With the introduction of online payment solutions to customers, customers enjoy a more convenience shopping experience, whereas the merchants are able to expand their online business. However, it also brought in the risk of payment frauds; wherein the fraudsters steal or buy another person’s payment information such as banking data, social security number and login credentials to make unauthorized purchase of money transfer, with the help of credit or debit cards mostly.
As per the recent data global losses from payment fraud has tripled from $9.84 Billion in 2011 to $32.39 in 2020. Payment fraud is expected to continue increasing and projected to cost $40.62 billion in 2027 – 25% higher than in 2020.
Types of Frauds:
Chargeback fraud-These are the frauds occur when a customer orders a product and request a chargeback. In such cases the customer wants to receive a product of service for free.
Phishing– This is a type of scam where the people are manipulated into sharing the sensitive data by respond to scam email or text messages.
Credit Card Fraud– This is the most prevalent type of theft whereby the fraudsters se the lost or stolen credit cards to procure goods, services or funds without paying for them.
APP (Authorized Pushed Payments) Frauds– Involves various scams like social engineering or phishing to trick their victims into authorizing a payment to the fraudsters account.
Clean Fraud– it is a subtype of credit card fraud. In such cases, the fraudster uses stolen credit card to make a transaction. It is called “clean” since the transaction appears to be legitimate.
Merchant Fraud– This fraud involves creating a fake website to gather payments from customers without actually sending them the purchase goods. These fake websites are taken down after tricking a certain number of customers.
These following strategies help to reduce the risk of payment frauds:
Monitor Transaction– In case you notice unusually small transaction, different credit cards from same IP address or any other transaction that arouse your suspicion; then in such case one should not process the transaction he transaction until the payments are verified.
Maintaining Awareness– Since the fraudster keep finding new ways to commit payment frauds, one has to try to keep updated on the ecommerce fraud trends. This awareness helps in reducing the frauds.
Partner up with Payment Processor– The safety of customers depends on payment processor. Hence one should tie up with a good payment processor who is PCI and PSD2 compliant, have advanced fraud screening tools, SSL-encrypted online payment forms, and should not experience outages.
Two factor authentication on website payment– It is basically a tool used by the organization to secure online payment. The access will only be granted after presenting 2 or more pieces of evidence.
Fraud Detection Software– Such type of software helps the online companies to reduce fraud related losses and improve customer experience by monitoring transactions, identifying security breaches and sending alerts for sending potentially fraudulent behavior.
Regular Password Updates– One should regularly update the firewalls, security patches and hosting solution to make it difficult for cyber attackers to get into the system and create havoc.
With the fast growth in the digital payment options, new payment frauds emerge every day. Thus, the banks, financial institutions and payment processors invest huge amount to secure their systems to protect them from cyber criminals. The merchants also need to understand the growing threat of the payment frauds and thereby implement various tools and strategies to protect their customer’s vital information.