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Emerging Fraud in Marketplaces: How Product Listing Fraud Is Gaining Traction

By Julian Wong August 28, 2018

Photo of Julian Wong

about Julian Wong
Julian is the VP of Customer Success at DataVisor. A proven leader in the realm of trust and safety, Julian developed scalable systems and teams for mitigating fraud and abuse at Indiegogo, Etsy and Upwork. Julian also led Google’s engineering team responsible for building algorithms to prevent fraud on its ad platform.

Most businesses are aware of common types of online fraud such as payment fraud, eGift card fraud, and account takeover (ATO) fraud. However, fraudsters are constantly coming up with new and innovative ways to commit fraud. Today we are taking a look at product listing fraud, a relatively new type of fraud that is a rapidly growing problem for online marketplaces.

What is Product Listing Fraud?

Product listing fraud is sometimes referred to as marketplace fraud. It is a type of fraud that largely occurs on peer to peer (P2P) marketplaces such as Craigslist, OfferUp, and Wallapop. Fraudsters create product listings on marketplaces in order to scam buyers. Here are the primary forms of product listing fraud: 

Scam Money from Buyers

The fraudster will post for sale a non-existent or counterfeit luxury item such as an automobile or a designer handbag. These items are typically listed far below the market value to attract many local consumers. Scammers often use low prices to entice buyers into making a deposit via an instant payment service like Venmo. Scammers also sometimes engage with buyers and coordinate with them to meet at a physical location to exchange goods. The scammer then ends up robbing the buyer.

Pull a Bait and Switch

Sometimes the fraudster will pull a “bait and switch” adding keywords to a listing that are unrelated. For example, a product listing would include a popular item (e.g. furniture or handbag) in the title and description. However, when a consumer clicks on the product page, they are redirected to an advertisement or spam message unrelated to the item the consumer was looking for. The goal for the fraudster is to use P2P marketplaces to reach large audiences with their spam content.

Phish for Personal Information

Fraudsters sometimes post products to phish for personal information. These listings include links to third-party websites that collect information about buyers. Buyers end up submitting personal information such as email, password, credit card number, and address.  

Product Listing Fraud is Difficult to Detect

This type of fraud is difficult to detect for many reasons. One reason is that the fraudulent product listings often look professionally done and better than legitimate listings. And many of the product listings are created and end quickly, within a day or less. Another reason is that most of the interactions happen offline, so there’s a level of anonymity. Scammers can hide behind email addresses and temporary phone numbers. They can also fake their GPS location. Finally, many of these marketplaces only connect sellers and buyers. Payments and exchanging goods are up to the buyers and sellers to facilitate, often outside of the marketplace. These offline interactions result in less information that can be tracked in an online manner for detecting fraud.

Product Listing Fraud is on the Rise

One of the reasons product listing fraud is on the rise is because marketplaces, especially P2P marketplaces, are getting more and more popular with consumers. According to Forrester, in 2016, roughly half of the global online retail B2C spend came from marketplaces, and the marketplace share could increase to 66% by 2022 if the trend continues. Another reason for the rise of product listing fraud is that the number of transactions that go from online to offline is increasing at a rapid pace. There’s also the sheer number of items posted on online marketplaces. OfferUp alone has hundreds of millions of listings. And finally, scammers are making millions from marketplace fraud. 

A Difficult Problem for Marketplaces

Companies with online marketplaces must take steps to help protect buyers from fraudsters. Not only to help buyers from getting scammed and losing money but also to ensure that their marketplaces remain reputable. 

Spammers use sophisticated techniques like URL obfuscation to trick social media platforms into believing they are trustworthy. Learn more about common techniques spammers use to conduct attacks at scale at our Technical Blog on Medium.

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