With digital fraud often losing shoppers for online merchants, it's of utmost importance for any business to protect themselves and legitimate customers. Many merchants accept fraud simply as a cost of doing business, even though its cost is increasing by the day.

One of the most common methods of digital fraud is location spoofing—but what exactly is location spoofing and is it even illegal? In this article, we'll answer those questions and show how merchants can combat this fraud without affecting legitimate customers.

How Does Location Spoofing Work?

Location spoofing occurs when a fraudster hides or cloaks their true location to lower the risk of being caught or to access geo-locked benefits they are not permitted to. In terms of online business, fraudsters will hide their true IP addresses and GPS coordinates, as well as the shipping address.

What does law enforcement have to say about the legality, or illegality, of location spoofing? When location spoofing is used to commit crimes such as fraud, then it is illegal, but only because it was used to commit a crime. Spoofing your own location is usually not illegal, depending on the jurisdiction.

There are legitimate reasons someone may choose to spoof their location, such as testing software or protecting their privacy from their ISP. None of these activities are illegal, but no one other than a business owner or contractor has reason to spoof their location when interacting with an online business. If anyone is detected to be spoofing their location, it is most likely a case of fraud or a scam. Fake GPS signals are taken seriously by the government, as they can disrupt public services and even military activities.

It's important to note that location spoofing includes a fraudster contacting a business' service team or the shipping company to change the shipping address after the order has been placed. Verifying such changes with the original intended recipient is vital in the fight against fraud.

Dangers of Location Spoofing for Online Businesses

Fighting location spoofing should be standard practice for any fraud manager. Once a location is spoofed, the fraudster can impersonate legitimate customers, take advantage of sign-up or referral bonuses, create fake accounts, and further mislead the online business.

When a fraudster uses location spoofing to abuse or exploit an online business, it often goes undetected until it becomes a big problem–and then it's often too late. Lines start to blur and distinguishing between real customers and fraudsters becomes all too difficult. Damage limitation in the form of geo-locking IP addresses and credit cards usually results in legitimate orders being questioned, customer inconvenience that could push potential customers away, and even erroneous order cancellations and entire groups of lost potential customers. Such situations cause the business to lose sales in the short term and returning customers in the long term. Sure, some areas of the world have statistically higher average proportions of fraudsters, but that doesn't mean you should reject all people from that area and affect your sales.

According to estimates, e-commerce losses to online payment fraud were estimated at 20 billion U.S. dollars globally in 2021. That is a growth of over 14 percent compared to the 17.5 billion dollars recorded in the previous year. In today's digitized world with its ever-growing fraud underworld, an online business needs to be proactive to protect itself from fraud.

How to Protect Your Business From Location Spoofing Scams

While it's possible to manually go through all customer orders to try to catch those pesky location spoofers, it's often too much for any one person to handle—especially as your e-commerce business begins to grow. A business may opt to increase friction in the onboarding process to combat spoofing, but this inconveniences legitimate customers and often drives them away. With today's modern technology, there's a much easier way to go about payment fraud prevention: predictive artificial intelligence.

At nSure.ai, we offer industry-leading fraud protection technology that has empowered merchants around the world to combat fraudulent activities without chasing away potential customers with commonly used techniques like geo-locking. Our advanced AI platform uses data analytics to perform near-instant and real-time analyses on customers and orders.

All actions are performed automatically, allowing you to sit back and let the software handle the nitty-gritty process of catching fraudsters. nSure.ai contractually guarantees an SLA of 500ms on every decision provided, with no need for user verification, 3D Secure, or other SCA, with a guaranteed acceptance rate of no lower than 98%.