Globally, e-commerce companies will have suffered losses from payment fraud of about $50 billion by the end of 2023, which is still rising. Card-not-present (CNP) fraud alone is expected to reach $10.16 billion by 2024, accounting for $8.75 billion in payment fraud losses in 2022.
It raises the question, "What can you do to safeguard your company from online payment fraud?" To protect you and your clients from the terrible damages fraud can bring about regarding money, reputation, and business?
Prevention and fraud detection are great places to start. Payment fraud detection strategies are crucial for every company conducting online business to ensure the security of financial transactions and payments.
What Is Meant By Fraud Detection?
Fraud detection in the context of payments refers to seeing and reporting questionable transactions or activities both during and occasionally after they have taken place.
Fraud detection uses various techniques, including data analysis, pattern recognition, and machine learning, to distinguish between authentic and fraudulent transactions. Furthermore, fraud detection systems are getting even smarter and more scalable as artificial intelligence (AI) gains traction.
Setups for detecting payment fraud also depend on risk rules, which are collections of conditions and triggers that indicate fraud when a transaction satisfies them. These "rules" can include:
Transaction: let's say the amount is more than $10,000.
Location: an area designated as high-risk, either due to a history of significant fraudulent activity emanating from there or a flagrant inconsistency between the cardholder's address and the location.
Cardholder Behavior: Cardholders may commit card testing fraud if they try to make multiple extremely low-value purchases quickly.
Fraud Prevention:
The tactics known as fraud prevention aim to thwart fraudulent transactions before they harm your company.
The preventive yin to the reactionary yang of fraud detection is fraud prevention. Fraud prevention aims to stop fraud before it occurs, whereas fraud detection focuses on identifying and halting fraud when it happens. It involves implementing the procedures and policies necessary to reduce your fraud risk and act as a first line of defense against con artists.
For illustration purposes, assume that your company is a medieval fortress and the con artists are nomadic groups of robbers out to steal your riches. The massive wall and crocodile-filled moat you construct around your castle symbolize fraud protection. It's an effective means of hindering the adversary but not eliminating them.
You also place soldiers and lookouts along the top of the wall. You're waiting for the invader to stop them in their tracks in real-time when they do manage to swim through the moat and ascend the wall. This section is similar to fraud detection in that it's your means of becoming aware of impending risk and taking immediate action to stop it.
Here are a few instances of preventing fraud:
AVS and CVV check to ensure the cardholder's information matches the bank's records.
Using a customer's face, voice, or fingerprint, biometric verification verifies their identification and confirms that they are trying to make a purchase.
- Strong Customer Authentication (SCA) is a method of identity verification that combines biometric, device, and knowledge-based elements.
- IP intelligence allows you to stop transactions coming from phony IP addresses.
- 3D Secure is a security technique that verifies credit and debit card purchases using a three-domain paradigm.
- Thanks to the SSL cryptographic protocol, payment solutions and customer devices can communicate securely.
Your company will lose money if you don't take action to eliminate chargebacks and other types of fraud. Additionally, if you don't take action to stop them, the same fraudsters may continue to attack your company. Even worse, if you have too many chargebacks, you can be investigated by credit card companies (like Visa and Mastercard), fined, or even have your payment processor sever their relationship with you.
Naturally, fraud detection and prevention services are not limited to your company. It also affects your clientele. By protecting their online transactions, you communicate that you respect their business and privacy and are not just lip service regarding payment security.
Finally, since credit and debit payments ultimately depend on trust, fraud detection and prevention are crucial. The system would collapse without that—a secure, reliable digital platform where users could pay via their phones or computers. Accepting numerous of the most widely used payment methods globally would also be beneficial!
The detection and prevention of online payment fraud cannot be done with a "one size fits all" strategy.
There are many types of fraud, ranging from the simple card-not-present and card-testing scams to the more complex and prolonged schemes of synthetic identity criminals. Payment fraud can be planned and orchestrated, opportunistic and spontaneous.
Your company needs a broad toolkit that can adjust to the changing landscape of payment fraud rather than just one fraud prevention method.
The Payment Fraud Detection and Prevention solution could be easily customized to meet your sector's various and unique requirements, payment strategy, and your company's risk profile. It helps to provide you with all the technologies you need to secure your transactions, from configurable risk rules and machine learning to strong reporting and testing capabilities.
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