Auto parts businesses are thriving in the digital space, offering a wide array of products that serve both car enthusiasts and everyday drivers. But as eCommerce expands, so does the risk of fraud. Auto parts stores are particularly vulnerable due to the high-ticket nature of their products, which can be easily resold, making them attractive targets for fraudsters. 

Understanding the types of fraud that threaten your business and knowing how to combat them is key to preserving profitability and building customer trust, ensuring shoppers return to your store.

Here’s a breakdown of the common types of eCommerce fraud faced by auto parts businesses and the steps you can take to defend your shop.

1. Payment Fraud

Payment fraud occurs when stolen credit card information is used to make a purchase. This is the most common type of fraud auto parts businesses face, especially since high-value products like engines, tires, and electronics can be resold quickly. 

Fraudsters will also often engage in “card testing” by making small purchases to verify the validity of a stolen card. Once a card is deemed valid, larger purchases, such as high-ticket auto parts, follow. The business only realizes the fraud after chargebacks start rolling in, causing financial strain and loss of inventory.

How to fight back:

• Implement fraud detection systems like NoFraud that automatically detect and prevent fraudulent transactions in real time. These tools use advanced AI algorithms to analyze patterns, flag suspicious activity, and stop fraud before it happens.
• Set up velocity checks, also known as velocity rules, to track the frequency and volume of activities like transactions or login attempts within a defined time period. These checks are especially useful in identifying and preventing fraud patterns such as card testing, account takeovers, and other fraudulent behaviors involving quick, repeated actions. 
• Systems like NoFraud can identify patterns typical of card testing (e.g., multiple small transactions from the same IP address) and block them before larger purchases occur.

2. Account Takeover Fraud

Account takeover fraud happens when a fraudster gains access to a customer’s account and makes unauthorized purchases. Auto parts stores with loyalty programs or account-based shopping options are particularly vulnerable to this because fraudsters know these accounts offer high-demand, high-value opportunities for them. 

When account takeover happens, it’s often the result of weak passwords, phishing scams, or database leaks. Fraudsters can drain store credit, loyalty points, and make expensive purchases, leaving legitimate customers frustrated and leading to brand distrust.

How to fight back:

• Add Multi-Factor Authentication (MFA) to customer accounts to provide an extra layer of protection. This ensures that even if login credentials are compromised, fraudsters will still need access to the customer’s phone or email.
• Implement mechanisms to lock out or prevent login attempts after a certain number of failed login tries. After a set number of failed attempts, lock the account temporarily to prevent brute-force attacks.
• Use a strong fraud prevention solution to continuously monitor account activity, alerting customers and businesses of any suspicious behavior and blocking unauthorized access.

3. Refund Fraud

Refund fraud, also known as return fraud, occurs when fraudsters exploit your return or refund policies for financial gain without a valid cause. Common tactics include falsely claiming an item was never received (known as Item Not Received or INR fraud) or returning used or damaged products for a full refund. 

Fraudsters may also engage in product swapping, bricking (returning a non-functioning item), or using a Fake Tracking ID (FTID) to manipulate tracking information, making it appear as though the returned item was delivered when it wasn’t. This type of fraud can easily go unnoticed without the right systems in place.

How to fight back:

• Tighten your return and refund policies to minimize loopholes. For example, have customers present a QR code at a shipping drop-off center so the center can generate the label, ensuring customers cannot tamper with the tracking information.
• Do not issue refunds when the return package is scanned. Rather, issue them after the returned goods are inspected.
• Retain records of shipping receipts, tracking numbers, proof of delivery, and any communication with the customer regarding shipment.
• Implement serialized tracking for products, ensuring each item has a unique identifier. This makes it harder to return items fraudulently purchased or acquired elsewhere.
• Use a robust fraud prevention solution that can help flag suspicious refund requests. A great solution can analyze behavioral data to detect patterns typical of refund fraud, helping you avoid these scams.

4. Chargeback Fraud (Friendly Fraud)

Chargeback fraud, also known as friendly fraud, occurs when a legitimate customer disputes a transaction despite receiving the goods or services, resulting in a forced refund from the payment processor, which ultimately comes out of the merchant’s pocket. 

While not always malicious, friendly fraud costs businesses billions annually. Studies reveal that up to 80% of cases involve consumers seeking convenience rather than consciously attempting fraud. Customers may forget about purchases or unintentionally abuse the chargeback system, claiming they never authorized a purchase or that the product wasn’t as described.

How to fight back:

• Provide clear, transparent communication with customers throughout the purchasing process. Ensure all tracking information is available, and keep records of communication and delivery.
• Consider a chargeback management service like NoFraud, which not only helps businesses dispute fraudulent chargebacks efficiently but also actively fights fraud on your behalf. These services compile the necessary evidence and documentation to significantly improve your chances of winning in representment. Additionally, NoFraud offers a chargeback guarantee on any orders they approve that are later confirmed as fraudulent, giving businesses peace of mind and financial protection.

Key Takeaway

Fraud is an unfortunate reality for auto parts businesses operating online, but it doesn’t have to wreak havoc on your bottom line. By understanding the types of fraud that target the industry and leveraging the right tools, you can protect your business and your customers from fraudsters.

Solutions like NoFraud combine AI, human expertise, and a global network to help high-growth eCommerce companies, including auto parts sellers, identify and prevent fraud in real time. 

From card testing to refund fraud, NoFraud’s platform offers tailored solutions that adapt quickly to evolving threats, allowing you to focus on growth while maintaining operational integrity. Ready to keep fraudsters away from your store? Try NoFraud free for 14-days! Schedule time to learn more.