Payment fraud is a 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 unauthorised debiting of funds from their payment cards. After all, fraudsters show great ingenuity in pursuit of easy money-making opportunities. Sometimes, there are unique, sophisticated schemes and conventional methods to deceive clients of financial institutions. Let’s clarify, what are 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 a real card. For merchants this type of fraud is also more difficult to detect: it’s challenging to verify if the purchaser is the real cardholder.
Payment fraud affects not only cardholders, as many got used to believe, but merchants as well.
Most of the schemes are aimed at fraudulent obtaining the card data or the card itself. 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:
This model includes various approaches, from the most unsophisticated, like buying stolen bank cards data on the dark web, to identity thefts.
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 just make an order online and after the delivery issue a chargeback, claiming a bank card theft.
To reduce the likelihood of fraud all parties of a payment process should follow some 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 on the Internet. It is better to get a separate card for such purposes and transfer money there as needed.
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 illegal debiting of 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 a fraud following hot trails.
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:
I.e. setting up corresponding filters after analysing the business, its average check, and the clients’ geography.
In certain cases, 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 sakes of conversion. For instance, an online business possesses with a high margin and a well-organised customer relationship in terms of collecting and verifying user data, confirming, and tracking orders. It is also applicable for low-risk businesses: 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 it may fall flat. The best way to fight fraud is to take measures to prevent it.
We at Corefy provide our customers with the ability to create customised firewall rules based on analytical data or use their own blacklists 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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