How Marketplaces Can Combat ATO, Payment Abuse, and Refund Fraud

Online marketplaces are facing an onslaught of increasingly complex fraud schemes. Beyond Account Takeover (ATO) attacks, fraudsters are exploiting vulnerabilities in new ways—through collusion schemes, bot-driven manipulation, payment abuse, and refund fraud. These multi-layered campaigns target both operations and profitability, threatening trust with customers and partners.

To stay ahead, marketplaces must adopt advanced, proactive defenses that uncover fraud networks, detect suspicious behaviors, and prevent fraud before it can cause harm. This post dives into key trends and actionable strategies that marketplaces can use to protect their platforms.

The Evolution of Fraud in Marketplaces

Fraudsters are no longer operating in isolation. They’re deploying coordinated tactics that involve multiple types of fraud, combining automation, deception, and social engineering. Below are the most pressing trends shaping today’s fraud landscape:

1. The Rise of Collusion Schemes

One of the most concerning trends is the rise of collusion fraud, where multiple users conspire to exploit the platform. These schemes can take many forms, including:

• Promotion Abuse: Multiple fake accounts are created to exploit discounts, referral programs, or loyalty points.
• Payment Fraud Rings: Groups collaborate to exploit payment gateways, engaging in chargeback abuse or money laundering.
• Fake Reviews and Seller Ratings: Fraudsters artificially boost product or seller ratings to increase visibility and deceive buyers.

Collusion schemes are difficult to detect because the participants may appear to act independently, making them harder to identify through standard fraud detection measures.

How to Combat Collusion:

• Entity linking and behavioral analytics can detect coordinated behavior across accounts.
• Use machine learning models to identify shared patterns, such as IP addresses, devices, or transaction sequences.
• Monitor suspicious activity spikes around promotions to prevent abuse early.

2. Bots Manipulating Listings and Scraping Data

Fraudsters are increasingly using bots to manipulate marketplace listings and scrape valuable data. These bots can overwhelm a platform with fraudulent listings, reduce inventory visibility for legitimate sellers, or gather competitive pricing data. In many cases, bots are also used to game search algorithms, pushing fraudulent listings to the top.

Common bot-related fraud tactics include:

• Scraping sensitive data (such as pricing or product descriptions) to gain an unfair advantage.
• Sniping listings—automatically purchasing in-demand products to resell them at inflated prices.
• Flooding listings with fake or misleading products to drive away legitimate sellers.

How to Combat Bot Manipulation:

• Implement rate-limiting to slow down repetitive bot actions.
• Use honeypots—hidden fields that only bots will fill out—to identify and block bad actors.
• Deploy behavioral analytics to monitor patterns like rapid listing updates or suspicious scraping activity.

3. Emerging Fraud Tactics Gaming the System

Fraudsters continuously develop new ways to game the system, making it challenging for marketplaces to keep up. These tactics often go beyond traditional fraud and focus on exploiting operational loopholes or manipulating platform dynamics. Examples include:

• Dynamic Pricing Manipulation: Fraudsters use automated tools to influence marketplace algorithms and force favorable pricing.
• Fraudulent Refunds and Returns: Exploiting lenient refund policies by making false claims or sending back fake items.
• Account Farming: Fraudsters create and maintain fake accounts over time to build legitimacy, only to exploit them later for fraud or resale.

How to Stay Ahead of Emerging Fraud:

• Use real-time behavioral analytics to spot irregular activities like sudden account changes or pricing shifts.
• Develop automated workflows that trigger alerts for suspicious refund or return patterns.
• Stay ahead of fraud trends by collaborating with other marketplaces to share insights and emerging fraud techniques.

Why Traditional Defenses Are No Longer Enough

Traditional security measures like passwords, CAPTCHA, and even SMS-based two-factor authentication (2FA) are becoming increasingly ineffective. Sophisticated fraudsters now use tools to bypass these defenses, and static systems often can’t keep up with evolving fraud patterns.

• Passwords are easily compromised through credential stuffing and phishing.
• Transactional data alone provides limited visibility into user behavior, leaving fraud signals undetected.
• Reactive fraud detection addresses problems after the damage is done, resulting in higher losses.

How Marketplaces Can Adapt and Stay Ahead of Evolving Fraud

To defend against this new wave of fraud—whether it’s ATO, collusion, payment abuse, or bot manipulation—marketplaces need dynamic, layered security solutions. Here are actionable strategies:

1. Implement Adaptive Authentication

Adaptive authentication adjusts the security measures based on real-time risk analysis, providing seamless access to legitimate users while blocking suspicious ones.

How to Implement It:

• Track device fingerprinting, geolocation, and login behavior to detect unusual patterns.
• Use step-up authentication for higher-risk scenarios, requiring biometric or one-time passcodes.
• Apply adaptive authentication to both logins and high-value actions like purchases or refunds.

2. Use Behavioral Analytics to Uncover Fraud Networks

Behavioral analytics enables marketplaces to detect fraud patterns that cross multiple accounts or platform interactions. It’s essential for uncovering collusion, account farming, and refund abuse.

How to Implement It:

• Monitor user behaviors—such as browsing habits, login frequency, and transaction timing—to spot anomalies early.
• Use entity linking tools to connect seemingly independent accounts and identify coordinated fraud rings.
• Automate alerts for suspicious activities, allowing your team to act quickly before fraud escalates.

3. Strengthen MFA Beyond SMS for High-Risk Transactions

Traditional SMS-based MFA is vulnerable to attacks like SIM-swapping. Instead, use stronger, more secure MFA options for critical actions on the platform.

How to Implement It:

• Encourage users to adopt app-based MFA or hardware tokens for added security.
• Use biometric authentication for high-value transactions, such as large purchases or payouts.
• Implement MFA selectively—apply it only to high-risk scenarios to minimize user friction.

4. Educate and Collaborate with Your Users

Empowering your users with knowledge and tools is key to preventing fraud. Proactive communication reduces the chance of them falling victim to phishing, credential stuffing, or social engineering attacks.

How to Implement It:

• Send regular security updates and tips on spotting fraudulent activity.
• Provide real-time alerts for suspicious behavior, such as unusual login locations or high-value purchases.
• Collaborate with customers by making it easy to report suspicious activity or lock their accounts if needed.

Adapting to a New Era of Fraud

Marketplaces are operating in an increasingly complex fraud environment, where attacks like account takeovers are just the beginning. With the rise of collusion schemes, bot-driven manipulation, payment abuse, and refund fraud, marketplaces need to rethink their defenses.

The key to success lies in proactive, layered security—leveraging adaptive authentication, behavioral analytics, stronger MFA, and user education. By staying ahead of fraud trends and adopting dynamic defenses, marketplaces can protect their platforms, customers, and bottom line.

Fraud isn’t going away. But marketplaces that remain agile and proactive will be best positioned to thrive in this evolving landscape.