By Whitney Troxel
As you look for the best payment processing system for your business, remember that safeguarding yourself and clients from fraud is an absolute must. Businesses face a constant battle against fraudsters who are looking to steal payment information and run up charges on both customer and business accounts. In this blog post, we will discuss the various types of fraud that businesses encounter, as well as ways to prevent fraud from happening in the first place.
Understanding the Risk of Fraud
As the world transitions towards a cashless economy, the risk of payment fraud continues to increase. The rise in online shopping, mobile payments, and other digital payment methods has made it easier for cybercriminals to target unsuspecting victims.
According to recent reports, every dollar lost in a fraudulent transaction actually costs businesses $3.75. Since over 30% of small businesses have experienced payment fraud in the last year alone, this is an issue that businesses can’t afford to ignore.
Types of Payment Processing Fraud
It’s important for businesses to be aware of the different types of fraud so they can take action to prevent them. Some of the most common types of payment processing fraud include the following:
- Chargeback fraud — This type of fraud occurs when a customer disputes a legitimate charge, resulting in a refund that the fraudster then pockets.
- Friendly fraud — This occurs when a customer doesn’t intend to commit fraud, but disputes a charge they don’t recognize as legitimate.
- Identity theft — This involves creating a fake identity to open accounts or make purchases.
- Carding fraud — This cunning scam takes place when cybercriminals utilize stolen credit card information to make fake transactions.
- Account takeover fraud — This involves hackers accessing an account and using it to make unauthorized purchases.
As technology advances, fraudsters become more sophisticated in their techniques to gain sensitive account and personal information. Businesses must remain vigilant to protect both themselves and their customers.
Developing Fraud Prevention Strategies and Security Protocols
Many payment processors have advanced software and technology to prevent fraud. Every business should work with their payment processor to develop a fraud prevention strategy. This involves:
- Assessing the potential risks — Identify the areas of your payment processing system that are most at risk of fraud such as online payments or mobile transactions.
- Identifying vulnerable areas — Work with your payment processor to identify any existing weaknesses in your security protocols.
- Implementing robust security measures — This may include implementing measures such as encryption, tokenization, and two-factor authentication to protect data from malicious actors.
You should regularly review and update your security protocols to ensure they are up-to-date and effective against emerging threats. By prioritizing security in payment processing, companies can not only protect their customers’ sensitive information but also maintain their reputation and trust in the industry.
Assessing Your Payment Processor’s Fraud Prevention
Utilizing the latest data protection technologies helps to ensure complete security when it comes to payment processing. However, not every payment processor has the resources to invest in cutting-edge fraud prevention tools.
Some industries are more prone to fraud than others. If your business functions in an industry with high fraud rates, you need to have a detailed conversation with your payment processor about their fraud prevention tools. You may have slightly higher fees or rates upfront, but the right tools will save you time, money, and frustration in the long run. Fraud protection is not an area of payment processing where you want to cut corners or save costs.
Now more than ever, it is important to take measures to protect yourself from financial risk. It is essential to understand the different types of fraud and how they work in order to create the best protection plan for your company.
In addition to creating security protocols, using advanced data protection technologies are all invaluable techniques for becoming fully secure. Creating a safe environment for payment processing involves a great deal of work, but when treated like an investment in the future of your business, these procedures become even more valuable.
Nexio’s Fraud Prevention
Nexio is proud to partner with Kount for our fraud prevention. Kount’s AI-driven technology accurately classifies fraudulent transactions through a two-step process. First, Kount analyzes the data from an online transaction. Then it compares the data to other interactions in the Identity Trust Global Network™ to determine if the interaction is trustworthy or not.
By providing a thorough evaluation of a site visitor’s identity, behavior, and previous transactions, Nexio helps you stay ahead of the fraudsters and keep your business safe. For more information on strengthening your security protocols and further reducing risk, contact Nexio today!