Fraud Exposed: Let’s Talk About Marketplace Fraud

Online marketplace sales are expected to surpass an astounding USD 400 billion in 2023 in the US alone. Whether it’s Amazon, eBay, or Alibaba, marketplaces have revolutionized the online shopping experience. Acting as a one-stop shop for a multitude of different products, marketplaces allow users to buy anything from a notebook to glow in the dark toilet paper on the same platform.  

But where opportunities rise, fraudsters tend to follow. Online marketplaces are a goldmine for fraudsters, who can either be the buyer or the seller. Let’s take a look at some of the common types of online marketplace fraud.

5 types of marketplace fraud 

1. Coupon abuse 

Marketplaces often offer incentives to draw new users to their platform (‘use code XYZ to get $10 off your first purchase’). They also offer one-off or seasonal discounts to retain their current users and incentivize them to purchase more. Fraudsters take advantage of this by creating multiple fake accounts, which allows them to refer themselves and re-use promo codes many times. Some fraudsters amplify this by using bots and emulators to abuse these promotions at scale. 

2. Fake seller rating

A product’s ranking on a marketplace contributes greatly to its visibility. Fraudsters will create fake accounts and give themselves positive ratings, and give their competitors negative ratings. Fake seller ratings also mislead buyers into purchasing a product that is not up to their expectations which can break trust between the user and platform. 

3. Account takeover (ATO)

An account takeover happens when a fraudster gains unauthorized access to a user’s account using stolen credentials. Once in the account, fraudsters buy and receive items using the account holder’s card details which are usually stored in the account. They can also change the login credentials to lock genuine users out, or resell the account credentials on the dark web. ATOs can also hinder trust. One bad encounter with fraud can break trust and cause users to use another marketplace. 

4. Flash sales abuse 

Online marketplaces often hold flash sales to sell items at low prices. During a flash sale, items are often sold extremely fast, often in a matter of minutes or even seconds. Fraudsters may use bots and emulators to buy items in bulk, which they then resell on other platforms at much higher prices. And because fraudsters use automation tools to purchase goods, they are able to buy up all the available promotional-priced items before genuine users.

5. Buyer-seller collusion 

Buyers and sellers sometimes work together to abuse rebates and rewards. Spending on marketplaces sometimes gives users certain rebates and rewards. Fraudsters can work with a seller to abuse this by buying an item and claiming the rewards. The seller will pay back the buyer the value of the item so that no money has been spent, but reward points have been obtained. The buyer and seller then split the rewards so in the end, the platform loses out. 

How SHIELD can help stop marketplace fraud 

SHIELD’s Risk Intelligence enables marketplaces to stop fraud and build trust, allowing them to stay one step ahead of fraud threats. The SHIELD ID and group of Risk Indicators allow online businesses to identify fake users and fake accounts, and know what tools are being used to commit fraud in real time. 

With online marketplace payments to hit an astronomical USD $8.7 trillion by 2025, it’s imperative that businesses are proactive in stopping fraud and building trust to supercharge their growth. 

Find out how SHIELD helps online businesses stop fraud and build trust