Online payments are one of the most used types of payments in the world. Experts claim that about 90% of customers around the globe purchase goods and services using online payments. With the increase in the number of people using this approach, there is also an increase in transaction fraud. When faced with an increase in payment fraud prevention measures implemented by much larger organizations, cybercriminals begin to target smaller businesses with minimal security measures to try their luck. Nevertheless, there are ways you can protect your growing business from these attacks.
In this article, we would be looking at what payment fraud is, how to recognize them, the phases of fraud, and how Nexthash can help you handle it with payment fraud prevention.
What is Payment Fraud?
Payment Fraud is the process of stealing someone’s payment information, then using it to make purchases or unauthorized transactions. The legal owner of the payment information discovers that their account is being used to make purchases or transactions they didn't know of, then decides to report. This is where most businesses take the hit because they have to pay several fees to settle the dispute while losing Time and resources. In some payment fraud, the account owners can also initiate a “false chargeback”, arguing the product never got to them.
If merchant account holders such as PayPal, banks, and other financial services find it is more insecure to deal with a business, the business might end up losing their account due to the risk of fraud. This is a very difficult situation for small business owners. Let's look at the different kinds of Payment frauds and how you can identify them.
How do you recognize Payment Fraud?
For your business to undergo payment fraud prevention, you have to be able to identify and know the types of payment fraud out there. There are three types of payment fraud. These are lost or stolen merchandise, unauthorized transactions, and false requests for refunds. Let's look at some of the course of events that takes place for illegal transactions.
This mode of payment fraud makes use of websites and emails that entice readers to fill in sensitive information like credit card details and login details of a financial platform. Payment fraud prevention set up by web tools and search engines helps differentiate and point out untrusted websites which are trying to play this trick on individuals. Users should still look out for these web pages.
Credit Card Scam
This is undoubtedly the most famous type of fraud found in the online payment community. The most exact example is a cybercriminal using stolen card information to purchase things online. The credit card owner then opens a dispute to get their money back and the business owner not only loses their product but also pays back money stolen by the thief.
Denial in Receiving the Product
Another common scenario is when the buyer claims that he didn't receive the purchased product. The cybercriminal orders for a product and the small business owner sends it to him, the criminal then claims that they didn't get the product. They may also claim that they didn't even make the order and it's hard to prove if they are telling the truth.
Card testing fraud just like credit card fraud happens when cybercriminals use stolen cards to process frequent low-value purchases. If your payment fraud prevention system does not detect and block such card testers, you need to get ready for several chargebacks from the credit card company of the real card owners.
This scheme happens when a customer tells the small business owner that they want a refund for some certain reasons then tries to trick the seller that they I've sent the product back but it never gets to the seller’s hand. Other times, the buyer can also send just a single product claiming he sent more items in the package demanding a refund for the full product.
Triangulation Fraud is when a fake online store offers a product at a really low price. Cybercriminals use this method to get credit card details and the address of their victims. They then use these financial details to order from a real store then make minor purchases that are very hard to detect.
Phases of Frauds
Small business owners need to know the stages or phases of fraud so that they can be able to set up payment fraud prevention to tackle those stages. The three major stages of fraud are planning, launching, and cashing.
This stage revolves generally around surveying, target selection, and intelligence gathering. What do cybercriminals look for when targeting an online business for an attack later on? What kind of things can be detected and which breadcrumbs can be picked up? How can business owners make their sites appear like harder targets?
The launching phase is when the cybercriminals have finally selected their target of execution. This means all types of fraud such as malware attacks, phishing scams, triangulation, etc. Which is aimed at getting the financial details of customers.
At this phase, the cybercriminal has observed a set of victims, selected the area of operation, and has launched an attack that has given him access to individual accounts through malware, the phishing website, or the mobile banking channel. This phase is extremely important to focus all the payment fraud prevention because this is where everything comes to play.
How can Nexthash help you in Payment Fraud Prevention?
Businesses are now finding out that blockchain technology could be the answer to combat both internal and external payment frauds. About 90% of banks in both Europe and North America are currently experimenting on how to use the blockchain to combat fraud. Blockchain boasts of a chain of digital ledgers that cannot be tampered with and the finance world is using that to reduce the issue of fraud. The concept of blockchain introduces the use of smart contracts to set rules for contracts, verify if the process has been carried out then give a go-ahead for the reward to be released. Any individual or party that defaults in the contract can only do so with content from the other party.
Companies like Nexthash integrate small business owners with payment processors to be able to handle their transaction histories and prevent change in the financial records. They equip businesses with tools that link them to the blockchain network hence providing various ways for businesses to prevent fraud and losing money.
Visit NextHash today and learn how your small business can be protected from fraud.