How can you prevent and control the risk of fraud with online transactions in 2023?

Aug 6, 2023

Fraud risk with payments is a part of every business. A great payment solution can benefit companies because it provides customers with satisfaction and trust, and makes them want to purchase from your company again. An unprofessional payment system can sink your ship: today there's a great deal of fraud. A comprehensive system to handle payments will to reduce risks, secure the clients of your business, and keep your business secure. In addition, a comprehensive platform can help merchants combat fraud with a minimum of effort or difficulty.

What exactly is fraud in the payment process?

The risk of fraud can be found in any purchase that is made by a person for whom it was not the one who was authorized to make the purchase. Most fraudulent transactions are usually performed using stolen credit card data that is a form that is called identity theft. It is common for fraud results in the loss of property or finances for the merchant, consumer, or both.

Fraud could be triggered by various methods: stolen credit card information and also compromised account information and phishing. Triangulation is a common method of obtaining information. It is evident the consequences of this in disputes over payment (also known as chargebacks), which are costly and cause issues for businesses of all sizes. The methods used to commit fraud are diverse and tend to change in the process of improving the security of our systems. In this post, we'll take a examine different types of fraud involving credit cards.

Pay fraud is on the rise.

In the State of Online Fraud report of Stripe the researchers discovered that the volume of fraud has grown substantially since the start in the Covid 19 pandemic: 64 percent of business executives around the world stated that it is more challenging for them to stop fraud. 40% of companies had reported an increase in the number of attempted card testing attacks compared to the previous years.

Online transactions that result in payment losses are expected to be greater than $343 billion globally between 2023-2027, in accordance with Juniper Research. It's not a matter of how likely your business is at risk, but the moment it could become. Facing inevitable adversity, the best option is to protect your company with strong fraud prevention techniques.

What's behind this rise in fraud? The rise of online shopping.

Stripe discovered that by 2021, organizations using their platform handled 60% more payment quantity than they did in 2020. This growth offered more opportunities to commit fraudulent transactions.

The payment fraud is a typical type

Card testing and attack on card security

When trying out cards, a criminal person tries to make minor purchase using the stolen numbers of credit cards to see if the information is working, usually many times, using various card. It allows criminals to swiftly identify if the card information is able to be utilized to make larger purchases. This happens most often when the credit card details are purchased by criminals following the data breach.

Testing cards purchases usually originate by a foreign country, using billing and delivery addresses that are not in line with the customer's IP address location.

The option to refuse or even re-fund suspicious transactions can help prevent the fraud that occurs with these types of transactions. Charges that are fraudulent will be denied and reversed in the event that they're not refunded.

Stolen credit cards

The most fraudulent way to use stolen cards happens where a person makes an actual purchase with stolen credit card information. If that is the case the addresses for delivery and billing may differ since the fraudster prefers to have the merchandise delivered to them, not the owner of the card.

These types of frauds could be difficult to identify since there are many motives that could lead to customers needing an address that is different, such as moving or staying away from their homes. In case of doubtful situations, the purchase may need to be an examination to determine if it is appropriate to your company as well as the your customers.

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

Revenue loss and loss of confidence are two of the biggest issues for fraud risk in the field of payments, however the business impact of fraud can have more harsh consequences: significant fines for violations of regulations and even getting exiled from the business.

Revenue loss from disputes over payment

Abandoned carts because of fraud prevention

Stripe observed that "the more fraud a business tries to stop, the greater likely they are to block legitimate charges in addition to cutting down on their conversion rate for payment." These preventative measures can sometimes hinder the process the purchase of a customer.

If you have numerous steps to validate the authenticity of your customers, or you direct them to pop-ups or a alternative site on which they need to enter the details of their credit cards, they may become dissatisfied and abandon their purchase.

The merchant is responsible for any fraudulent transactions.

Merchants are responsible for transactions that they accept through their website and their stores. They need to determine if they can accept or deny an unreliable transaction.

Charges resulting from fraud can be disputable or retractable which can result in a charge due to the fraud. It is possible to avoid these charges by denying and reimbursing fraudulent transactions. However you must be able to respond to complaints about chargesback when there are legitimate charges, in the form of proving that there was no fraud took place.

Five ways to avoid fraudulent payment transactions.

Five of the strategies are products or services that may be built by the company or purchased through a third-party. In-house risk management may be the right choice for companies that have sufficient resources for their needs and purchased tools may make transaction management easier for smaller group members.

Integrate fraud prevention tools

Software developed to establish the thresholds to detect fraud can block or block high-risk transactions that meet your requirements. Software for setting thresholds for fraud will stop any payment that appears odd or could raise red flags due to details like IP addresses or the profile of a client that is unusual.

The solution that is developed internally can take a lot of time and money to create, however it could be the best option for businesses that need an extensive amount of customization, or who handle sensitive information. Third-party solutions are quicker to deploy, but may be charged per transaction.

Identifying the scope and the sensitivity of your potential risk of being a victim of fraud is a good way to assist determining what type of software is appropriate for your company.

Team members for hiring fraud and risk management teams

A person or a group for review of transactions is an everyday practice in preventing fraud. Any transactions identified can be inspected and subsequently approved or rejected in accordance with the rules and guidelines you have set up by your organization or your payment supplier. Manual approvals of high risk or expensive transactions can help reduce your costs and losses due to fraud.

Anything that appears suspicious is not accepted or returned. All disputes must be resolved using evidence, or accept in the event that there is fraud. There are many disagreements that are resolved by providing evidence that is reliable, which will eliminate the fee, and retaining the funds. The most reliable evidence is a tracking ID, screenshot of the delivery, the interactions with the customer, and proof of use. The kinds of evidence that you may utilize will depend on the company's type, but providing documentation of the use or purchase is a good foundation for dispute protection.

Develop fraud prevention processes

The methods to prevent and respond to fraud differ for every company. It's helpful to start with risk assessments to help you and your staff know the typical customer like, the types of scams your business is susceptible to, as well as the ways the criminals can find ways through your fraud protection methods.

Make use of the information from your risk assessment to update your fraud threshold criteria and methods for dealing with the possibility of fraud.

Make the switch to a single solution that covers payment

For small and medium-sized businesses For small or medium-sized companies, an all-in-one option is the most effective option for your money as well as your working times.

What is the most important thing to look for in a comprehensive payment solution?

Machine learning

The models of Machine Learning are trained for making decisions by receiving huge quantities of pertinent output as well as input information. Based on inputs provided the model calculates the probabilities of every output. It uses that likelihood to assess the fraud risk of every transaction.

Rules that can be customized and risk-filtered

Customized risk filters enable firms to define risk tolerance thresholds that flag transactions as suspicious as long as they fulfill certain conditions. The thresholds are adjustable according to your specific business requirements. Filters are able to be configured for many different factors such as:

  • The IP addresses are authorised by a specific server or region
  • Blocked IP addresses known for fraud
  • Multiple transactions, fast and frequently from the same IP address
  • Verification of the shipping address
  • The volume or amount of transactions

Flexible rules allow for diverse business forms. Where a clothing merchant might mark purchases that are too large, a wholesaler for construction may focus on shipping and billing information.

Conclusion

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