Online payment fraud is one of the greatest concerns for merchants worldwide regardless of the business scale. According to estimates, the global eCommerce losses from it accounted for $20 billion in 2021, which represents a 14% increase from $17.5 billion recorded in the previous year1.
Staying informed about emerging types of fraud and implementing all the necessary security measures is critical for keeping your business and clients protected. Read ahead to find out how to detect different forms of fraudulent activity and learn practical tips on how to prevent it!
Online payment fraud is the act of conducting a transaction with stolen information that deprives a victim (an individual or business entity) of their funds. There are many types of fraudulent activity, namely:
This is the practice when fraudsters send out fake communications to potential victims. The criminals’ goal is to trick the recipients into believing that the message is coming from a reputable source and convince them to provide payment information and other sensitive data. Phishing scams tend to create a sense of urgency to make individuals feel the need to take immediate action.
Depending on the industry, type, and structure of your business, you might need to pay closer attention to certain subtypes of phishing practices, such as:
According to the latest statistics, 96% of phishing attacks occur via email, another 3% are carried out via malicious websites, and only 1% of them happen through phone calls2.
Triangulation is a type of online payment fraud that gets its name from the fact that there are always three elements involved in the dishonest transaction:
Here is how the triangulation scam process typically goes:
This is a common type of payment fraud that is particularly dangerous, as consumers may never realize that they support a dishonest player.
Merchant Identity Fraud
Another type of payment scam that often affects businesses is merchant identity fraud, which can be divided into three main categories:
The so-called “friendly” fraud occurs when a consumer places an order online with their credit card and then proceeds to initiate a false chargeback claim. Some common reasoning that is used in such cases includes:
While not all chargebacks are fraudulent, this might be the case in many cases. Chargebacks can result in penalties, increased processing costs, and even merchant account termination for businesses, so it’s critical to be able to detect and prevent friendly fraud, as well as other payment scam types.
Knowing the main types of fraud that businesses encounter brings you one step closer to preventing such instances.
A common question among merchants is: “how do online transactions detect fraud?” In fact, the purchase has no way of marking itself as malicious. Monitoring the orders placed at your store and noticing signs of suspicious activity is the way to proceed.
Payment Fraud Red Flags
Some red flags that could be a sign of malicious activity in the eCommerce sphere include:
The list goes on - as eCommerce evolves, so do fraudulent practices. Taking all the necessary precautions is essential to detect and avoid various types of payment scams effectively.
While paying attention to suspicious activity goes a long way, there are other steps you can take to avoid online payment fraud, namely:
1. Staying Informed on the Latest Fraud Trends
Hackers are always looking for new and advanced ways to avail of money illegally, so fraud comes in all kinds of shapes and forms.
Some of the most popular payment scams by the end of 2021 were:
As for the predictions regarding 2022 and beyond, a survey conducted by the Association of Certified Fraud Examiners (ACFE) demonstrates that experts anticipate an increase in payment fraud instances by 71%3. Some of the reasons behind this forecast are:
Hence, continuously monitoring the news regarding fraudulent practices is essential to protect sensitive data and funds.
2. Delaying the Shipping of Suspicious Orders
If, after examining a transaction, especially an international one, you have doubts about whether it is legitimate or not, it makes sense to delay shipping the items for at least 24 hours. This would give a legitimate credit card owner some time to notice an unwanted transaction and report it to their bank.
3. Collecting Signatures Upon Delivery
Instead of simply dropping the product off at the customer’s door or releasing it without confirmation, it is highly advisable to ask the receiver to sign a document. This will help you tackle a couple of potential issues:
4. Implementing Advanced Tech Solutions
While it certainly helps the detection process, manually reviewing every transaction is not the most efficient way of tracking potential fraud. Tech solutions are essential for your business and clients to be protected from advanced scamming techniques.
Some excellent security elements include:
Choosing the right service provider is fundamental for ensuring the correct implementation of security solutions and advanced fraud protection.
Payneteasy is a leading payment platform provider with a strong focus on creating a safe environment for your customers.
Our white label payment gateway boasts Risk Management technology that is designed to increase transaction approval ratios and mitigate fraudulent activity. Some of its features you are sure to appreciate include:
The combination of these risk management elements ensures that your business’s security, revenues, and reputation are safe. Contact us without delay if you have any queries or wish to take a critical step in preventing payment fraud!
1 - Statista - Value of e-commerce losses to online payment fraud worldwide in 2020 and 2021
2 - Tessian - Must-Know Phishing Statistics of 2022
3 - Brighterion - Merchant fraud predictions for 2022: a pandemic-driven increase
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