How To Prevent Payment Fraud For Retail Business?

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In today’s society, online payments are by far the most dominant payment method for any business. According to an Experian report, more than 90% of people throughout the world use online payments to buy goods and services. However, the rise in online payments leads to increases in payment fraud which can cause a lot of trouble for businesses.

What is payment fraud?

Payment fraud is the case in which someone steals another person’s payment information and uses it to make illegal transactions or purchases.

The real trouble to retail businesses is when the owner of payment information or cardholder notifies that their accounts are being used for the transaction that they don’t know and raises a dispute to the business owners. Then business owners will have to resolve the disagreement, pay multiple penalties such as chargeback costs and investigation fees, and lose time and resources in the process. In some cases, customers can incorrectly initiate a chargeback, claiming they never received the product. Besides, businesses can lose credibility with customers because of payment fraud.

Types of payment fraud

Payment fraud can occur in many ways. However, we can list three types of payment fraud which are currently most popular as following:

Identity Theft: This is the most typical payment fraud type. Rather than creating a new identity, fraudsters simply take another person’s personal and banking information and use it to make illegal purchases and transactions.

Friendly Fraud: One of the most challenging issues for online businesses is friendly fraud. Some customers order a few products, pay for them, and then falsely initiate a chargeback. Even though they did receive it, they still try to persuade the seller that their card was stolen. The scope of friendly fraud is vast, and it differs by industry. It’s a big problem for businesses because it’s extremely tough to detect and resolve.

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Clean Fraud: This is the most difficult type of payment fraud to identify. Clean fraud refers to false transactions that appear to be legal. The fraudsters use stolen credit card information to impersonate the cardholder.

Fraudsters can steal credit card information by convincing account holders to make a purchase on a fake website, intercepting messages between transaction parties, and even by buying them on the dark web, which is only accessible through specific browsers. The stolen information will then be used to impersonate the cardholder and conduct illegal transactions.

 

How to prevent payment for fraud for retail businesses?

payment processor

It is not easy to eliminate the payment fraud thread. However, retail businesses still can protect themselves from payment fraud in the following ways:

Apply your own Enterprise Resource Planning software: This is the most effective way but the most expensive. With ERP’s support, you can manage every aspect of your business, including management of inventory, sales, orders, customers, employees, marketing activities, and reporting. It also goes along with data security which helps businesses reduce the risk of payment fraud.

Manage transaction carefully: Ensure that all critical information, such as the shipping address, IP address, amount, and date, is monitored and verified during a transaction. This makes it easier to keep track of transactions and decreases the possibility of anything essential being changed without your knowledge.

Partner with a verified payment processor: A third-party payment processor can help you keep customer’s private information secured since payment processors will have their security system to ensure their data managing function.

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Restrict access to confidential information: Any employee can access customer data is a risk for business, just give access to confidential information to who you trust. 

Encrypt transactions and emails containing confidential information: When you encrypt a document before sending it to someone else, you ensure that the recipient can only view it and not edit or alter the information contained inside. This eliminates the possibility of customers altering sensitive information and exploiting it for unscrupulous purposes.

Use strong authentication procedures: Using a multi-factor authentication method ensures that no one other than you has access to your money.

Keep awareness of the latest fraud trends: Fraudsters are always looking for new tricks to get and use private information. Therefore, you have to be aware of what is happening around, and what the latest fraud trends are. Then you can implement necessary actions to protect your business.

Conclusion

In summary, in the context of the eCommerce trend, both retail businesses and customers are at risk from payment fraud. However, it can negatively affect a business’s credibility and performance. Therefore, with all information and recommended steps to prevent payment fraud, we believe that businesses will be able to discover the best solutions to this problem and stand out in the market.