant financial losses and a decrease of credibility rating among users.

Preventing Online Marketplace Fraud

Proven Tips to Combat Seller Fraud on Marketplaces

While the fraud situation at online marketplaces is indeed difficult, there are tech solutions that help to tackle it.

Payneteasy’s advanced risk- and dispute-management tools enable clients to achieve high sales with minimum risks. Our smart solutions include:

  • Multi-stage anti-fraud system. This tool thoroughly analyzes user traffic and effectively detects suspicious bank card transactions.
  • Seamless Ethoca integration. It ensures a lower chargeback ratio and improved fraud management.

Our risk and fraud management system based on machine learning enables fraud risk mitigation, saving funds, and maintaining an excellent impeccable reputation among the users.

With the presence of such a powerful fraud management infrastructure at the online marketplace, spotting and blocking seller fraud becomes a lot easier. Besides, it’s a long-term solution, as the algorithm will keep registering emerging signs of fraud and creating risk signals for them.

Bottom Line: Is Eliminating Seller Fraud at Marketplaces Possible?

Proven Tips to Combat Seller Fraud on Marketplaces

While the notion of fully eliminating seller fraud at online marketplaces is unrealistic, it’s possible to minimize the likelihood of malicious attacks. To do so, it’s critical to invest in state-of-the-art risk management software that offers all-round protection for the eCommerce platform alongside real-time fraud alerts.

After all, marketplaces create unique opportunities for small businesses to grow and thrive in an environment with an international outreach. That’s why it’s essential to prevent various fraud types from becoming an integral part of marketplaces and negatively affecting their credibility and sales volumes.

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