The Silent Killer of E-Commerce: How Affiliate Fraud is Destroying Merchant Accounts

Affiliate fraud is causing skyrocketing chargebacks and terminated merchant accounts. Learn the two most common schemes and the critical tracking shift that can save your business. Protect your MID now.

1/30/20262 min read

man in black and white fitted cap
man in black and white fitted cap

The Silent Killer of E-commerce: How Affiliate Fraud is Destroying Merchant Accounts (And How to Stop It)

Affiliate Fraud is Killing Your Merchant Account. Here’s How to Fight Back.

If you’re seeing a sudden, unexplained spike in chargebacks and your payment processor is threatening to terminate your Merchant ID (MID), your affiliate program might be under attack from within. Many e-commerce merchants are discovering a harsh truth: the very partners driving "sales" can be the ones orchestrating their downfall.

This isn't just lost revenue—it's an existential threat to your ability to process payments. Let’s break down how it happens and, most importantly, how you can defend your business.

The Two Poisonous Pillars of Affiliate Payment Fraud

Affiliate fraud typically follows one of two devastating playbooks, both ending with the same result: the affiliate gets paid, and the merchant gets wrecked.

1. The Shady Ads ➔ Dispute Pipeline

  • The Scheme: An affiliate uses deceptive, misleading, or outright fraudulent advertising (fake claims, hidden terms, cloaked landing pages) to drive traffic.

  • The Fallout: Customers feel duped when they receive the product or service. They didn’t get what was promised, so they file disputes (chargebacks) with their bank.

  • The Damage: You, the merchant, eat the cost of the chargeback, the product, and the associated fees. Your chargeback ratio skyrockets, putting your MID in immediate jeopardy.

2. The Prepaid Card Laundry

  • The Scheme: This is more brazen. An affiliate uses stolen or fraudulent prepaid cards to make "purchases" through their own affiliate link.

  • The Fallout: The sale posts, you pay the affiliate commission, and the "customer" (the affiliate) gets the product or simply abandons the order. Then, the cardholder or bank disputes the fraudulent charge.

  • The Damage: You lose the product, pay the chargeback fee, and you’ve already paid the affiliate commission. It’s a double loss. This pattern is a red flag for banks and can get your account shut down fast.

In both scenarios, the affiliate profits from the commission on a sale that was destined to be reversed. You’re left holding the bag—a bag full of chargebacks that processors simply won’t tolerate.

The Fatal Flaw in Most Fraud Detection

Most merchants track their financial health by looking at aggregate, account-level data. They see a rising chargeback rate on their entire Merchant ID and scramble to find the cause.

This is like trying to find a leak in a pipe by only looking at the puddle on the floor. You know there’s a problem, but you can’t pinpoint the source.

The critical shift you must make is this: Stop tracking chargebacks only by MID. Start tracking them by traffic source.