While Affiliate management for self-managed programs was being written some sections didn’t make the final cut. This is one such section, discussing e-commerce fraud perpetrated by customers, rather than affiliates. It may find its way into a future book, but in the meantime, I hope someone finds it useful.
E-commerce fraud and how it affects affiliates
Sadly, theft and fraud are alive and kicking online. Affiliates work hard to reach as many visitors as possible so they can easily become involved by accident.
Every affiliate program should be designed to make sure e-commerce fraud doesn’t cost you even more.
- Fraudsters may discover their next target through a comparison site – because they have the best prices.
- Fraudsters may use a large affiliate site to appear more genuine and “hide” amongst a group of real customers.
- Customers from some affiliate sites may receive favourable security checks, making it easier to commit the fraud.
- Extra reward – by placing their orders through a cashback or loyalty site, they can earn some extra cash with minimal risk.
The aim here is usually to secure goods or services unfairly. It isn’t limited to your affiliate program, but affiliates can easily become involved by accident. Anyone who sells using e-commerce can be a victim of online fraud.
Things to look out for
The important thing is to be vigilant. If your business experiences online fraud in general, check how many of those sales were associated with affiliate commissions.
Some indicators of untoward activity can include:
- A high percentage of sales where the order is immediately cancelled or returned
- An increase in complaints from customers
- Customers who say they ordered over the phone… when you don’t have a sales line
If you spot anything:
- Speak to your e-commerce / operations team. Make sure these orders are investigated properly and if necessary postpone shipping until you are happy
- Speak to the affiliate
- Ask your network for advice
Am I at risk?
The CRAVED model helps identify your product’s attractiveness to fraudsters. CRAVED is an acronym for Concealable, Removable, Available, Valuable, Enjoyable, and Disposable.
Concealable
Things that are difficult to identify or can be easily concealed after theft are more vulnerable. If you sell online, you don’t have to worry about someone slipping a product in their pockets, but can you identify it once it has been delivered? If it doesn’t have a unique ID or serial number, then it may be hard to identify among hundreds of others.
Removable
In the real world, this explains why motorbikes are often stolen because they are easy to transport. In e-commerce, it describes how easy it is to receive the product. Standard retail sales with no credit checks or signed-for delivery are more accessible.
Available
Desirable objects that are widely available are more vulnerable because an active market makes resale much easier.
Valuable
Online fraudsters will usually choose more expensive items, especially if they are stealing to sell. The return on investment is also a factor – will they need to sell the item they obtain at below face value?
Enjoyable
Fraudsters often target things that are enjoyable to own or consume because a) they want them for themselves or b) there is a proven demand for them.
Disposable
Products which keep their value and have an active resale market are very attractive. In the commission section we address the impact of products with a 100% resale value, such as gift cards or phone credit.
Here are some examples of products that score highly on the CRAVED scale:
Batteries
CRAvED
Batteries have traditionally been popular for laundering money. While they don’t retain 100% of their value, batteries retain their value very well. They can be purchased with “dirty” money (such as stolen credit cards) and then resold on the secondary market for “clean” cash.Mobile phones
CrAVED
Mobile phones tick nearly every box on the CRAVED scale. Their high resale price means phone fraud can be very lucrative. While phone networks and resellers constantly monitor for fraud, the high reward means there is always someone trying to circumvent the security checks.
What do the networks do about it?
Most networks actively check for suspicious patterns or unusual transactions. However, most of these checks are automated. A lot of e-commerce fraud needs a human to identify and investifgate.
As the affiliate manager you are ultimately responsible for identifying suspicious transactions.
Be alert, but don’t panic unduly
We are addressing fraud through affiliate accounts because it pays to be thorough and well prepared, but it is not common for most programs.