How do you stop and control Cyber-based Payment Fraud by 2023
The risk of payment fraud is a part of every company. A great payment solution can be a huge benefit to businesses: it provides customers with a positive, trustworthy experience which encourages them return to your store. A terrible payment solution can ruin your business: right now there is a lot of fraud. A comprehensive platform to process payments will help reduce risks, protect your clients and ensure your company's security. Best of all, the most comprehensive payment platform allows merchants to combat fraud with a minimum of trouble or fuss.
What is a payment fraud?
Fraudulent payment occurs when there is a transaction where the cardholder didn't authorize the transaction. In most cases, fraudulent payments are made with stolen credit card details and are a kind of identity theft. It is common for fraud to result in the loss of property or financial assets by consumers, the seller, or both.
Fraud can come about in a number of ways: stolen credit card information as well as stolen account details and phishing. We see the results of this in disputes with payment providers (also called chargebacks), which are costly and could cause problems to any company. Fraud tactics are varied and are likely to continue evolving as we improve our security mechanisms. In this post we'll look at different forms of fraudulent use of credit cards.
Payment fraud attempts are increasing
In The State of Online Fraud report by Stripe, researchers found that fraud volume has increased significantly since the onset of the Covid 19 pandemic: 64 percent of business executives around the world stated that it is harder for their businesses to fight fraud, and 40% more businesses saw the increase in attempts at tests compared to prior times.
The losses from online payments are expected to exceed $343 billion globally between 2023-2027, in accordance with Juniper Research. There is no question of if your business will be targeted, however, it's a matter of the time it will be. Facing inevitable adversity and threats, it's best to safeguard your business by implementing strong fraud prevention techniques.
What's causing this increase in fraud? The growth of e-commerce.
Stripe observed that, in 2021, companies who use their platform made 60% more payments quantity than they did in 2020. This increased volume of transactions opened up more avenues to commit fraud.
The most common types of fraud in the payment industry
Card testing, carding or other attacks
In the course of testing cards, a bad actor attempts to purchase items with stolen credit card numbers to see if the card number functions, which is often times using a variety of card. The fraudsters can quickly verify whether the stolen data is able to be utilized for larger transactions. The most common scenario is when the card information is bought by malicious actors in the aftermath of a data breach.
Purchases for testing cards are typically made from a foreign country using billing and delivery addresses that don't match the customer's IP address location.
Refunding or denying suspicious transactions can help prevent this type of payment fraud. Charges that are fraudulent will be disputed and reversed if they're not reimbursed.
Stolen credit cards
A stolen card payment fraud happens when consumers make an actual purchase using stolen credit card numbers. If this is the case, delivery and billing addresses could be completely different since the fraudster would like the item delivered to them, not to the cardholder.
This type of fraud can be difficult to detect because there are lots of possible reasons that a buyer could require multiple addresses for example, travel or living far from their home. In the event of suspicious circumstances purchases, it is possible to require an examination by a manual person to determine if it is appropriate to your company and the typical buyer type.
What are the risk factors of fraud in the payment industry?
The loss of revenue as well as the loss of customer trust are top of the list when it comes to security concerns with payment fraud, but the business impact of fraudulent activity also includes much harsher consequences: Significant fines for violating regulations or even being shut down.
Revenue loss from disputes over payment
Carts that were abandoned because of fraudulent prevention
Stripe discovered that "the greater the amount of fraud that a company is able to block it is, the more likely they are to prevent legitimate purchases in addition to reducing the conversion rate of their payments." The preventative measures could often hinder the purchase of a customer.
If there are too many verification steps, or when you direct users to a pop-up or other site for them to input the details of their credit card They may be frustrated and abandon their purchase.
Merchants are responsible in the event of fraudulent transactions
Merchants are responsible for the transactions through their sites and their shops. It is also a matter of deciding whether to approve or deny any suspicious transactions.
Charges resulting from fraud can be challenged or retracted, and be charged in the process. This can be avoided by denying and reimbursing the suspicious transactions. In addition, it's important to respond to chargeback disputes for legitimate charges by providing evidence that no fraud occurred.
Five methods to prevent the risk of fraud in payment
Each of these five techniques are a set of tools or solutions which can be developed by the company or purchased through a third-party. Internal risk management could be the most effective choice for businesses that have the resources to support them, while purchased tools can simplify transaction management for small and busy teams.
Integrate fraud prevention tools
Software that sets fraud thresholds will block high-risk purchases that match your standards. Tools for fraud thresholds will stop a payment that looks atypical or alerts you to red flags due to data points like IP location or an unusual customer profile.
A solution developed in-house can require long and money to create and is a good choice for companies who require extensive customization, or those that deal with sensitive data. A third-party solution is faster to deploy, but may have a fee per transaction.
Identifying the scope and sensitivity of your risk for fraud can assist you in choosing the type of tool is best for your business.
Hire fraud and risk management teams
A person or a group to review transactions is commonplace for the prevention of fraud using manual methods. The transactions that have been flagged can be reviewed and approved or declined in accordance with the guidelines and rules that are set by your organization or service supplier. Manual approvals for higher-risk or high-value transactions may help reduce your costs and losses due to fraudulent transactions.
Purchases that look like fraud are not to be accepted or returned. Disputes should always be responded to when there is proof to support them or accepted in the event that there is fraud. There are many disputes that can be settled by providing evidence, eliminating a fee and keeping the revenue. Examples of strong evidence are a tracking ID and a photo of the delivery, the interaction with the customer and proof of use. The types of evidence you can use depend on your company's nature and the nature of your business, however providing evidence of receipt or use is a good foundation for dispute protection.
Develop fraud prevention processes
Response and prevention strategies for fraud will look different for every company. It's best to begin by conducting risk assessments that will assist you or your staff to know what your typical client looks like, what types of frauds your company is susceptible to, and what ways fraudsters can work around your current fraud prevention methods.
Use the results of your risk assessment to update the criteria for determining your thresholds for fraud and fraud response processes.
Make the switch to an all-in-one solution for payment
For small and medium sized firms, an all-in one solution could be the most efficient choice for your money as well as your time.
What are the things to search for in an integrated payment system
Machine learning
Machine learning models are educated to make decisions using huge amounts of pertinent existing output and input data. Given inputs, the model determines the probability of each given output. It uses that likelihood to determine the fraud evaluation of every transaction.
Rules that can be customized and risk-filtered
Customized risk filters enable firms to define the thresholds for risk tolerance that identify suspicious transactions if they satisfy certain requirements. These thresholds can be tuned to suit your specific business requirements. Filters can be configured for many different factors for example:
- Autorized IP addresses for particular server or region
- Blocked IP addresses are known to be associated with fraud
- Rapid, repeated transactions from the same IP address.
- Address verification for shipping
- Transaction amount or volume
Customizable rules give flexibility to different business types. Where a clothing merchant might flag excessively large purchases, a construction wholesaler might focus on shipping and billing data.