How can you prevent and deal with Online Payment Fraud in 2023

The threat of fraud in payments is an inherent risk for any company. The right payment method is beneficial to businesses because it provides customers with satisfaction and confidence, as well as entices buyers to shop with you in the future. A terrible payment solution can cause a lot of damage to your company: today, we're talking about fraud. However, a robust platform to handle payments can lower risk, safeguard the clients you serve and increase the security of your business. Most importantly, an extensive platform can help merchants combat fraud with a the least effort and without stress.

What is a payment fraud?

Fraudulent payment occurs when there's a situation that the cardholder wasn't responsible for approving the transaction. The majority of fraudulent transactions are usually done by using stolen credit card numbers as well as a form of fraud that is known as identity theft. Fraud results in generally the destruction of property or financial assets for the merchant either the consumer or the merchant.

Fraud can manifest through many different ways, including stolen credit card details or stolen information about a bank account, phishing, triangulation. The results of this are disputes with the payment provider (also called chargebacks) which can be costly and pose a risk to companies of all sizes. The methods used to commit fraud are diverse and will continue developing as our security systems advance. In this post we'll look at different forms of credit card fraud.

Payment fraud attempts are increasing

In the State of the Internet Fraud report by Stripe Researchers found that fraud rates have risen substantially since the beginning of Covid 19. Covid 19 pandemic: 64 percent of the global leaders within the business world said it is becoming more difficult for them to stop fraud, and 40% of firms reported an increase in attempted tests of attacks compared to the past.

The losses incurred from online transactions will likely to exceed $343 billion by 2023 to 2027, according to Juniper Research. It is not a matter of the likelihood that your business is at risk, only when it might become. Facing inevitable adversity it is wise to safeguard your company with effective fraud prevention strategies.

What's causing this increase in fraudulent transactions? Ecommerce growth.

Stripe discovered that by 2021, companies that use their platform handled 60% more payments quantity than they did in 2020. This increase in transactions also opened more possibilities to be a victim of fraud.

Payment fraud is a common type

Card testing and carding attack

In the course of conducting tests on cards, a fraudulent actor attempts to purchase items using stolen credit card details to determine if the number is working, usually several times using a different credit cards. Fraudsters quickly discover whether the data they've obtained is able to be utilized for bigger purchases. Testing of credit cards usually occurs after your card details are purchased from criminals following the tragedy of data breaches.

Purchases for testing cards are generally made in foreign countries with delivery and billing addresses that do not match the customer's IP address location.

Declining or refunding suspicious transactions can help prevent fraud associated when these transactions are made. The fraudulent charges will be challenged and reversed when they're not paid back.

Stolen credit cards

The fraudulent use of stolen credit card happens when consumers make an actual purchase using stolen credit card numbers. In this instance, the delivery address and the billing address could be completely different since the person who is committing fraud would want the product delivered to them and not the cardholder.

These types of fraud can be hard to spot due to the many reasons that customers could require different addresses such as travelling or having to be far from their home. In cases of suspicion, the purchase might require manually reviewed to determine if the transaction looks right for your organization and the type of buyer.

What are the risks from the possibility of fraud in payment?

The loss of revenue and losing trust in customers are the most significant concern in terms of the dangers of fraud in the payment industry, however the impact on business from fraudulent activity also includes much harsher sanctions: Huge fines due to not complying with regulations and even getting removed from business.

Loss of revenue that results from payments disputes

Abandoned carts due to fraudulent prevention

Stripe found that "the more fraudulent a company tries to prevent it is and the greater chance they will be able to stop fraudulent purchases. They also decrease the efficiency of conversion for their payments." The prevention measures can sometimes hinder customers make a purchase.

If you require multiple verification steps or you send your customers to a pop-up or a different site where they are required to enter the credit card details, they may become annoyed and may stop purchasing.

Merchants are responsible for the case of fraudulent transactions

Merchants are accountable for transactions that occur through their sites and their retail stores. They have to decide when they will decide whether or not to approve a fraudulent transaction.

The costs that arise from fraud are often contested and reversed. They could lead to the issuance of a bill as a consequence. It is possible to avoid this by delaying and paying back suspicious transactions. It is also crucial to react to disputes regarding chargebacks with legitimate charges in order to prove that fraud taking place.

Five methods to prevent the fraud of payment

Five of these techniques comprise an assortment of tools or solutions which are developed by the business or acquired from a third party. In-house risk management may be the perfect solution for companies of larger size with adequate equipment and resources. Purchasing tools could assist in facilitating the management of transaction for smaller and busy teams.

Integrate fraud prevention tools

Software designed to set thresholds for fraud will block high-risk purchases that fit the requirements you set. Software for setting thresholds for fraud will stop the purchase that is uncommon or raises red flags based on particulars such as the location on an IP or an unusually profile of the customer.

A solution that is in-house can require a lot of time and effort to design however, it could be an ideal choice when you need a lot of modifications, or handle sensitive information. Third-party solutions are quicker to deploy, but may charge a per-transaction fee.

Understanding the sensitivity and scope of your fraud risk will aid in determining which kind of software will be best suited to your business.

Risk management and hiring fraud teams

A person or a group to review transactions is commonplace for the prevention of fraud through manual processes. The transactions that have been reported as suspicious can be examined then subsequently deemed acceptable or not according to the guidelines and guidelines set by your company or service provider. Manual approvals of high-risk and high-value transactions could assist in cutting down your costs and loss due to fraud.

Items that look suspicious are not to be accepted or returned. Any disputes should be resolved by providing evidence to back them or approved in the case the claim is false. Many disputes could be resolved by supplying evidence which eliminates the fee as well as retaining the money. Examples of strong evidence include a tracking number or screenshot of delivery, interaction with the client or evidence of the use. Evidence that can be used will depend on the company's character, however providing evidence of use or receipt could be an excellent basis for creating a non-debate atmosphere.

Develop fraud prevention processes

The processes for preventing and responding to fraud vary for each company. Start by assessing the risk to help you or your team determine how your customer's typical look like, what kinds of fraud your company could be vulnerable to, and the ways that fraudsters could find ways through your fraud protection methods.

Make use of the results of your risk assessment to review your fraud threshold guidelines and fraud response procedures.

Select a single-stop payment method

Small and medium-sized companies, an all-in-one solution is the ideal choice to save money and your time.

What should you find in a total payment program?

Machine learning

Machine learning models can be trained to make better decisions after receiving huge amounts of data relevant to input as well as output. Given inputs, the model calculates the likelihood of a given output. It uses that probabilities to decide on its assessment of fraud for each operation.

Customized risk filters and rules

Custom risk filters allow companies to establish thresholds for risk tolerance that flag suspicious transactions when they satisfy certain requirements. They are able to be altered according to your specific business requirements. Filters can be set for various factors such as:

• These IP addresses are issued by particular servers or from certain regions
• IP addresses blocked by the government are suspected of fraudulent activity
• Multiple transactions, rapid and frequent at the same IP address
• Address verification is required for shipping
• The volume or amount of transactions

Flexible rules allow for diverse business models. While a retailer of clothing could flag purchases as too large, or a construction wholesaler may concentrate on shipping and billing data.

Conclusion

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