Payment fraud prevention

What is online payment fraud?

Payment fraud is the theft of payment data for its further unauthorised use by fraudsters.

There is a myriad of purchasers and merchants who know firsthand about payment fraud associated with the unauthorised debiting of funds from their payment cards. After all, fraudsters show great ingenuity in pursuing easy money-making opportunities. Sometimes, there are unique, sophisticated schemes and conventional methods to deceive clients of financial institutions. Let’s clarify the types of payment fraud and how to avoid it.

They can be of two types: card-present — those using a physical card for making a purchase, and card-not-present — those using only card data without the card itself. Cybercriminals’ primary target is the second type, for it allows them to implement fraud schemes without even having an actual card. For merchants, this type of fraud is also more difficult to detect: verifying if the purchaser is a genuine cardholder is challenging.

Who is affected by payment fraud?

Payment fraud affects not only cardholders, as many got used to believing but merchants as well.

Types of fraud schemes

Most schemes aim to obtain the card data or the card itself fraudulently. Governments, businesses, and even cardholders by themselves are constantly trying to find a way to cope with each scheme. But as the payment industry develops, the diversity of fraudulent schemes unfolds.

There are several main models of fraudulent actions:

  • Data theft.

    This model includes various approaches, from the most unsophisticated, like buying stolen bank card data on the dark web, to identity thefts.

  • Data faking.

    Some cybercriminals utilise interception schemes or account takeovers to receive the ordered goods or services instead of the initial purchaser.

There also is a type called friendly fraud or chargeback fraud. Dishonest purchasers mostly use this one. They make an order online and, after the delivery, issue a chargeback, claiming a bank card theft.

How to fight payment fraud?

To reduce the likelihood of fraud, all payment process parties should follow simple security rules.

Banks urge their customers to be more careful with their cards:

  • Not to trust their cards to third parties;

  • Not to leave them unattended;

  • Not to write PINs in easily accessible places and even more so on the card itself;

  • Never share your PIN code with anyone (nobody has the right to demand it).

Do not leave personal and card data on sites you know nothing about. Pay attention to various certificates confirming the safety of payments through this site. Do not use cards with large amounts of money to pay online. Getting a separate card for such purposes and transferring money there as needed is better.

If you have the slightest suspicion of illegal debiting of your account, contact the bank. The cardholder has a certain period to refuse or dispute the illicit debiting for money from the card account. The duration of this period can be checked with the issuing bank.

Immediately inform the bank about the loss or theft of a payment card. It is much easier to investigate fraud following hot trails.

Antifraud & conversion

Online businesses often utilise various antifraud solutions to cope with fraudsters. But any solution of this kind requires customisation to maintain high-level security while not promoting profit losses.

Here are several ways to solve this problem:

  • Individual fine-tuning.

    I.e. setting up corresponding filters after analysing the business, its average check, and the clients’ geography.

  • The mechanism for manual approval of transactions.

    Sometimes, online stores should monitor suspicious transactions and decline them manually.

Still, there are cases when it’s preferable to turn off some antifraud filters for the sake of conversion. For instance, an online business possesses a high margin and a well-organised customer relationship in collecting and verifying user data and confirming and tracking orders. It also applies to low-risk firms: they imply a low level of fraud.

There is no one-size-fits-all method for fighting fraud. While some methods suit certain businesses, to others, they may need to be revised. The best way to fight fraud is to take measures to prevent it.

How can Corefy help?

We at Corefy allow our customers to create customised firewall rules based on analytical data or use their own blocklists to fight fraud. Our team is ready to assist and provide you with any narrow-focused information. Feel free to contact us and ask any questions you have.

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