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Top 10 of online fraud

Posted by Michael Bloch in ecommerce (Saturday March 25, 2006 )

The National Consumers League (NCL) recently released a top 10 list of Internet scams covering the period January – December 2005. The total loss related to online fraud in 2005 was well over double the losses sustained by consumers in 2004. Complaints only grew by around 20%; indicating that people are being scammed for far more per incident than in the past.

The top 10 scams for 2005 and the average amount lost in each instance:

Auctions – 42% – $1,155
General Merchandise – 30% – $2,528
Nigerian Money Offers – 8% – $6,937
Fake Checks – 6% – $4,361
Lotteries/Lottery Clubs – 4% – $2,919
Phishing – 2% – $612
Advance Fee Loans – 1% – $1,426
Information/Adult Services – 1% – $504
Work-at-Home Plans – 1% – $1,785
Internet Access Services – 1% – $1,262

The number of people still falling for Nigerian type scams (aka 419 or advanced fee fraud) is a real concern, especially given the average amount lost. These scams have been around for decades and given extensive media coverage, but it would appear that greed tends to override people’s better judgement.

Around 25 years ago, my father worked in the Department of Consumer Afffairs in Australia and would investigate complaints from consumers about Nigerian scams, which at that time were usually executed via mail, fax and phone. He had little sympathy for those caught up in the scam as in most instances, even if the the money had been real, the people involved understood that the whole process of having it transferred into their accounts was quite visibly illegal.

While Nigerian/419 scams hit consumers, there’s another type of scam that also originated in Nigeria which has an impact on online retailers. Learn more about it in my article – Nigerian scams affecting ecommerce merchants.

The number of consumers who do fall prey to online scams also affects all of us involved in ecommerce in other ways. It’s well known that one of the reasons that consumers are hesitant to shop online is because of the degree of scamming that occurs. It’s not unusual for someone who is “stung” to then cease online purchasing – and to advise their friends and colleagues to stop as well.

While increasing the profile of stories about scams and fraud in the media may deter some people from shopping online in the short term, it’s all about raising awareness with the long term view in mind; when hopefully an educated public will not fear ecommerce, but just be more discerning.

Read more of the NCL 2005 fraud trend report (pdf)


Preventing credit card chargebacks – anti-fraud strategies


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