How to Safeguard Your Business From Payment Fraud in 2024
Where there’s a business, there’s a fraud. While eCommerce businesses have brought a lot of advantages compared to brick-and-mortar stores, they’ve also been victims of more sophisticated frauds.
The total losses of eCommerce frauds are more than 40 million dollars, which will continue increasing along with the expansion of this field. Thankfully, there are a lot of technologies, old and new, that aim to minimize the chances of fraud occurring.
In this article, I will break down some of the most effective methods that are used for safeguarding your business. But before that, we will explore some of the common payment frauds that we might expect in the current year.
Common payment frauds in 2024
We’ve all heard about the common methods how to commit fraud in physical stores. Stolen credit cards, fake IDs, etc. Well, it’s not surprising to find out that one of the most common eCommerce frauds is based on a form of identity theft called account takeover.
This fraud happens once a malicious individual gets their hands on a victim’s account. From there, they can make purchases or transfer funds. The credentials can be gained through phishing or other means. While this isn’t directly your fault, businesses should always warn about phishing attempts and notify users what are their legitimate means of communication.
Chargeback fraud is no less common, and it happens once a user requests a chargeback for a product that there’s no issue with. This is a simplified explanation. Chargeback fraud also includes stolen credit cards and fake locations, while the amount refunded goes to the fraudster.
In the end, we have the credit and debit card frauds. These frauds happen once fraudsters obtain financial data from someone via illegal means. Sometimes, they use a scanning device placed on an ATM, and on other occasions, this happens through online scams.
This is far from being a complete list of payment frauds. However, the previously mentioned frauds are commonly occurring, and the list below should certainly help you prevent the majority of them.
Use software for payment fraud detection
One of the best methods of preventing payment fraud is with the use of modern, and advanced software that’s specialized for that. I will break down some of the other methods below, which can be categorized as general business security rules, but payment fraud detection software is the most applicable and essential.
Many payment fraud detection solutions allow you to easily integrate them with your business, and they will give you protection in real-time. Combining the use of digital footprinting along with BIN analysis and anti-money laundering protocols ensures maximum security.
This software also comes with various features that utilize artificial intelligence and machine learning to give you the best results. One aspect of it, whitebox machine learning, allows you to have a detailed look into all the reasons why is a certain transaction scored as risky.
Compared to more traditional methods of fraud prevention, fraud detection software offers quite an effective way of dealing with certain types of online threats. What may be considered a downside is that it’s usually subscription-based.
Effective methods for fraud prevention
There are many fraud prevention methods, each coming with its advantages and the price of implementation. Your goal should be to maximize the amount of problems you’re protected against for the least amount of resources.
Thankfully, fraud prevention methods are constantly improving. The recent rapid implementation of AI and ML tools has done a lot of good for fraud prevention software. We can only expect new tools in the future.
Authentication measures for users
Implementing multi-factor authentication measures for users can significantly help your business with preventing various types of cyber threats and fraud. Furthermore, this measure also protects each user individually.
Good authentication starts with account creation. You should ensure that users are using strong passwords for their accounts that include upper and lower-case letters, numbers, and symbols and that are at least 8 characters long.
The next step should be implementing a multi-factor authentication process. Authentication factors are:
Knowledge,
Possession,
Inherence
and Location
Since we’re talking about online accounts, we can exclude the location for our examples. Password is a knowledge factor, while possession can be an authentication device. Inherence is the use of biometric information such as a fingerprint or a retina scan.
A good option would be to urge users to verify their accounts with SMS or email. This way, if someone gets their hands on a user’s credentials, they will still need their phone or an email to access the account.
Monitor suspicious accounts
There aren’t many good reasons why you should monitor any user activity and intrude on their privacy. However, it’s also important to recognize the difference between legitimate accounts and those who aim to scam someone.
You won’t have to, nor should you monitor, just any account that you stumble upon. However, recognizing suspicious activity, such as constantly changing IP addresses and locations, asking for refunds, or changing credit card information, is essential.
Payment fraud detection software can help you automatize the process of monitoring suspicious behaviors. In the end, you will be presented with the ability to cancel risky transactions.
Create warnings about phishing and other scam attempts
There are many online threats that can be prevented only through education and common sense. Less tech-savvy people often mistake a fraudulent website for a real one, which can sometimes be quite problematic. If someone scams a user pretending to be from your company, then the victim of a scam can blame your business.
You can’t do much to protect your users from this. But you need to constantly notice them about the legitimate individuals that are a part of your business and how to recognize if someone is using a phishing website.
Phishing can also be an internal problem. For example, if one of your employees has their accounts stolen because they left their credentials on a phishing website. This can be prevented by cybersecurity training of your employees.
Furthermore, your employees’s accounts can be protected via individual security measures such as MFA.
Develop a secure website
One of the best ways to protect your business from fraud is to focus on security from the ground up. If a website is an important part of your business, you should certainly pay additional attention to developing a secure website.
Common security vulnerabilities can be outdated plugins or CMS versions, and it’s best to have someone observe this in real time. There are also certain security principles that should be satisfied during the development process. The best way to ensure this is to conduct cybersecurity audits.
One of the most important parts of website security is the use of SSL protocol. This is one of the most important security protocols. It ensures the encryption of the traffic between your website and your users and between your website and the web server.
SSL also has an impact on your search engine ranking, and it’s essential that you have this protocol installed.
When talking about website security, it’s also a great idea to install certain security plugins. Although there are hundreds of them, you should do an analysis of your business and choose the plugin that’s the most applicable to your situation.
Preventing payment fraud should be your goal in 2024
You should do what’s within your power to prevent your business from becoming a target of any type of fraud. You might think to yourself, “But I only make a couple of sales. Why should I go out of my way to prevent fraud?” this only means that scammers will take up a larger portion of your earnings if they are successful.
The amount of money that you invest in fraud prevention will certainly be much smaller than the amount you can suffer if you become a victim of fraud. Fraud prevention protects your earnings as well as your reputation.
If your users have their accounts hacked because of your poor practices, you can expect lower popularity and sales in the future. Fraud prevention is essential for long-term business success, and with various tools and methods, it has never been more easy to implement it.
Some of the methods from this list can be more effective than others, so you should analyze your business’s vulnerabilities and protect yourself from the problems you’re most susceptible to.
