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6 Types of Fraud That Can Affect Subscription Businesses

Updated: Feb 1

Online fraud is almost the same size as world health or global military expenditures, in 2021 alone fraud has cost the global economy 5.1 trillion dollars in losses. A huge problem indeed, and one of the fastest-growing forms of theft. Nowadays, businesses are obligated to focus more of their time and effort on fraud prevention practices for the safety of their websites, employees, and most importantly their customer data. The problem is that fraud comes in many different forms and shapes, and so do the risks associated with it. Depending on the level of security measures you have in place, your business might be either subject to a full data breach or potential financial loss. However, the more devastating side of fraud can be experienced through reputation damage.

What is Fraud?

Fraud is any deceitful or unlawful act aimed to mislead and deceive another person or organization into giving up value. Fraud is not just limited to financial losses, any form of deception or dishonesty for exploitative reasons can be considered fraud. However, the main concern should be on one’s ability to identify and prevent the main types of fraud that can affect your business. In the following section, six of the most common types of fraud will be discussed, giving you a better understanding of what to look out for.

6 Types of Fraud You Should Know About:

Identity Fraud

Identity fraud is one of the bigger umbrellas of fraud that many other types of fraud fall under. But to put it simply, identity fraud includes any form of illegal usage of someone’s personal information without their prior knowledge or consent. That can include financial identity theft, medical identity theft, and business identity theft.

Account Takeover (ATO)

Account takeover is when a fraudster gets a hold of your customer’s account credentials via shady phishing links or poor account security. Thus, allowing the intruder to get a hold of your client’s sensitive information as well as their payment and shipping details. This will severely impact your brand’s reputation and leave a very bad sentiment on your general customer experience. 

Card-Not-Present (Card testing) Fraud

CNP fraud occurs when criminals attempt to create illegal transactions using thousands of stolen credit card information to determine the validity of an individual card. Transactions have stifling effects on e-commerce websites, news or media platforms, and basically, any business that has an active subscription process.

Fake Account Creation (FAC) Fraud

Fake account creation fraud exists primarily because of card testers. In order for card testers to test their illegitimately acquired cards, they have to create thousands of fake accounts using bots to test for active cards. This process can have dire implications on data integrity, site speed, and the website’s overall user experience.

Insurance Fraud (IF)

Insurance fraud mainly is related to customers or clients submitting fake or inflated insurance claims based on false information seeking to defraud and illegally benefit from the insurer. Insurance fraud costs the industry $80 billion each year.

Friendly Fraud (FF)

Friendly fraud is when customers either subscribe to a certain service or buy a certain product with their credit cards, and then dispute the charges with the associated bank once they have already benefited from them. Making it seem like they have been wrongfully charged for something they didn’t request.

To learn more about how to effectively combat the six types of fraud listed above, join us in our upcoming Fraud Prevention Webinar. If you are looking to learn more about what Pelcro can do for your business, schedule a demo call with one of our experts, or get started with a free trial and find out today.


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