How to Prevent and Manage the possibility of fraud when it comes to electronic payments before 2023

Risk of fraud with payment is a part of every enterprise. The right payment method is beneficial to businesses since they provide customers with an enjoyable, reliable experience and encourages them to buy from you again in the in the future. Unprofessional systems for payment could cause a sinking ship to your business There is today an abundance of fraud. But, a comprehensive payment platform can mitigate those risk, shield your customers as well as ensure your business's security. One of the best benefits is that the most extensive payment solution allows merchants to combat fraud with a minimum of effort or trouble.

What is a fraudulent payment?

Fraudulent payment occurs when a transaction is made in which the person who bought it was not the one who was authorized to make the purchase. The most fraudulent transactions typically are using stolen credit card details, which is a type of identity fraud. Fraud often results in losses in the financial or property of either the merchant or consumer or both.

Fraud could manifest itself through various methods, such as stolen credit card details or stolen information of a bank account fraud, phishing and triangulation. We see the results of this in disputes over payment (also called chargebacks) that can cost a lot of money and can cause problems for companies that are of any size. The methods used to commit fraud are diverse and are likely to continue evolving as we improve our security mechanisms. In this blog we'll look at different forms of credit card payment fraud.

The amount of people trying to commit fraud with payment has been increasing.

In the State of Online Fraud report of Stripe the researchers discovered that the volume of fraud has increased substantially since the start of Covid 19 pandemic. 64 percent of world leaders in business said that it's become harder to fight fraud. 40% of companies observed an increase in the number of attempted card testing attacks compared to the previous years.

The losses from online payments are expected to surpass $343 billion in 2023 and 2027 as per Juniper Research. It is not a question how likely your company will be at risk, but it's only a matter of what time. Facing inevitable adversity it is best to protect your business by implementing effective fraud prevention strategies.

What's behind this rise in fraud? Growth in ecommerce.

Stripe discovered that by 2021, organizations that use their platform handled 60% more payment amounts than in the year 2020. The growth in transactions offered more chances to be a victim of fraud.

The most common types of fraud in the payment industry

Card testing or carding attacks

When testing cards, a bad person tries to make small transactions using stolen credit card information in order to test if the card number works, which typically happens when using a different cards. It allows criminals to swiftly check whether the stolen information could be used to make larger purchases. The most common scenario is the case where card information is bought by malicious people in the aftermath of a data breach.

The purchases for card testing are typically made in foreign countries which has billing and delivery addresses that don't match where the address of the client.

The decision to reject or reimburse transactions that appear suspicious could help to prevent this kind of fraud. Fraudulent charges can be reversed and challenged when they're not reimbursed.

Stolen credit cards

The scam of the stolen credit card occurs in the event that a buyer makes an actual purchase with stolen credit card information. If that is the situation, then the delivery and billing addresses may be completely different since the fraudster wants the product shipped to them instead of to the person who holds the card.

It is possible for this type of fraud to be hard to spot since there are a variety of potential reasons why a purchaser may require a different address such as travel or being outside of the home. If you find any unusual situations the purchase might require an examination of the transaction to determine if the transaction is suitable to your organization and typical clients.

What are the main risk factors of fraud in the payment industry?

Revenue loss and loss of confidence are among the most significant concerns for security concerns in the case of payment fraud. However, the negative impact for businesses caused by fraudulent activity could have far more serious consequences: Fines that are significant for violations of rules and regulations, or even being exiled from the business.

The loss of revenue resulting from payments disputes

Carts that were abandoned because of the preventance of fraud

Stripe observed that "the greater the amount of fraud that a business is able to prevent, the more likely they are to stop legitimate transactions and also reduce the probability of converting payment." Prevention measures may sometimes hinder the process of customers making purchases.

There are too numerous steps for verification and/or direct users to a popup, or another site to enter their credit card details They might be unhappy and cancel their order.

The merchant is accountable in the case of fraudulent transactions

Merchants are accountable for transactions they make on their websites and in their stores. This includes deciding which transactions they will take or decline a suspicious transaction.

Charges resulting from fraud may be challenged or reversed, and will incur a fee as a result. This can be avoided by refusing to reimburse fraudulent transactions. However, it's important to respond to disputes regarding chargebacks for legitimate charges with evidence of the chargeback was not fraudulent.

Five ways to reduce the risk of the risk of fraud in payment

The five methods comprise a set of tools or options that could be designed in-house or bought from a third party. Internal risk management may be the most suitable option when a company has enough resources, and the tools purchased can help streamline the administration of small teams employees.

Integrate fraud prevention tools

The software designed to establish thresholds for fraud will block the transactions with high risk that do not meet the requirements. Software for setting thresholds for fraud will stop a payment that looks odd or raises red flags in light of data indicators such as IP location or an unusual user profile.

A solution developed in-house can require an extended amount of time and resources to develop, but may be the best option for companies that need lots of customisation in addition to those that manage sensitive information. A third-party solution is faster to implement, however it could be charged per each transaction.

Understanding the sensitivity and scope of the fraud risk you face can help you determine what kind of tool is most appropriate for your company.

Risk management and hiring fraud teams

A person or a group to conduct a transaction audit is an established practice in the field of manual fraud prevention. transactions that have been flagged as fraud may be scrutinized and then deemed acceptable or denied according to the rules and guidelines established by your business or payment supplier. Manual approvals for high-risk or high-value transactions may aid in reducing your expenses or losses due to fraud.

Any purchases that appear to be fake should be canceled or returned. All disputes must be resolved using evidence that is available, or accepted in the event that they are fraudulent. A lot of disputes can be settled by providing evidence in order to stop a charge, and keeping the revenue. A few examples of evidence that is strong could be a tracking number as well as a photograph of the item being delivered, as well as interactions with the customer and proof of the use. Evidence that is possible varies depending on the kind of company that you manage and the character of your business, however providing evidence of use or receipt is a good basis to resolve disputes.

Develop fraud prevention processes

The processes for preventing and responding to fraud are different for each business. It's helpful to start with a risk assessment in order to aid you and your employees determine how your client's typical look like, what types of fraud your company might be at risk from in addition to the methods fraudsters could use to circumvent the current methods of fraud prevention.

Make use of the information from the risk analysis you done to alter the criteria for determining your limits for fraud as well as your procedures for responding to fraud.

Switch to an all-in-one solution for payment

Small and medium-sized businesses, an all-in-one solution is the ideal choice to cut costs and time.

What should you look for in an all-in-one payments solution

Machine learning

Machine Learning models Machine Learning are trained for decision-making by being fed enormous amounts of current data about inputs and outputs. Based on inputs provided, a model calculates the probabilities of each output. The model then utilizes this probability to decide on its fraud assessment of each transactions.

Customized risk filters and rules

Custom risk filtering allows organizations to define levels of risk tolerance to identify suspicious transactions if they satisfy certain requirements. The thresholds are adjustable in accordance with your company's requirements. Filters are able to be adjusted for many different factors like:

• The IP addresses that are authorized by certain servers, or even from certain zones
• Blocked IP addresses have been identified as being associated with criminal activity
• Reliable, frequent transactions coming via the exact IP address.
• Shipping address verification
• Volume or amount of transaction

Flexible rules allow for diverse business forms. A clothing retailer might mark purchases as excessively large, while a wholesaler for construction may be more worried about billing and shipping details.

Conclusion

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